Commission Recommends Higher Vehicle and Driver Fees, Gas Tax Increase

Drivers in Pennsylvania can expect to pay more at the pump and higher fees for vehicle registration and driver's licenses, according to a commission aimed at closing the state’s $3.5 billion transportation budget gap. 

“These are direct user fees that have a dedicated spending source,” said state Secretary of Transportation Barry Schoch, chairman of the Transportation Funding Advisory Commission. “There is a direct correlation between the user fee and the benefit to the user. These are motor license fund fees, and they will go directly back into that.” 

The commission, formed by Gov. Tom Corbett to study the needs of the state’s transportation and mass transit infrastructure, completed its work July 18 and will present its final report to the governor this week.

Overall, the commission’s recommendations are expected to increase transportation funding by $2.5 billion annually within five years. 

The toughest sell, among the proposed increases Corbett and the General Assembly would be required to approve, will be uncapping the Oil Franchise Tax. This tax, instituted in 1983, is applied to the first $1.25 of every gallon of gasoline at the wholesale level. After incrementally uncapping the tax over the next five years, the commission estimates the state will generate more than $1.3 billion annually.

For example, the average driver would pay an extra $100 annually for a vehicle driven 12,000 miles per year with an average fuel efficiency of 25 miles per gallon, according to the commission. 

“We are not changing the rate of taxation with the Oil Company Franchise Tax. We’re simply correcting a legislative problem, which is that it was capped back at a time when $1.25 seemed like an obscenely high price for a gallon of gas,” Schoch said. 

Drivers could expect a 10 cent increase in gas prices as a result of the cap being lifted, though the exact increase will depend on the price of gas, he added. 

However, some drivers might not notice the increase, said Ted Leonard, executive director of the Pennsylvania AAA Federation, which represents motorists. 

“The way we’ve seen gas prices fluctuate, some of the costs that we’re talking about here are far less than how much gas prices have fluctuated,” Leonard said. 

Schoch said gas tax revenue--which funds most road and bridge projects--has been declining in recent years as fuel efficiency has increased. However, the state collected slightly more than $1 billion in gas tax revenue during fiscal 2000-01, compared with more than $1.2 billion in fiscal 2010-11. 

The commission also will recommend increasing various driver and vehicle fees to match inflation since the last time they were increased. 

The commission also is expected to suggest doubling the length of time between required renewals for driver’s licenses and vehicle registration. Currently, vehicles must be registered every year and driver’s licenses must be renewed every four years. 

Combined with the proposed inflation-based increases, the current $36 annual vehicle registration fee would almost triple to $98 every other year, and the current $29.50 driver’s license fee would more than double to $69 for an eight-year license. 

Leonard cautioned that the higher costs may be a burden on some drivers, even if they only have to pay them half as often. 

Jim Runk, president of the Pennsylvania Motor Truck Association, which represents trucking and transportation companies in the state, said the industry generally favors fuel taxes to pay for highways, as opposed to increases in registration fees or toll roads. 

The commission will not recommend the tolling of any highways or state roads, but will suggest the General Assembly pass “enabling legislation” to allow such decisions to be made at a later date.

From the outset, Schoch said the commission would increase the state’s gasoline tax, but the changes to the Oil Franchise Tax were an adjustment meant to collect lost tax revenue. Pennsylvania's gasoline tax is currently 32 cents per gallon, the 13th highest in the nation. 

Nathan Spade, executive director for state Sen. John Rafferty, R-Montgomery, chairman of the Senate Transportation Committee, said the senator will review the report and wait to hear the governor’s position before taking action. 

State Sen. John Wozniak, D-Cambria, minority chairman of the committee, said bipartisan solutions to transportation funding issues were necessary. 

"It’s clear that more money is needed to maintain and improve our roads, bridges and public transportation systems," Wozniak said in a statement. 

A transportation funding study completed in 2006 recommended making changes to existing spending on transportation before looking for more revenue. Schoch said the commission had reviewed ways to save money and would continue to seek savings in coming years. 

Leonard said the commission saw revenue as critical. 

“I don’t think there is any doubt in anybody’s mind around this table that additional funding is needed,” Leonard said.