The Legislature is poised to approve a plan to overhaul the way Maine pays for road and bridge maintenance following years of concern about the state’s reliance on gas taxes and bonds.
Both the House and Senate have given preliminary approval — in near-unanimous votes — to a proposal that is expected to generate more than $100 million dollars next fiscal year for the state’s primary source of revenue for paving and plowing as well as road and bridge maintenance. The Senate is expected give final approval to the measure Thursday afternoon and send it to Gov. Janet Mills, who plans to sign the bill into law, according to her office.
The proposed transportation budget would capture 40% of sales taxes on vehicle purchases and 40% of sales and use taxes collected by the Bureau of Motor Vehicles beginning on July 1. The funding model, which is based on a proposal first floated this session by Republican lawmakers, seeks to shift away from gas taxes that account for roughly two-thirds of the revenue flow into the Highway Fund. Gas tax revenues are expected to continue to decline — absent an increase in the tax rate — as vehicles become more fuel efficient and consumers switch to electric vehicles.
In the immediate future, passage of the Highway Fund budget will also avert a potential partial shutdown of the Maine Department of Transportation on July 1 that could have affected ferry service and other DOT functions over the busy Fourth of July holiday.
Republican Sen. Rick Bennett of Oxford, who serves on the budget-writing Appropriations and Financial Affairs Committee, said the state “has been papering over” the challenges in the state’s transportation funding model for years. The state consistently turns to voters to approve bonds — or state borrowing — for road and bridge projects. The Legislature also periodically earmarks money from the state’s General Fund — which finances the rest of state government — to the Highway Fund. And this year, Mills had proposed earmarking part of Maine’s revenue surplus to the DOT budget.
Bennett cited the auto industry’s shift toward all-electric vehicles as further impetus for the change.
“We’re going electric and we need to solve this problem and the gas tax is not going to be doing it for us,” Bennett told the Senate on Wednesday night. “I applaud this Legislature for grappling with this issue now, putting us on a road to sustainability for the Highway Fund and recognizing . . . if we don't act now, it is only going to get worse.”
Republicans on the Legislature’s Transportation Committee pushed for the change and managed to pick up several of their Democratic counterparts on a proposal to tap 50% of sales tax revenues on both vehicle purchases and auto parts. But there were concerns that the dramatic shift in funding could upend negotiations over a budget change package now being hashed out in the Appropriations Committee.
Compounding those fears were the prospects of a partial shutdown at the DOT if Democrats and Republicans were unable to reach agreement on the transportation budget. While the Legislature’s Democratic leadership eliminated the possibility of a government-wide shutdown on July 1 by passing a baseline budget without Republican support earlier this year with plans to negotiate a supplemental budget with Republicans. But they did not pass a transportation budget at that time. As a result, two-thirds of both chambers of the Legislature will need to approve the separate transportation budget in order for it to take effect as an “emergency measure” in time for the new fiscal year that starts July 1.
Sen. Peggy Rotundo, a Lewiston Democrat who co-chairs the budget committee, proposed tweaking the proposal Wednesday night to capture 40% of vehicle sales taxes rather than 50%, as originally proposed. Additionally, Rotundo proposed capturing 40% of sales and use taxes collected by the BMV rather than sales taxes from auto parts. That shift also resulted in higher revenues to the Highway Fund.
“It meets the critical need of making sure the Highway Fund is solvent so that we can keep 2,400 state employees employed as of July 1,” Rotundo said.
