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Bulletins, News, and Press: Legislative Bulletins

Soaring Gas Prices Hurt Road Funds in ‘06

Monday, September 25, 2006   (0 Comments)
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Road and bridge funds took a hit this year as drivers conserved at the pump, according to recent numbers just released from the State of Michigan House Fiscal Agency. The numbers show that gas tax revenue was significantly lower from January to July 2006, compared to the same period in 2005 and 2004.

Many believe that road revenues increase as the cost of gas increases, but that isn’t the case. In fact, they can’t be more wrong. Michigan’s flat fuel tax of 19 cents draws no benefit from rising fuel costs and road revenues actually go down when consumption drops. (View gas tax chart here.)

From January to July of 2006, gas tax collections were $520.5 million, which is $5.2 million behind 2005 and $13.3 million behind 2004. At the same time, sales tax revenues on gasoline purchases from January to July 2006 jumped by $74.6 million above 2005 and $116.4 above 2004. Sales tax does not go to roads. Most of the sales tax goes to schools.

As gas prices rise, consumers are cutting back on driving and looking for ways to conserve their fuel use. That all equals less gas sold and less gas tax collected, which only puts a tighter squeeze on funds for roads.

Michigan has an annual estimated funding shortfall of $700 million for its state transportation system (MDOT managed) and at least $2 billion more for its local roads (counties, cities and villages).

If you have any questions please contact Mike Nystrom, Vice President of Government and Public Relations at mikenystrom@mi-ita.com ; or Keith Ledbetter, Director of Legislative Affairs at keithledbetter@mi-ita.com; or by calling the MITA office at (517) 347-8336.


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