October 2,1997 97-R-0999

TO:

FROM: James J. Fazzalaro, Principal analyst

RE: Gas Tax Changes Since 1983

You asked for a history of the changes to the state gasoline tax since the collapse of the Mianus River Bridge in 1983 and for information on the additional state agency expenses that the Special Transportation Fund (STF) has been required to support in recent years.

Attached you will find a copy of the final report of the 1995 Task Force on the Future of the Special Transportation Fund. Detailed answers to both of your questions can be found in this report. In summary, at the time of the Mianus River Bridge collapse in 1983, the state gasoline tax was 140 per gallon. All of the revenue was deposited into the state's General Fund since there was no dedicated transportation fund at that time. Initially, the General Assembly created only a small dedicated fund, taking 10 of the 140 tax and putting it into a special fund. In 1984, the governor presented the legislature with a comprehensive, 10-year transportation infrastructure renewal program. The legislature expanded the STF to accommodate the more extensive program. In the process the legislature approved a series of automatic incremental increases in the fuel tax totaling 90 during the 10-year period to follow. The fuel tax would be increased incrementally until it reached 230 per gallon by July 1, 1991.

The legislature began transferring certain state agency expenses to the STF in 1989 by moving the retirement costs for Department of Transportation employees. These actions were taken to relieve some of the General Fund's deficit. Annual STF surpluses, which were planned into the original program as self-liquidating over the 10-year initial planning timeframe made these transfers possible. The personnel, fringe benefit, and retirement expenses for all Department of Motor Vehicles (DMV) employees were transferred to the STF in 1991. This was followed by transferring all expenses associated with the Department of Public Safety's (DPS) motor patrol activities in 1992.

It was clear at the time of the 1991 transfer of DMV expenses that the STF would not be able to avoid future deficits if additional revenue was not put into it to cover the additional expenses. The legislature increased the fuel tax to coincide with the DMV expense transfer. This consisted of an initial increase to 250 per gallon on July 1, 1991 followed by eight incremental increases over the next few years that would bring the tax to 340 by 1996. The decision to transfer the DPS expenses necessitated a revision to the increase schedule enacted in 1991. A 1993 law made the scheduled increase to 340 effective on October 1, 1995, three months sooner than the 1991 law required, and added five more 10 increases for the next five calendar quarters. The last scheduled increase went into effect on January 1, 1997, bringing the gasoline tax to 390 per gallon.

Following considerable debate over the size of Connecticut's gas tax, the legislature enacted PA 97-309 which (1) reduced the gas tax to 360 on July 1, 1997, (2) reduces it another 30 to 330 per gallon on July 1,1998, (3) transfers budgeted DPS motor patrol expenses back to the General Fund in FY 1998-99, (4) transfers the associated DPS fringe benefit expenses in FY 1999-2000, and (5) transfers additional transportation-related revenues into the STF, including part of the petroleum products gross receipts tax.