The news coming out of VDOT seems good: revenues are up and so is the amount of construction and repair work. It’s the sort of news one might expect from an economy that, however timidly, is growing again. It’s all good news, until we get to this:
However, Connaughton said, “We have to be concerned about the impact of high gas prices. Two-thirds of our funds come from gas taxes. If prices continue to rise, that could reduce consumption and, with it, revenues.”
This sounds like Secretary Connaughton being sensible. However, my sources tell me that at the Virginia Concrete Conference earlier this month, the Secretary told the assembled road builders that Virginia was going to have to “adjust” the gas tax to keep it viable as a long-term funding source and that everyone should look for a push on a higher rate in the next General Assembly session.
Of course this could have been nothing more than Connaughton telling the crowd what it wanted to hear.
There’s also the possibility that Connaughton could be winging it on a gas tax hike, and no one else in the McDonnell administration was aware of Connaughton’s promise. Given the governor’s distaste for general tax increases (but his willingness to raise fees), it would come as something of a surprise to learn that his administration had suddenly decided to get behind a hike in the gas tax.
Or maybe Connaughton was really voicing the Governor’s intended policy.
To be fair to all parties, I’ve written it may be necessary to raise the gas tax temporarily, but only if a number of substantive reforms to VDOT, the transportation trust fund, and more are made first.
Let’s assume that Connaughton was speaking for the administration. Given his most recent remarks that higher fuel prices could further dampen revenues, it might make sense for him to pursue a higher tax in an attempt to cover the revenue shortfall. But it’s a position filled with political risk for Connaughton’s boss, Gov. McDonnell. Does he want to be seen as the Governor who kicked drivers when they were down?
Maybe he does. And perhaps he’s willing to take that admittedly huge risk because he would couple a gas tax hike with a tax cut elsewhere – say in the state’s sales tax, or the individual income tax. There is some precedent for this from McDonnell.
Back when he was a candidate, McDonnell told a group of us that he was considering eliminating the personal income tax, but only if it was revenue neutral – meaning that other levies would rise. He said it wasn’t polling well and, unsurprisingly, the idea never appeared during his campaign. Secretary Connaughton may have given that room full of road builders an early peek at the return of a revenue-neutral tax change.
The 2012 General Assembly session will be Gov. McDonnell’s penultimate go-round with the worthies. If he intends to push for a big tax change, it could make next winter’s gathering as momentous, and potentially fractious, as another governor’s penultimate session – that of Mark Warner in 2004.
Warner got the tax hike he wanted and has thrived ever since. Maybe McDonnell is banking on lightning striking twice.
