By: Sam Sobul, Public Policy and External Affairs Intern
William Tarter Jr., Public Policy and External Affairs Associate
What Happened
The substitute transportation budget introduced by the Ohio Senate Transportation, Commerce and Workforce Committee was amended Thursday and passed out of the committee on a 6-5 vote. It was approved by the Ohio Senate 24-6. The Senate version of the transportation budget, also known as Substitute House Bill 62, changed the amount of a proposed gas tax increase, as well as the amount of money given to public transportation. The new bill reduces the House’s gas tax increase proposal of 10.7 cents per gallon over two years for gasoline and 20 cents per gallon over three years for diesel, to 6 cents per gallon for both gasoline and diesel beginning July 1.
While no organizations argued for decreasing the funding, some did argue that the transportation budget, which is primarily supported by the gas tax, was the wrong place to find money for public transit.
The amount earmarked for public transit was also reduced. In the House version of the bill, public transportation received $100 million from Federal Highway Administration “flex” dollars. This would be in addition to the $6.5 million that comes from the General Revenue Fund, which is included in the state operating budget (introduced last week). In the Senate version, all money for public transit is removed from the Transportation Budget, and $55 million would be included in the state’s operating budget. The $55 million number was the final number that the Senate agreed to. The Senate Transportation Committee initially passed $40 million and $8.5 million was added to that in an amendment by Senator Matt Dolan. This is in addition to the $6.5 million currently allocated. The fact that the money is coming entirely from the state operating budget is significant, because that $55 million amount would mean public transit funding must compete with other programs from across the state for the same dollars. This will be discussed later in this blog post.
Other Changes
The Senate also included several other changes in the bill, only a few of which will be mentioned here. The proposed registration fees for hybrid and electric vehicles have been reduced by $25, to $175 and $75, respectively, but those changes will not go into effect until January 1. The Senate also changed the proposed formula to charge a tax for those who use Compressed Natural Gas (CNG). This tax would be phased in over five years. The Senate transportation budget would end the Financial Responsibility Random Verification Program on June 30. We previously wrote about this program here. It randomly selects 5,400 people each week and sends them a letter requiring proof of vehicle insurance. If proof is not provided, the person’s driver’s license is suspended. There is evidence that these suspensions disproportionately affect poor Ohioans. Finally, the Senate passed language which would increase the earned income tax credit (EITC) from 10 percent to 30 percent, as a well as remove a mechanism that limits the credit to not more than 50 percent of the taxpayer's tax liability if the taxpayer's Ohio adjusted gross income exceeds $20,000.[1] This is expected to reduce the gas tax impact on lower income Ohioans and would reduce tax income to the state by $38 million annually.
The Process
These changes came after the Ohio Senate’s Transportation, Commerce and Workforce Committee held six days of formal hearings, and some informal hearings the week before, on the transportation budget that passed the Ohio House of Representatives on March 7. The remainder of this post will discuss the arguments made by those who testified in front of the Senate before the newest version of this bill was introduced.
The bulk of the testimony on the gas tax was in favor of increasing it to the 18 cents per gallon on gasoline and diesel that was initially included in the executive transportation budget, this is in contrast to the proposed decrease we have seen in the House and Senate passed versions of the budget. The organizations that testified in favor of the increase argued that this tax hike was the bare minimum necessary for Ohio to construct, maintain and expand its road and bridge infrastructure. Noticeably, not a single organization that testified before the Senate introduced its version were in favor of lowering the tax on gasoline, despite that being the end result. There were, however, a few organizations that testified that the diesel rate should not be raised to the extent included in the House bill. These organizations argued that the increased diesel costs would be passed along to consumers and could raise the costs of transportation for small businesses throughout the state. Another handful of organizations submitted testimony that the proposed fees on hybrid and electric vehicles were too high. They argued that, since hybrid vehicles still use gas and pay the gas tax, it is unfair to also charge them a $100 registration fee. Additionally, testimony was provided saying that the proposed $200 fee on electric vehicles would amount to a higher “user fee” than the average driver would pay under the gas tax, with Clean Fuels Ohio arguing that, by its calculations, a $96/year registration fee for electric vehicles would be more reasonable. Finally, two organizations argued that the House provision, which implemented a tax on CNG in line with the diesel fuel tax should be phased in, rather than jumping from 0 to 28 cents per gallon immediately, as it would do under the House bill. The Senate version does not change the rate, but does change how CNG is measured for the purposes of this tax.
Public Transportation
Similarly, none of the testimony regarding public transit spending argued that the amount should be less than $100 million in federal “flex” dollars that were included in the House bill. Indeed, while the $100 million is more than twice what DeWine initially requested ($40 million), several organizations testified that, based on a transit needs survey done in 2015, the state needs to fund public transit at a rate of $185 million per year. Additionally, the $100 million from the House bill is entirely for capital projects, not operational costs. The $55 million dedicated to public transit would have flexibility to be used for operating costs or capital projects, and could be subject to debate in the operating budget process. Several of the organizations arguing for an increase in public transit spending in this budget also favor finding a dedicated source of funding for public transit outside of what is earmarked for infrastructure.
While no organizations argued for decreasing the funding, some did argue that the transportation budget, which is primarily supported by the gas tax, was the wrong place to find money for public transit. Both the Ohio Department of Transportation and the Ohio Contractors Association stated that, since even an 18 cent per gallon increase in the fuel tax will barely cover expenses for roads and bridges, paying for public transit out of federal flex funds will make the shortfall significant. This shortfall would become even more pronounced if the gas tax amount that is approved is significantly less than the original 18 cents recommended by DeWine.
Next Steps
Since the transportation budget is required to be signed into law by March 31, waiting until March 21 until the Senate passed its version of the budget will give the General Assembly just 10 days to complete the process. The remaining steps at this point include having a conference committee to create a bill that reconciles the differences between the House and Senate versions, have that bill pass both the House and the Senate and then get signed by the governor. The DeWine administration is in favor of a much larger gas tax increase than is in either version of the transportation budget. Some legislators have expressed concern that if the increase that comes out of conference committee is too low, DeWine won’t sign the bill, forcing the process to start over. As a result, Speaker of the House Larry Householder has stated that the House “has things prepared” in the event that a short-term funding solution is needed.[2]
If you would like to read any of the testimony given in the Senate on the transportation budget, it can be found here: http://www.ohiosenate.gov/committees/transportation-commerce-and-workforce/document-archive
[1]LSC, Page 44. https://www.lsc.ohio.gov/documents/budget/133/transportation/SR/comparedoc-hb62-sr.pdf
