Jet fuel tax increase proposed

The Revenue Committee heard testimony March 27 on a bill that would raise the tax on aviation jet fuel sold in Nebraska.

<a href='http://news.legislature.ne.gov/dist15' target='_blank' title='Link to the website of Sen. Lynne Walz'>Sen. Lynne Walz</a>
Sen. Lynne Walz

Fremont Sen. Lynne Walz, sponsor of LB440, said the tax on jet fuel purchased for and used in aircraft within the state has not increased since 1984. The bill would increase it from 3 cents to 10 cents per gallon.

Walz said proceeds from that tax and the state tax on aviation gasoline—currently 5 cents per gallon—go to the Aeronautics Cash Fund, which funds the operation of the state Department of Transportation’s Division of Aeronautics. The division uses a portion of those funds to support the state’s general aviation airports, she said, which are vital to Nebraska’s economy.

The division estimates that LB440 would increase revenue to the Aeronautics Cash Fund by $1.5 million in fiscal year 2020-21 and $3.6 million in FY2021-22.

Geary Combs, chairman of the Blair Airport Authority, testified in support of the bill, saying it would increase revenue for much needed infrastructure improvements at the state’s 80 general aviation airports. State grants for airport improvement projects have been cut in recent years, he said, and those grants may total only $100,000 this year.

“Today, with virtually no funding available from the state, the burden of improving the airport falls fully on … federal dollars and local property tax,” Combs said.

Kyle Schneweis, director of the state Department of Transportation, testified in opposition to LB440, saying the proposed tax increase is not warranted.

Schneweis said the state has not completed an aviation needs assessment since the early 2000s. The department plans to update that study this year or next year and also will prepare a long-range plan that will examine aviation within the context of the entire transportation system, he said.

“Before we make policy decisions like this,” Schneweis said, “it’s important to understand what the needs of aviation are.”

John Heimlich, vice president and chief economist at Airlines for America, also testified in opposition to the bill, saying it would cost the airline industry an additional $4.7 million per year. He said this would force airlines to raise airfares and reduce service growth at a time when Nebraska is trying to grow its economy.

Heimlich said the state’s commercial and general aviation airports received approximately $33.9 million in federal grants in 2017 and another $29.6 million in 2018. Airline cargo, ticket and fuel taxes fund those grants, he said.

“We are proud to serve big and small communities and proud to pay user fees at all those airports to support them,” Heimlich said. “What we’re loath to do is subsidize airports that we don’t use.”

Sarah Curry, policy director for the Platte Institute, also testified in opposition. Many transcontinental flights land at Midwest airports to refuel, she said, and LB440 would put Nebraska at a disadvantage to neighboring states such as Kansas that have lower jet fuel taxes.

Curry said most states exempt jet fuel from sales tax and 16 states tax private jet fuel purchases but exempt commercial jet fuel to avoid taxing a business input.

Jon Large, a Nebraska Association of Airport Officials board member, gave neutral testimony on LB440. According to 2015 and 2016 reports from the state Department of Aeronautics, now the Division of Aeronautics, Nebraska airports have delayed or abandoned federal projects because reduced state funding has prevented them from financing a 10 percent match required to receive certain federal funds, he said.

This has led to a deterioration of airport systems and an increased need for reconstruction due to the delay of rehabilitation projects, according to the reports. Between 2010 and 2018, Large said, more than $18 million in federal funds allocated to Nebraska airports expired because those airports could not meet the 10 percent match.

The committee took no immediate action on the bill.

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