The saga of transportation funding and tax reform in the 2015 legislative session goes back to the beginning of the session. Powerful entities, such as IACI, indicated just how much they wanted tax reform. By reform I mean cuts. But other issues, transportation and education specifically, have garnered much more of the legislature’s attention. Combined with numerous other issues; gambling, tanning beds, and education funding, tax reform and transportation funding were pushed to the end of the session.
What has resulted have been two weeks of transportation and tax reform bills dying and rumors swirling of a potential bill being amended by the Senate to include over $150 million in fee and gas tax hikes. But I am getting a bit ahead of myself. Let’s start at the beginning.
Before the session began the Governor made clear he wanted the $262 million road maintenance shortfall projected by ITD to be dealt with or at least minimized. The primary limitation the Governor set on the legislature in this endeavor was that it would include no money being shifted from the general fund. The Governor did this in an effort to make sure money allotted for education would not be spent for other purposes. He also indicated he would like the revenue to be created primarily through user fees and a gas tax hike.
Raising revenue in a red state is always a difficult proposition. In a legislature full of conservative Republicans the idea gets even dicier. With education dominating the legislature for so long dealing with transportation and tax reform was always going to be on the back-burner. But, in early March it began to become clear the House was going to try to work on both as education (Teacher Pay Ladder) was all but finalized.
What came of these efforts were HB 310, 311 and 312. All attempted in some way to tackle transportation and tax reform. HB 311 called for an elimination of the sales tax on groceries, a flat income tax of 6.7% for the top three income brackets and a gas tax hike of seven cents. HB 310 called for shifting funding from the General Fund to transportation and HB 312 called for higher vehicle and registration fees.
All three narrowly passed the House to varying degrees but were dead on arrival in the Senate. By unanimous consent the Senate killed HB 311 by sending it back to the Transportation Committee and will not bring up. HB 310 will not be heard as it violates Otter’s funding preference. Due to the fact that revenue generating bills can only come from the House it is likely the Senate will attempt to modify HB 312 and likely make it far more expense.
While certain to make Senate GOP leaders and the Governor happy it is unclear if such an effort could pass the House. Members want to show their constituents they did not just vote for a tax increase (called fee hikes by politicians). Rather, the idea of a tax shift through tax reform is more appealing because it is revenue neutral. But when the state needs revenue and it can only be generated through user fees and gas tax increases the options are extremely limited.
We should not be surprised to see in the next day or two a major rewrite of HB 312. In it, don’t expect much on tax reform. The Senate seems unlikely to go for anything impacting revenue even if it is something as popular as eliminating the sales tax on groceries. Also expect to see a major revenue expansion from the House’s initial $61 million.
Good to know Republicans cannot do tax reform but they can raise revenue just as easily as any Democrat.