RICHMOND ‑- The General Assembly’s long-running debate over financing Virginia’s transportation needs may revolve once again around the gasoline tax and the use of revenue from the state’s general fund.
The Senate Finance Committee on Tuesday endorsed an overhaul of Gov. Bob McDonnell’s transportation funding package, advancing a bill that would increase the gasoline tax by 5 cents per gallon, impose a 1 percent tax on the wholesale price of gas, and increase vehicle registration fees to generate funds for roads, rail and transit.
The total package could generate an estimated $4.5 billion in statewide transportation revenue over five years, including $1 billion that would come if Congress passes legislation to enable states to compel online retailers to collect state sales taxes.
The Senate plan is a substitute for a House of Delegates bill (HB 2313) that, among other things, would eliminate the state’s 17.5 cents per gallon gas tax and increase the sales tax from 5 percent to 5.8 percent. The House plan closely resembles McDonnell unveiled on the eve of the General Assembly session. It would generate about $3.1 billion over five years.
The Senate committee advanced the bill on a 9-6 vote, with four Republicans and all five Democrats on the panel supporting the alternative proposed by Sen. Frank Wagner, R-Virginia Beach.
The full Senate will vote on the legislation Wednesday, the deadline for each house to act on revenue bills passed by the other chamber. If the Senate passes the revised bill, it will set up negotiations with the House over a centerpiece of McDonnell’s legislative agenda.
The politically divided Senate failed to pass a transportation bill before last week’s deadline for each house to act on its own legislation.
McDonnell said the Senate proposal advanced Tuesday “is much different in scope from our original proposal, although it contains several key elements.”
“The Senate bill uses far too little in general funds, which is an essential part of a solution,” McDonnell said in a statement issued by his office. “I remain convinced that the gas tax is a declining revenue source and therefore we must look for new ways to meet our growing transportation needs. The Senate bill, though, will raise gas taxes and gas prices for the consumer. However, it is important to remember today’s action is not a final bill. Instead, it simply advanced the process of passing a final transportation plan to the next step.”
House Speaker Bill Howell, R-Stafford County, has been critical of proposals to increase the gas tax. But on Tuesday, he was satisfied to see the Senate committee keep a bill alive so that House and Senate negotiators can work toward a compromise.
“That’s all we were looking for, something to go into conference and see if we can hash out a compromise,” said Howell, the lead sponsor of the House bill.
Tuesday’s Senate Finance Committee meeting indicated that those negotiations could be testy. When Del. Chris Jones, R-Suffolk, stood to present the House bill, Senate Republican Leader Tommy Norment, R-James City County, asked the committee to postpone its hearing until Howell showed up to testify.
Howell last week effectively killed a Republican-engineered Senate redistricting plan, which had been attached to a House bill, by ruling it out of order. After a terse exchange with Jones in Tuesday’s committee meeting, Norment relented and allowed the hearing to proceed without the House speaker’s testimony.
The Senate plan would keep the retail sales tax rate at 5 percent and increase the share of the tax that is dedicated to transportation from 0.5 percent to 0.55 percent. McDonnell wants to gradually increase that share to 0.75 percent over five years.
But Democrats, who occupy half of the Senate’s 40 seats, argue that the shift would drain funds from education and other programs that are paid for out of the state’s general fund budget. Sales tax proceeds account for 20 percent of the state’s general fund revenue.
Senators in both parties have been adamant about retaining some sort of tax on gasoline. The plan the Senate will consider Wednesday would increase the tax at the pump to 22.5 cents per gallon, the first increase since 1987, and index the rate to inflation. It also would impose a 1 percent sales tax on the wholesale price of gasoline.
The Senate plan, like McDonnell’s, would increase vehicle registration fees by $15 and apply the revenue to passenger rail and mass transit. The passage of a transportation bill could speed the extension of passenger rail service to Roanoke.
“It does look like a really good start,” said Sen. John Edwards, D-Roanoke. “We’ll see what happens as it goes through the process.”
The six Republicans who voted against Wagner’s alternative today included Sen. Steve Newman of Lynchburg, who sponsored McDonnell’s original plan in the Senate. Newman said he opposed the plan because “very little general fund revenue is left and revenue neutrality is gone.”
Newman, the chairman of the Senate Transportation Committee, called Wagner’s alternative “a bridge too far.”
The proposed 5 cents per-gallon increase in the gasoline tax resembles a proposal advanced last week by the trade association for Virginia’s gas stations and convenience stores. The Virginia Petroleum, Convenience and Grocery Association called for a tax increase of 6 cents per gallon.
Mike O’Connor, the association’s president and CEO, raised concern Tuesday that the Senate plan would index the gas tax to the Producer Price Index, which would track the cost of road-building materials. O’Connor said other states that index their gas taxes tie the rates to the consumer price index or the wholesale price of gasoline. The trade group would prefer that lawmakers wait until next year to address the indexing issue with “consensus” legislation, O’Connor said.
– Michael Sluss