Nebraska’s fuel tax to go up 3 cents July 1

Nebraska’s fuel tax will likely go up three cents on July 1, to 26 cents per gallon.

That’s a half cent less than expected several months ago when state senators debated fuel tax issues.

But whether that hike will be reflected in prices at the pump is anyone’s guess, according to state Sen. Deb Fischer of Valentine.

“The fuel tax dropped four cents Jan. 1. And I don’t think people noticed, because gas prices did not drop 4 cents,” said Fischer, chairman of the Legislature’s Transportation and Telecommunications Committee.

“It will be interesting to see what prices do July 1, because they didn’t drop in January,” she said

This change in the state fuel tax is a result of Nebraska’s unique road financing system in which a portion of the per-gallon fuel tax is tied directly to the amount budgeted for road work.

This is called the variable tax and helps keep road funding stable. The variable tax can change twice a year -- on Jan. 1 and July 1 -- so that the state will collect the amount of money in the budget for the fiscal year, not much more and not much less.

Nebraska relies on the fuel tax to pay for all its roads, said Fischer.

“We don’t use general funds. We don’t bond,” she said.

Many other states have a gas tax plus they use sales and income tax, she said.

Nebraska gets a little money from motor vehicle registrations and some from the sales tax on motor vehicles, but the per gallon fuel tax is the main funding source for roads, she said. A little over a penny of the July increase is tied to $14.5 million senators added to the roads budget during the 2008 session.

Senators overrode a veto by Gov. Dave Heineman to increase the budget and thus the tax.

Senators decided additional funding was needed to combat double-digit percent inflation in road building materials.

Nebraska ranked 25th in gas taxes, based on a January 2008 comparison of state taxes.

At 26 cents a gallon, Nebraska would have moved to 18th to 20th.

The state gas tax average was 25.33 cents a gallon in January, based on American Petroleum Institute information.

Nebraska’s variable tax dropped dramatically in January because the state had taken in much more money than predicted from the fuel tax and vehicle sales from July to December, the first six months of the fiscal year.

In order to hit the budgeted amount by the end of the fiscal year, June 30, the variable tax dropped by 4 cents to 23 cents per gallon for six months.

Senators had expected the fuel tax to go up to around 26.5 cents in July.

But higher-than-expected revenue from motor vehicle sales reduced the need for the fuel tax revenue, said Steve Maraman, controller for the Department of Roads.

Fuel consumption is flat to declining, said Maraman. “But sales tax on new and used motor vehicles continue to come in higher than projected. So people are buying more vehicles than anticipated or more expensive than anticipated,” he said.

Fuel prices are averaging around $3.97 for regular in Nebraska, according to the American Automobile Association Web site. Twenty-nine states have gas averaging $4 or above.

Because prices are so high and because there are wild fluctuations, they are an emotional issue, Fischer said.

A week ago when Fischer drove to Lincoln she saw a wide range of prices from $3.95 in Valentine to$3.77 in Kearney.