Repeal of roads funding by sales tax discussed

The Revenue Committee heard testimony Feb. 27 on a bill that would repeal a newly adopted means of funding roads.

The Legislature passed a measure in 2011 that dedicates 0.25 percent of the state’s 5.5 percent sales tax to fund roads projects starting in fiscal year 2013-14. LB531, introduced by Lincoln Sen. Danielle Conrad, would repeal the sales tax allocation, leaving roads to be funded exclusively by the gas excise tax.

While she supports highway construction projects, Conrad said, this is not the best way to fund them.

“Diverting sales tax revenue has many potential unintended consequences,” she said. “Every time the Legislature makes any changes related to sales tax in the next 20 years, we’ll have to take this into consideration.”

Jason Hayes, representing the Nebraska State Education Association, supported the bill, saying it would ease the financial burden on essential services.

“Given the continued economic uncertainty, this puts both our state budget and our people at risk,” he said. “Our current commitment to public education does not equate to our commitment to our state’s highways.”

Mark Whitehead, president of the Nebraska Petroleum Marketers and Convenience Store Association, opposed the bill. He said changes in people’s driving habits have made excise tax revenue unreliable.

“There is a diminishing return on the excise tax because people aren’t driving as much as they used to,” Whitehead said. “We need to diversify away from the old formulas.”

President and CEO of the Norfolk Area Chamber of Commerce Dennis Houston, also opposed the bill.

“For the citizens of Norfolk and Madison County, this isn’t just about repairing existing roads,” he said. “It’s about rural economic development and new job creation.”

Renee Fry, executive director of the OpenSky Institute, testified in a neutral capacity. She said the importance of good roads to Nebraskans’ prosperity is not in question.

“We support adequate investment to repair and build roads,” she said. “However, we do have concerns about straying from traditional funding methods when we are already struggling to fund other essential services.”

The committee took no immediate action on the bill.