For the first time in six years, Idaho fuel tax revenue has declined as drivers faced with $4 per gallon gasoline shunned their cars and as fuel distributors blended tax-exempt ethanol to meet federal mandates.
The $5 million drop in fuel tax revenue in fiscal year 2008, which ended June 30, comes at an inopportune time: Gov. Butch Otter is trying to raise additional cash to fill a $240 million annual transportation funding shortfall.
From 2003 to 2007, revenue from Idaho taxes on gasoline and diesel fuel rose more than 10 percent, to $234.8 million in fiscal 2007, helped by population growth. In fiscal 2008, however, revenue slipped 2 percent, to $229.6 million.
But Otter doesn't want to raise the 25-cent-a-gallon gasoline tax. Otter aides said the volatility of revenue from Idaho's gas tax is a big reason. "Putting it on the gas tax isn't the best way to go," said spokesman Jon Hanian. "But who knows what will ultimately be decided?
Other alternatives under discussion include boosting registration fees or adding a tax to rental cars.
Drivers are increasingly hopping on public transportation, buying fuel-efficient cars such as hybrids or employing other strategies to reduce consumption as gas prices increase - a trend some say has encroached deep into Idaho's four-wheel-drive-loving agricultural heartland where gigantic pickups have long been a mainstay on the roads.
"I even spotted a hybrid in Soda Springs," said Suzanne Budge, a lobbyist for the Idaho Petroleum Marketers & Convenience Store Association. "That's not natural."
John Miller, The Associated Press
The sale of ethanol-blended gasoline is increasing rapidly in Idaho, crimping state revenue for highways because ethanol is exempt from the 25-cent state gasoline tax.
Fuel distributors that supply Idaho service stations - including Chevron, Shell, Stinker and others - have increased their ethanol blending, at least in part to meet a 2007 congressional mandate to blend 9 billion gallons of ethanol into the U.S. fuel supply this year.
Last year, 33 million gallons of gasohol - gasoline mixed with 10 percent ethanol - were sold in Idaho, out of more than 655 million gallons. In the first four months of 2008, 44 million gallons of gasohol were sold. If the trend continues, more than a sixth of all gas in Idaho this calendar year would contain ethanol.
That means the state would lose out on $3.3 million at a time when Gov. Butch Otter is urging lawmakers to drum up more revenue to repair the state's decaying highways.
The tax exemption is a longtime incentive to spur the industry's growth. A bill to repeal it stalled in committee during the 2008 Legislature, in part because of opposition from farmers who supply raw materials to ethanol plants in Caldwell and Burley.
"I am still intrigued by that idea," said Rep. James Ruchti, D-Pocatello, the bill's sponsor. "The state should be cautious about how long it subsidizes these sorts of ventures."
John Jackson of Boise-based Jackson Oil, which distributes fuel to more than 300 Shell, Texaco, Phillips and Chevron gas stations across the West, did not immediately return a phone call seeking comment on his company's decision this year to inject ethanol into gasoline once it arrives in Idaho along a pipeline originating in Salt Lake City.
Given the proliferation of ethanol, however, AAA of Idaho is calling for more transparency at service stations, after some of the group's members expressed fear that grain alcohol could damage older cars or boats' fiberglass gas tanks.
Idaho Department of Agriculture rules already require pumps that dispense ethanol-blended fuel to be labeled, but AAA spokesman Dave Carlson said more explicit notification may be necessary.
"More and more stations are switching over," said Carlson, who is assembling a list of locations that still sell gasoline without ethanol. "We think the marketplace should have enough transparency so that consumers know what they're getting when they pull up to any station."
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