Money available for state highway and bridge projects will fall by nearly a quarter during the next budget cycle when cash from the lease of the Indiana Toll Road all but runs out, transportation officials said Wednesday.
In 2014 and 2015, highway funding will return to what Indiana Department of Transportation officials called "historic funding levels," which means the state will have the same sources of cash as it did before outgoing Gov. Mitch Daniels leased the toll road for $3.8 billion under his Major Moves program.
Those revenue streams will total about $3.1 billion during the two-year cycle, including revenue from state and federal gasoline taxes. In the current budget cycle – which ends June 30 – the state has had more than $4 billion to spend on road and bridge projects.
But the traditional revenue streams for highways are also threatened, INDOT Commission Michael Cline told the State Budget Committee, which is considering spending requests for the next two years.
Although drivers are traveling roughly the same number of miles across the state's highways, they are purchasing less gas and therefore paying less in gas taxes. That will reduce the amount of money available to fix existing roads and match federal revenue available for new highways, Cline said.
"Those revenues are needed and we're going to be challenged" to find them, he said.
The gasoline tax problem is not a new one for Indiana and it's the same challenge faced by Congress and lawmakers in other states.
But Indiana's highway funding issues are exacerbated by the drop off in toll road funds – the same revenue that helped the state build hundreds of miles of roads while other states were struggling to maintain their existing highways.
At least seven states are now experimenting with new ways of collecting taxes to compensate for dwindling gas tax revenues, Cline said. Among them are ideas to have cars carry mile trackers so that drivers pay fees based on their highway usage.
But Cline said no such experiments are underway in Indiana.
State Budget Director Adam Horst – who will leave his post at the end of this year – told lawmakers that the state has other options as well. It could increase the current 18-cent-per-gallon tax, although over time, additional hikes would be necessary for the revenue to keep pace with needs.
"That's not a popular option," Horst said.
Cline told lawmakers that none of the 7 percent sales tax now charged on gas purchases goes to highway funding. And when prices at the pump are high, the sales tax actually generates more than the gasoline tax.
"If it all came to INDOT, it would look like we were flush," Cline said. "But it would take away from somewhere else."
Also, INDOT officials have examined whether the state should index the gasoline tax, so that it rises and falls to keep up with rising highway construction costs. One such model showed that indexing the tax could generate as much as $200 million more per year.
That's the amount Cline estimates the state needs in additional revenue just to keep up with preservation projects – meaning fixes for existing roads and bridges.
"These are questions this body – and the state legislature – are going to have to think about," Horst said. "How do we find a sustainable long term solution? It's a problem other states are facing too."
Lesley Weidenbener is managing editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.