There are only three weeks until the governor’s budget address on February 3rd, leaving plenty of time for speculation around what agency budget proposals will or will not make the cut in the governor’s budget proposal. One of those key proposals is Department of Transportation Secretary Gottlieb’s budget request, which includes a proposal to modify and increase taxes on gasoline and diesel fuel. Last week, Governor Walker stated that he’s “not particularly keen” on a gas tax increase, which has raised questions regarding the status of his transportation secretary’s proposal on the gas tax and other aspects. The legislative leadership has not embraced the idea either – both Assembly Speaker Robin Vos and Senate Majority Leader Scott Fitzgerald told reporters after inauguration that supporting an increase to the gas tax would be politically infeasible within their caucuses.
Department of Transportation’s Motor Vehicle Fuel Tax – or gas tax – generates $358 million in revenue over the next biennium by increasing the current flat gas tax by 16% on gasoline and 32% on diesel in the first year. The state’s current gas tax is fixed at 30.9 cents per gallon for both gasoline and diesel. Under the proposal, a new gas tax mechanism will be established with a fixed rate and variable rate component. The variable rate component would be tied to the previous year’s average wholesale fuel price and would be recalculated annually by the Department of Revenue. The proposal instills a hard tax floor and requires that the total tax never be less than 35.9 cents per gallon for gas and 40.9 cents per gallon for diesel. Furthermore, the new mechanism also puts in place a tax ceiling and limits the total tax level for each fuel to no more than a five percent increase in any year.
The comments from the governor and legislative leadership regarding the gas tax have left many to wonder what alternatives may be included in lieu of the gas tax increase. Secretary Gottlieb justifies a substantial gas tax and fee increases in his budget proposal, stating that based on current revenues, the transportation fund will end fiscal year 2017 witha $300 million shortfall. That does not include the $945.5 million in new projects that DOT would also like to pursue over the biennium. The governor said almost immediately after he received DOT’s budget request that there would be “significant changes” in his transportation budget proposal.
The governor and legislators have mentioned some potential alternatives. In an interview in December, the governor mentioned one alternative to divert sales tax on automobiles to the transportation fund from the general fund. Other options that have been floated by legislators include raising registration fees, implementing a mileage-based use fee and/or exploring tolling in the state. The governor will present his budget proposal soon enough and there is no speculation that the next several months will be filled with discussions in the Capitol around transportation funding.