Kaine: Pump prices drag down state revenue

BY JIM NOLAN
Media General News Service
Published: June 16, 2008

State government is also choking on the rising prices at the pump.

Gov. Timothy M. Kaine says rising fuel prices are not only costing the government more to operate but also will contribute to reduced revenues coming into state coffers. That could alter state budget projections and finances and bring about more cuts, Kaine said.

“I’ll have to lay out the magnitude of that challenge,“ said Kaine, who is scheduled to present revised budget projections when he makes his annual report to legislators in August.

“Obviously, we’ve been through two rounds of expense tightening,“ the governor said. “One in November, where I reduced the state budget by $300 million cutting expenses. And then in February I had to do a $1.4 billion reduction in the prospective two-year budget,“ he added.

Additional costs can be seen in everything from fuel for state police vehicles and school buses to energy costs to air condition and heat state office buildings, prisons and community colleges.

“But we also have a revenue effect,“ said Kaine. “As gas prices go up, people drive fewer miles, and that reduces revenues to the state’s transportation fund.“

Kaine said he saw a recent statistic that showed Americans drove 11 billion fewer miles in the month of March than they did during March of last year. “So what we will see is increasing costs everywhere in state government and fewer transportation dollars,“ he added.

“There may well have to be more cuts,“ Kaine said. “But it’s too early to make that determination. But by August, we’ll know with some certainty.“

Transportation funding in the state is already facing a crisis.

None of the components of the governor’s proposed transportation package involve generating revenues from a gas tax, or the number of miles being driven in the state.

Kaine is seeking to raise $1 billion in revenue through increases in vehicle-registration fees, the auto sales tax, the grantor’s tax and regional sales-tax increases in Northern Virginia and Hampton Roads.

The proposal, which will be discussed at the upcoming General Assembly special session on transportation June 23, is intended to make up for a projected $385 million deficit in state highway maintenance and to replace revenues lost when the Virginia Supreme Court struck down the taxing powers of the regional transportation authorities in Northern Virginia and Hampton Roads.

Contact Jim Nolan at (804) 649-6061 or .