Alabama has no plans to raise gas tax; state will rely on next year’s bond issue for road projects

Marcia Gruver Doyle Pix
Alabama Gov. Robert BentleyAlabama Gov. Robert Bentley

Gov. Robert Bentley says he has no plans to ask the Alabama legislature to raise the state’s 16-cent-per-gallon gas tax, responding to emailed questions submitted by The Tuscaloosa News. Instead, Alabama instead will look to a $508.5 million highway bond issue to finance highway projects, bonds that last week received a AAA rating from Standard & Poor’s Rating Services.

According to the paper, the governor’s office expects S&P’s highest rating to save the state $35 to 40 million in interest when repaying the bonds. Slated to be sold early next year, the bonds will pay for scheduled road projects, and be repaid from federal aid transportation grants Alabama receives, plus funds from state gas tax proceeds.

The Tuscaloosa News asked if the state gas tax would have to be increased to help pay back the bonds. Responding, Bentley’s office said ”the federal funds will be adequate to repay these bonds, but if the federal funds were to be inadequate, the state has committed to use state gas tax receipts to pay the unfunded portion of this debt service.”

The governor’s office did indicate, however, there might be a “slight increase” in the state gas tax if state gas tax receipts have to be tapped to pay back the bond issue. In addition to the 16-cent-per-gallon tax for gasoline, Alabama also has a 19-cents-per-gallon diesel tax.

Some are contending, however, that right now might be the best time for states to raise gas taxes. According to Dec. 8th report by NPR, several GOP leaders are saying such hikes would be less painful as fuel prices continue drop. For example, Michigan Gov. Rick Snyder, is calling for a doubling of the state’s gas tax over four years, a move that would raise more than $1 billion for road and bridge construction. And none too soon. National transportation research group TRIP issued a report last week estimating Michigan drivers are losing $3.8 billion annually in extra vehicle operating costs as the result of driving on deteriorated roads.

According to Carl Davis, a senior analyst at the Institute on Taxation and Economic Policy, “there’s kind of been a switch that’s been flipped” as more states consider gas tax increase, NPR reports Davis as saying. “The federal gas tax hasn’t gone up in over 21 years and the states don’t have the luxury of just sitting around and doing nothing on this issue. They have to find a way to keep their bridges from falling down and keep their roads from developing too many potholes.”