West Virginia's cash-strapped budget for building and keeping up roads will probably get worse as the weak economy hits two key sources of revenue for the state Road Fund, a West Virginia University economist said Monday.
Tom Witt, director of the Bureau of Business and Economic Research at WVU, told legislators Monday that highway funding will grow more dire than the bureau had forecast in 2004 and 2007 studies.
In the short term, Witt said, people are likely to cut back on travel and defer new car purchases - which, aside from federal funding, are the two main funding sources for the state Road Fund. A drop in miles traveled will affect state gasoline tax collections, while fewer new car sales will mean lower motor vehicle privilege tax collections, he said. Those taxes account for more than 58 percent of Road Fund revenues. Witt said new car sales in West Virginia are projected to drop to 66,100 in 2009, down 18 percent from the peak year of 2006.
Meanwhile, he said, gas tax collections are likely to decline in the long term, as drivers switch to more-fuel-efficient vehicles, hybrids, and other alternative fuel vehicles. "We're going to continue to see some erosion of the traditional sources [of revenue]," Witt told a legislative interim committee.
Eventually, states will have to consider ways to fund road projects other than taxes on fuel, he said. He noted that Oregon is looking at installing GPS devices on all licensed vehicles in that state and collecting a road tax based on mileage.
While state drivers complain about West Virginia's 32.2 cents per gallon gas tax, Witt said at least 11 states have higher fuel taxes, topped by California at 48.7 cents a gallon, and Connecticut at 47.2 cents. "The perception that West Virginia has the highest tax rate is not true," he said.
In the short term, he said, it might be preferable to increase the federal gas tax to fund additional road construction, to avoid large discrepancies in tax rates among the states.