Indiana Road Funding Solutions
Indiana’s $1 Billion Road Funding Gap
The funding gap for Indiana’s road system (state and local) is, conservatively, $1 billion annually. This represents the
amount of additional funding the state needs to maintain its aging road, street and bridge inventory. It does not
include the costs of upgrading the system.*
There are many options state leaders could implement to fill the road funding gap. Solutions should be long-term,
dedicated, stable and adequate to fund the needs.
Stop DIVERSIONS of fuel tax revenue $144M
In Fiscal Year 20l2, legislators allocated money from the Motor Vehicle Highway Fund (MVH) to support non-road
agencies and activities, including: Department of Revenue (DOR) Tax Division operating costs; State Police forensic
labs; Bureau of Motor Vehicles (BMV) and Department of Education school traffic safety programs. Of the agencies
supported by the highway fund, the State Police, the BMV and the DOR have the capability of raising their own
funds to pay for operating expenses – keeping $144 million per year in the MVH for road and bridge
improvements.
Fix the WHEEL TAX decision making process $105
Today, Indiana county councils are responsible for approving a county wheel tax; however, the county and all cities
and towns share the revenue based on population. Counties currently collect $69 million per year from the wheel tax,
with the capacity for $174 million. Counties are con-cerned with sharing revenue with cities and towns without a
recorded vote on a fee increase, and cities and towns are concerned with not having the authority to implement a fee
on their own. By broadening the ability of additional local entities to implement a wheel tax, policymakers would
encourage a greater use of this important road funding tool.
Implement a new statewide REGISTRATION FEE $300M
With the cut in vehicular registration fees from the offset from lottery revenues in the 1990s, there is some capacity
for raising registration fees to go toward the highway fund. There are about six million vehicles registered in Indiana.
A $50 annual registration fee would raise $300 million for roads.
Implement fees on ALTERNATIVE FUELED and electric vehicles $1M
Indiana has no mechanism to capture the equivalent of the per-gallon gasoline tax from alternative fueled and
electric vehicles. Drivers of these vehicles receive all of the benefits of using our roads without paying for them. In
2010, the US Energy Information Administration estimated that 13,000 of these vehicles were on Indiana roads, using
6.5 million equivalent gallons of gasoline. This equates to more than $1 million in unrealized state gas tax revenue
each year. The agency projects alternative fueled vehicles will make up nearly 50 percent of the market by 2035. It
is important to establish a structure to enable Indiana to collect a gas tax equivalent, regardless of fuel type, before
alternative fueled and electric vehicles become a larger share of the market.
INDEX the gas tax $15M
Indiana last raised the gas tax in 2003 to 18 cents per gallon, but its buying power has reduced by 19 percent.
Unless the gas tax is indexed, its buying power will continue to erode. Alternative fueled vehicles, reduced overall
driving and simple inflation will ensure that revenues do not keep pace with the need. Indexing alone won't provide
adequate funds to meet current needs, but it will help keep the situation from getting worse. Beginning an indexing
program now will add about a half cent per gallon to the gas tax, raising $15 million annually. According to INDOT,
indexing fuel taxes from 2003 will generate an additional $120 to $200 million per year, depending on the index
used.
Direct SALES TAX collected on fuel purchases to roads $550M
Currently, Indiana is one of only eight states collecting sales tax on the sale of gasoline and/or diesel fuel. Indiana’s
sales tax rate on fuel is one of the highest in the nation. As fuel prices rise, this tax provides a bonus to the state
General Fund to the tune of $550 million each year (based on a $3.00 per gallon price at the pump), but none of it
goes to state or local roads. Because it is a road user fee like the gas tax, legislators should direct the sales tax
collected on a gallon of gas to the MVH, not the General Fund.
RAISE the gas tax $30M
While raising taxes may be unpopular, it IS an option for raising additional funds. Each penny of the gas tax raises
approximately $30 million annually. The mechanism to collect and distribute these funds is already in place. It is
one of the simplest solutions available today.