Whether or not state lawmakers raise the motor fuel tax Iowa this year, Iowa faces a fiscal cliff likely to reduce transportation construction funds – and jobs — later this year.
That’s because the money in the federal Highway Trust Fund for the federal fiscal year beginning Oct. 1 will be dedicated to pay for commitments made in prior years, Iowa Department of Transportation Director Paul Trombino told the House Transportation Committee Jan. 23.
That will be a loss of about $460 million for Iowa. Some of that flows to local governments and the remaining $250 million makes up about half of the DOT’s construction budget.
“There will be no more dollars to cover the next fiscal year’s program,” Trombino said. “Those funds will be eaten up by programs from previous years.”
Trombino said DOT staff and the Transportation Commission are considering contingency plans – how to decide which projects might be pulled from the construction program, which by the end of June will top $700 million.
“On the good news side, we’re a cash-flow state, so we’re in a better position than others,” Trombino said. “We can probably continue for awhile, but eventually we’ll have to cut back.”
Asked whether Iowa could make up the difference with a gas tax increase, Trombino explained that each one-cent increase raises about $19 million. The state tax – 21 cents for gas, 22.5 for diesel and 19 cents for ethanol – would have to be increased more than 20 cents a gallon to raise $460 million.
The federal motor fuel tax hasn’t been raised in 20 years. A one-cent increase would raise $1 billion, Trombino said.
As disruptive as the loss of Highway Trust Funds will be on the state, Transportation Chairman Josh Byrnes, R-Osage, predicted counties that rely on bonding to finance road construction projects will feel real pain.
“At the end of the day, it truly is the property taxpayers who pick up that tab,” he said.
He’s proposed a 10-cent gas tax increase phased in over three years.
The fiscal cliff will begin to affect construction jobs “very shortly,” Trombino said. The federal government estimates 17,000 jobs are created with every $1 billion spent on transportations projects.