As Fuel Taxes Dip, Will Road Funding Suffer?

The pandemic lockdown has adversely affected fuel tax revenues for Pennsylvania, the primary source of funds for road repairs and construction.

Fiscal year 2019-20 ended June 2020 and covered the three hardest hit months—April, May, June—the fourth quarter of the fiscal year. In that quarter, the gasoline tax collections came in 11.3 percent lower than in the fourth quarter of the 2018-19 fiscal year ($158.5 million vs. $178.7 million). Also, in that quarter diesel revenues were down 8.9 percent compared to the previous fiscal year ($31.7 million vs. $34.9 million).

This is in contrast to the first three quarters of the fiscal year (July 2019-March 2020). For the first nine months, gasoline tax revenues were up 10.6 percent over fiscal 2019 ($395.4 million vs. $357.5 million), while diesel taxes were fairly flat, down less than one percent. For the fiscal year as a whole, the gasoline tax came in 8 percent less than the previous fiscal year while the diesel tax finished 2.2 percent lower.

The pandemic has caused everyone to rethink how things are being done. Currently, all road maintenance and construction projects in Pennsylvania are subject to the state’s prevailing wage law. The prevailing wage law mandates that a minimum wage, typically the union wage, be paid on all projects.  It also mandates that fringe benefits be provided. If a package is not provided, then the worker must be paid the monetary equivalent. That equivalent is subject to all payroll taxes whereas a benefits package is not. This forces non-union shops to pay more which, if they win a bid, gets passed onto the taxpayers.

The higher costs of prevailing wages force fewer roads to be repaired/built. The time has come to end Pennsylvania’s prevailing wage mandate.

Read the full policy report here.