Pavement before pledges: Wyo highways need gas-tax revenue

I can’t think of many easier jobs in Wyoming politics than lobbying against a gas-tax hike.

The tasks entailed —  lining up a majority of extremely conservative lawmakers who have gleefully pledged to never raise taxes, or motivating voters who hate paying more at pumps — aren’t at all difficult. 

Plus, history is on the side of opponents. Since 1998, Wyoming has only raised its fuel taxes once, by a dime per gallon in 2013. Three bills have gone down to defeat in the past three years, including a 9-cent-per-gallon increase in 2021 that the House didn’t even vote on.

Yes, the odds are stacked a mile-high against supporters of a 15-cent fuel tax increase to be considered during the upcoming budget session. The measure would be made in three 5-cent increments over the next three years. Today’s state tax of 24 cents per gallon would increase to 39 cents per gallon in fiscal year 2025.

But it’s not a hopeless cause, or even one whose supporters are limited to those who proudly wear our “tax-and-spend liberal” merit badges. Even if the gas tax hike ultimately fails, proponents who aim to boost Wyoming Department of Transportation’s funds for highway construction and repairs can still win the day.

That’s because the Joint Transportation, Highways and Military Affairs Interim Committee, which voted 9-2 to sponsor House Bill 14 – Fuel tax, has another vehicle to raise WYDOT funds. That one hasn’t been assigned a bill number, but it will start in the Senate.

The latter approach is a bit of razzle-dazzle brought to the panel by one of its members, Rep. Jerry Obermueller (R-Casper). Instead of a tax increase, it involves a diversion of mineral severance tax monies that now automatically flow into the Permanent Mineral Trust Fund.

The committee voted 8-3 in November to sponsor the bill, which would earmark an estimated $60.9 million to highways and $26.1 million to the state’s eight community colleges.

Meanwhile, HB 14 would raise $22.5 million in FY 2023, $44.9 million in FY 2024 and $67.4 million in FY 2025. All funds would have to be expended on construction and maintenance, not administration or operations.

So, how do those two revenue possibilities stack up compared to what WYDOT needs? Both would do the trick, though the tax increase would take longer.

The entire department, which includes the Wyoming Highway Patrol and the Aeronautics Division, has an estimated shortfall of $354 million per year. The federal Infrastructure Investment and Jobs Act will add $113 million annually to WYDOT’s coffers over the next five years, including about $93 million per year for roads and bridges.

That will still leave WYDOT needing about $20 million per year to keep up with its highway construction and maintenance costs. However, Sen. Bill Landen (R-Casper), who co-chairs the transportation committee, said the state will need to raise an additional $30 million or so annually to fully leverage federal grants that require some matching money.

Landen and Co-Chairman Rep. Don Burkhart (R-Rawlins) admitted it will be a struggle to win support for either bill. Burkhart suggested at the November meeting whittling the fuel tax increase to 2 cents annually over three years to make the idea more palatable.

“Whether it’s 5 cents or 2 cents (annually), the no-new-taxes guys are going to vote against it,” advised Sen. Jim Anderson (R-Casper). “So we might as well go for what makes a difference to the Highway Department in getting this done.”

Landen agreed. “It is a fight, and it should be a fight. … But we’ve hopefully hit home with the fact that we’ve got an infrastructure system that is running close to the edge of the cliff, and we have to do something,” he said.

The severance tax diversion may have the best chance to succeed, since it’s not a tax increase. Some legislators who believe every tax dollar must be squirreled away in savings may not like the idea, but both highways and community colleges have demonstrated long-term needs for extra revenue.

It will take a significant educational campaign to convince people that a fuel tax increase isn’t the end of the world for consumers, including those who operate snowmobiles and off-road vehicles. The effort must dispel the notion that raising the tax by 15 cents per gallon means consumers will automatically pay that much more at the pumps.

Fuel prices depend on several factors, including world oil prices, which rise and fall with geopolitical events in the Middle East, as well as the regional fuel market and the point where the product is taxed.

Wyoming is part of a regional fuel market that includes surrounding states. Taxes are assessed at the wholesale level, with trucks picking up fuel from refineries offering the best prices.

Wholesalers generally supply gas stations in a number of states, and don’t have a variable price list. They set one price at the beginning of the month, and typically pay states their fuel taxes owed at the end of the month.

One of the selling points to legislators for the 10-cent-a-gallon increase nine years ago was that Wyoming consumers had been effectively paying excess fuel taxes that other states were collecting. The Equality State still has lower fuel taxes than all other states in the region except Colorado, which is 2 cents lower at 22 cents per gallon.

Rep. Joe MacGuire (R-Casper) said several other Rocky Mountain states, including Colorado, collect state income taxes that are also used to fund a portion of their highway expenses. Wyoming lawmakers aren’t likely to ever go down that road.

The dime-per-gallon tax increase in 2013 didn’t result in corresponding price hikes. A first-of-its-kind national study by the American Road & Transportation Builders Association showed that a day after the Wyoming tax increase went into effect, prices were 3 cents per gallon higher. A month later, prices increased by 9 cents.

But a full year later, the price reverted to the original cost before the tax increase was enacted. In its review of Wyoming and four other states that raised gas taxes the same year, the organization said the data “strongly suggests that any additional [tax] increase in retail pump prices will likely be ‘lost’ in the weekly price fluctuation that has been documented over the past 10 years.”

It’s worth noting, though, that even if many stakeholders support a gas-tax hike in Wyoming, it may not be enough to sway the Legislature. A coalition that included the Wyoming Trucking Association, Wyoming Petroleum Marketers Association, Wyoming Contractors Association and Wyoming Taxpayers Association endorsed last year’s bill, to no avail.

The bill died when House leaders decided not to let the Committee of the Whole even consider it.

And opposition has already cropped up. Wyoming’s National Federation of Independent Business made headlines last month when it released a survey showing only 18% of members support HB 14.

With several billion dollars in federal COVID-19 relief and infrastructure funds being sent to Wyoming, small businesses wonder why a fuel tax hike is even on the table, according to NFIB.

I’ll venture an answer to that question: Those extra federal funds will disappear in a few years, and Wyoming must still improve its highway infrastructure over the long haul to help keep businesses open and maintain safe roads.

It’s not easy to buck the loud and large “no-tax-hikes-ever” crowd at the Capitol. But Wyomingites who understand that critical infrastructure needs can’t wait are holding a winning hand, backed by sound economics.