Costs Of Oil: Less Oil Revenue Causes State Funding Hole

Feb 17, 2015

Oil revenues form a big part of the Utah government’s budget. The state receives funding from not only the state’s gas tax, but also from public trust lands. These funds pay for a variety of things such as road maintenance, public schools, and hospitals. However, a drop in gas prices could hamper that funding.

Tammy Lucero, the Uintah County Economic Development Executive Director, said that oil from Uintah County alone forms an important part of the state’s revenues.

“It’s $100 million dollars every single year just coming from Uintah County, let alone the rest of the state of Utah where they produce any natural resources on federal lands. So, it’s significant, she said. “During 2008 our highest year ever, there was about $216 million dollars that went into the State of Utah’s coffers. It’s not that much now because we aren’t quite as crazy as we were then. It certainly is important, for sure.”

Gov. Gary Herbert’s proposed 2015 budget was drawn up before the drop in gas prices. The current shortfall amounts to $11.3 billion. Republican state representative Johnny Anderson of Taylorsville said that the 24.5 cent per gallon tax, which hasn’t changed since 1997, has not kept pace with the rising cost of road maintenance.

“We saw of our maintenance costs kind of spike as we came out of the recession,” he said. “I think those spikes were a little more reflective of the economy, particularly the construction segment of the economy coming out of the recession and trying to recoup a little bit of what had been lost during the recession period. I do believe that, over time, that will smooth out even more.”

According to the Institute on Taxation and Economic Policy, around the country, the average state’s gas tax rate has effectively fallen by 20 percent since the last raise. States with a fixed-rate tax, such as Utah, saw the value of their gas tax drop even further.

In an attempt to fill the funding gap, lawmakers have proposed raising Utah’s gas tax. A survey from UtahPolicy.com shows that Utahns are split on the question of raising the tax, with a third of respondents in favor and against it, respectively.

Another option could be to make up the difference with other sources. A proposal from Anderson would cut the current gas tax in half while making up the difference in other areas.

“The purpose of this proposal is to change the structure of our current gas tax. What I’m planning to do with the bill will take the existing 24 and a half cent gas tax and split it down the middle,” he said. “We would have 12.25 cents in gas tax remaining and then the other half of this would be a new general sales tax. This general sales tax would be on everything.”

In 2011, the state legislature voted to raid the general fund in order to finance transportation. Anderson’s proposal has yet to reach the floor of the state House of Representatives.