Declining Indiana Gas Tax Revenue Leads to Shrinking Budgets

Some state officials have suggested opening discussions about raising the state's 18-cents-per-gallon gas tax.

March 08, 2011

INDIANAPOLIS - Geopolitical changes in the Middle East and the trend towards more fuel-efficient and hybrid cars have decreased Indiana's fuel tax revenue, much to the detriment of the state's roads, highways and bridges, the Associated Press reports.

Indiana's counties rely on fuel tax revenue and their allocations have been dropping sharply the past few years, from $880 million in 2007 to $759 in 2010, with gas tax revenues a substantial portion of those totals.

According to the Indiana Department of Revenue, gas tax revenues peaked in 2004 and have dropped every year since except for a minor increase last year.

Economists have predicted that gas tax revenues will continue to decline or at best remain stagnant, no matter how or when the economy recovers, because of events in the Middle East and trends favoring fuel-efficient cars.

"All you have to do is take a look at Priuses (sic) in the parking lot and you know you have a problem," said John Mikesell, an economics professor at Indiana University. "Ultimately, using motor fuel consumption as a way to finance streets and roads is a losing proposition."

As such, the gas tax is "definitely not going to be able to keep up with the costs of things like salt, pavement, aggregate materials," said Andrew Berger, director of government affairs at the Indiana Association of Counties.

Henry County Highway Administrator Joe Wiley said his county's highway funding peaked at more than $3 million in 2004 but stood at $2.5 million last year, forcing the county to downgrade 15 to 20 miles of its roadways to gravel roads. The move has saved more than 90 percent in maintenance costs for those streets.

Some state officials have suggested opening discussions about raising the state's 18-cents-per-gallon gas tax to fall more in-line with the national average of 20.6 cents per gallon.

Indiana last raised its gas tax in 2002, from 15 cents per gallon.

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