Legislative leaders say they would be interested in giving West Virginia a break on their 35-cents-a-gallon gas taxes, but warn that it’s not as simple as just declaring it.
One issue, House Speaker Roger Hanshaw said today, is the guarantees the state has made on the bond covenants from borrowing money for highway improvements. Those obligations mean maintaining funding streams to pay down the bonds.
“We’re all about trying to cut taxes for sure,” Hanshaw, R-Clay, said today on MetroNews’ “Talkline.” “The thing we have to be sure we do is make sure we don’t do anything that jeopardizes the existing bonds that the State of West Virginia has issued and the commitments we’ve made that are tied to that revenue stream.
“If we do away with that dedicated revenue stream, what we have to do to stay in compliance with our bond covenants, as I understand them, is to replace it with a new stream of revenue.”
Have state legislature's thought about a temporary suspension of the 0.35.7 cents a gallon state gas tax? @SpeakerHanshaw speaks on this matter with @HoppyKercheval. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/OuU6CPIcbW
— MetroNews (@WVMetroNews) March 21, 2022
States like Maryland have enacted gas tax holidays as prices have spiked to historic levels following Russia’s invasion of Ukraine. Virginia Gov. Glenn Youngkin has proposed a gas tax holiday of three months, although Virginia’s legislature is divided because of the central role the gas tax plays in the transportation budget.
In West Virginia, Democratic lawmakers kicked off the debate last week by asking the governor to consider a gas tax holiday. Democrats announced they will follow up with another press conference on the gas tax holiday issue at 11:30 a.m. Tuesday.
The Democrats estimated the total cost of a month-long pause on the gas tax would be $35 million. They recommended making up for the tax dollars to the state Road Fund through an influx from the governor’s contingency fund or a supplemental appropriation from surplus funds. The state has been running a budget surplus approaching $600 million.
“We want to do this responsibly,” said Senator Stephen Baldwin, D-Greenbrier. “We can pause the gas tax while also fully funding the state road fund. This is just giving the people back some of their own money when they need it most.”
Gov. Jim Justice responded by suggesting the Democrats were grandstanding while also saying he would like to provide such relief but noting that would require an act of the Legislature.
“You know we were in our legislative session here for 60 days. You wait until it’s over and then you run out and say ‘Hey, I’m going to climb up on the biggest soap box I can climb up on’ — and our minority leaders did just that and say ‘let’s just get rid of the gas tax for 30 days.'” Justice said during a Friday briefing.
“Well, the interesting comment that I would have is, at the end of the 30 days, are you going to be the very people to advocate to put it back?”
The governor’s comments in the briefing didn’t go deeply into the issue of the state’s road bond obligations, but state code reflecting the Roads to Prosperity initiative that Justice pushed and voters approved specifies that “an annual state tax shall be collected in an amount sufficient to pay, as it may accrue, the interest on the bonds and the principal thereof.”
In 2017, the Legislature approved increases to vehicle registration fees and the consumer sales tax on motor vehicles while also raising the floor on the average wholesale price of gas to provide ways to pay for up to $1.6 billion in bonds for Roads to Prosperity.
In a statement last week, Justice made reference to the Road Fund’s role with Roads to Prosperity.
“Keep in mind that 100 percent of our gas tax goes directly to our state Department of Transportation for use building and maintaining our roads. Thanks to my Roads To Prosperity program and our renewed focus on secondary roads, we’ve broken the all-time record for road maintenance three years in a row,” he said.
“Our roadways and bridges got to the condition they were in due to decades of underinvestment. But now, through the mechanisms we’ve put in place, we have made miraculous progress in fixing our roads once and for all.”
Hanshaw and Senate President Craig Blair, R-Berkeley, issued their own statement last week, expressing concern about possible unintended consequences of taking a break from the gas tax.
“We completely support tax reductions, but because of decisions we have made as a Legislature, we cannot just pivot and decide we want to press pause on what is bonded revenue,” the two legislative leaders wrote.
“There are a multitude of legal reasons why we cannot simply suspend our gas tax. We cannot – and should not – implement policies like these that sound good, but in reality, would do far more damage to our state in the long term.”
Hanshaw and Blair questioned whether retailers would truly lower gas prices by the full amount of the tax. “Additionally, suspending this tax for even a month would cost West Virginia $35 million in revenue, could potentially cause the federal government to claw back allotted highway funds, and would put our bonds for the Roads to Prosperity projects at risk,” they wrote.
Hanshaw elaborated on that point today on “Talkline.”
“You’re right, we could call that kind of a session, get it done quickly, as long as we had some kind of proposal that would not put us in jeopardy with our other existing commitments,” Hanshaw said.
But he added a question. “What I don’t necessarily know is how our bond rating agencies would view a one-time proposal like that.”