Texas highways will get a big boost in funding from an existing revenue source.
Although the Texas Legislature meets only every other year, transportation funding discussion in the state never rests.
Texas Comptroller Glenn Hegar has announced the completion of a $2.74 billion transfer from the state’s severance tax collection into the State Highway Fund.
“The Texas economy remains strong and well positioned for continued growth albeit at a much more moderate pace than what we have seen in recent years,” Hegar said in prepared remarks.
The severance tax transfer into the highway fund is based on crude oil and natural gas production tax revenue in excess of 1987 collections.
Statute requires if either crude oil or natural gas production tax revenue generates more than the 1987 threshold, an amount equal to 75% of the excess is transferred into the State Highway Fund and the state’s Economic Development Fund. Hegar announced the Economic Development Fund will also receive $2.74 billion.
The funds transfers are required by a 2014 voter-approved constitutional amendment to allocate at least half of severance taxes for highways and economic development. The State Highway Fund can apply the revenue for use on non-toll highway construction, maintenance and right-of-way acquisition.
The transfers must occur within 90 days after the fiscal year’s end date, which was Aug. 31.
Highway funds cannot be used to apply revenue for purposes related to a toll facility tied to a public or private entity or to cover bonds issued for costs linked to a toll facility.
The fund collects revenue from sources that include fuel tax, federal highway reimbursements and vehicle registration fees.
State Legislature prepares to convene
The announcement of the severance tax transfer comes as state lawmakers prepare for the 2025 regular session.
Two House measures call for amending the rule that limits what work can be done with severance tax revenues routed to the highway fund.
HB542 would add “transit-oriented projects” to the applicable uses of severance tax revenues. A proposed constitutional amendment, HJR58, would permit affected revenues to also be used to construct and maintain transit-oriented projects.
The revision would effectively reduce the amount of revenue that otherwise would be made available for highway work.
Fuel tax revision pursuit
Another transportation funding pursuit that could soon receive attention at the statehouse would authorize an increase to the state’s fuel tax rate.
The Lone Star State collects a 20-cent fuel tax. According to the Texas Comptroller, the rate has remained unchanged since 1991. As a result, the state has relied on sources that include excess severance taxes to bolster transportation funding.
Efforts to raise the state’s fuel tax rate are common at the statehouse. During the previous regular session, multiple bills were introduced to increase the excise tax. The proposed increases have ranged from doubling the 20-cent rate to allowing the rate to be indexed to inflation, which would allow for regular increases.
One House bill that could receive consideration would index the excise tax to the highway cost index. The change would authorize the tax to be adjusted annually.
HB326 would allow the rate to increase or decrease each Jan. 1 based on the cost of certain highway projects.
Rep. Ray Lopez, D-San Antonio, has said that indexing would allow the tax rate to keep pace with the rate of rising costs of highway construction and would add long-term stability. LL
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