Friday, May 17, 2024

With fuel tax in jeopardy, audit finds electric vehicle fees inadequate

by BIZ Magazine

By Wes Muller, Louisiana Illuminator

Louisiana stands to lose over $320 million in fuel tax revenues over the next 10 years unless state lawmakers do more to keep up with America’s transition to electric vehicles. 

The message came from the Louisiana Legislative Auditor’s office, which submitted a report to the legislature Wednesday that highlighted how the state’s motor fuel tax — the largest source of revenue for the state’s Transportation Trust Fund — is currently insufficient and will become increasingly inadequate to pay for Louisiana roads and bridges over the coming years.  

“It’s a dying revenue source,” Department of Transportation Deputy Secretary Eric Kalivoda said of the fuel tax. 

The legislature’s Task Force on Administration of State Transportation and Development Services met jointly with the Louisiana Electric Vehicle Task Force to hear from the auditor’s office and discuss possible solutions to the dwindling fuel tax.

Louisiana collects 20 cents on every gallon of gas at the pump and has not increased that rate since 1990. That tax revenue pays for the maintenance and construction of roads, bridges and other transportation infrastructure. The problem is two-fold: the tax is not indexed for inflation, and it doesn’t apply to the ever-increasing number of drivers switching to hybrid and electric vehicles.

The audit report estimates that higher fuel efficiency and external electric charging will result in $563.6 million less in motor fuel tax revenues to the state from 2023 to 2032. Earlier this year, legislators passed a law that will collect new road usage fees from hybrid and EV owners, but the auditors said it won’t be enough to account for all of the losses. 

The road usage fees — $110 per year for EVs and $60 per year for hybrids and plug-in hybrids — are estimated to generate less than half the amount needed. 

Audit manager Gina Brown told lawmakers those estimates are based on a conservative projection that electric and hybrids will account for 30% of the new cars sold in Louisiana by 2032. 

Even though vehicles are putting more miles on the road, an estimated 28% more since 1990, the amount of gas being sold has increased only about 7%, Legislative Auditor economist Edward Seyler said. 

On top of that, the audit report pointed out that Louisiana has nearly $15 billion in unmet transportation infrastructure needs.

Sen. Patrick McMath, R-Covington, implored his colleagues to take infrastructure funding more seriously.  

“Investment in infrastructure is an investment in the economy and quality of life,” McMath said.

The auditors recommended indexing the road usage fees for inflation and increasing them to $66 per year for hybrids, $96 per year for plug-in hybrids and $112 per year for fully electric vehicles. They also recommended a $10 road usage fee for fuel-burning vehicles because they have also become much more efficient since 1990. 

Other options lawmakers discussed included charging a tax at public vehicle charging stations and completely replacing the gas tax with a higher road usage fee. 

However, Seyler said a tax at public charging stations would not account for people who charge their vehicles at home. Also, completely eliminating the fuel tax would not account for out-of-state drivers who use Louisiana’s roads, he said. 

The audit report came out on the same day the U.S. Department of Energy announced that two Louisiana facilities will receive more than $319 million in federal grants from the Bipartisan Infrastructure Law to manufacture EV battery components. 

Syrah Technologies was awarded $220 million to construct a facility in Vidalia to expand their production of a graphite material used in lithium-ion batteries. The project is expected to create 221 jobs. 

The second company, Koura, will receive $100 million to build the first U.S. manufacturing plant for the lithium compound used in EV batteries at the company’s existing site in St. Gabriel. That project is expected to create up to 80 new jobs.

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