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W.Va. gas tax to go down, and state Road Fund takes the hit

CHARLESTON, W.Va. — West Virginia drivers have been paying less at the pump, but that’s going to knock a hole in the state Highways budget.

The state gas tax will go down by a penny at the start of the new year. The change is triggered by an annual recalculation of the average wholesale gas price by the state Tax Department.

For drivers, that’s good news. The rate has fallen three years in a row. The state Tax Department estimates the average West Virginia driver — someone driving 20,000 miles with fuel efficiency of 25 mpg — will save about $28 a year compared to the rate three years ago.

But it’s not so good for the Road Fund. The state Highways Department had adequate warning that this would happen, so it has already budgeted for a drop of about $12.5 million dollars to its own budget.

Because of the multi-year downward trend, the Road Fund will be down $49 million compared to three years ago.

The total state Highways budget is about $1.1 billion with the state’s share at around $400 million and the rest being federal dollars.

A loss of $12.5 million won’t be painless, though.

Less road work is likely to be done in West Virginia this year because of a decline in gas tax revenue.
Less road work is likely to be done in West Virginia this year because of a decline in gas tax revenue.

“In our world that means fewer programs,” said Brent Walker, spokesman for the Highways department. “While we’ve budgeted for it, it certainly is less money.”

For example, he said, a program that replaces bridges of a hundred feet or less costs on average a million dollars per bridge. So one way of expressing the loss is 10 small bridges that wouldn’t be replaced.

County highways resurfacing costs about a hundred thousand dollars a mile, Walker said. So another way to demonstrate the loss would be roughly 125 fewer miles of resurfaced county highways.

“It’s an important part for us,” Walker said. “Twelve and a half million dollars certainly can be used in our programming, but we had budgeted it.”

West Virginia’s state government charges a per-gallon tax on fuel, generating revenue for highways funds. The tax is the chief source of revenue for most road construction and maintenance projects.

The gas tax is actually made up of two components. The first is a flat 20.5-cent tax on each gallon sold. The second component is a variable tax of 5 percent based on the average wholesale price of motor fuel.

State law requires the tax commissioner to recalculate the average wholesale price of fuel in the state each year. This year, that was calculated at $2.340 a gallon.

The coming year’s gas tax was calculated at a rate of 32.2 cents a gallon.

That’s about a penny less than last year, said Mark Muchow, deputy secretary for the state Department of Tax and Revenue.

“The price of fuel has gone down significantly the last couple of years,” Muchow said.

This will be the last time the West Virginia gas tax goes down because it has bottomed out based on changes introduced during Joe Manchin’s administration.

State law introduced in 2009 by then-Governor Manchin and approved by state lawmakers was designed to stabilize the gas tax. The change to the law prevented the tax from increasing more than 10 percent from one year to the next. The law also set a floor so that the tax also cannot dramatically fall. That change was meant to prevent the road fund from being starved.

“The tax level would have fallen this year down to the minimum if it hadn’t been for the 10 percent rule,” Muchow said.

The peak year in terms of tax rate was 2014 at 35.7 cents per gallon.

“If prices go back up, it would take a significant increase. Next year the maximum the tax can change is about 1.2 cents on the upside,” Muchow said.

The trend over the past three years is down.

“The total revenue reduction associating from the original to the new rate  is now down $49 million dollars over three years,” Muchow said.

West Virginia’s 33.2 cents a gallon tax was the 11th highest in the nation last year, according to The Tax Foundation. Surrounding states had these rates: Ohio, 28 cents; Pennsylvania, 50 cents (highest in the nation); Maryland, 26.54 cents; Virginia, 22.33 cents; and Kentucky, 26 cents.

Falling fuel prices, combined with more fuel efficient vehicles, have affected this method of raising money to fix state roads.

“You have fewer dollars coming into the state Road Fund because of the pumps, and you add that to the fuel efficiency because they’re not having to fill up as much, so it’s a double whammy,” Walker said. “Not only are you paying less, but you’re not filling up as much.”


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