Stateline Story

Lawmakers Exploit, Dread Soaring Gas Prices

When Hurricane Katrina came crashing ashore, it sent gasoline costs soaring - again - and sent state lawmakers scrambling to find ways to cope with the sky-high prices.

All summer, high fuel prices have given lawmakers opportunities to score easy political points, with legislators in several states putting pressure on their opponents to lower fuel taxes. But state officials also have had to grapple with the prospect that escalating energy bills could make it harder to keep state and local governments in the black.

Scott Pattison, executive director of the National Association of State Budget Officers, said state financial planners aren't panicking yet. He said budget officers are more worried about the possible long-term effects of high prices on the economy than the short-term impact on state ledgers.

With oil costs spiraling, state officials must worry about finding funds to fill the tanks of police cars, school buses and construction equipment at a time when, for most, money is scarce.

Arturo Perez, a fiscal analyst for the National Conference of State Legislatures said studies have shown that motorists so far aren't buying any less fuel, a reaction that could shrink gas tax dollars that flow to the states.

"Just because gas jumped to $2.50 doesn't mean you drop your Suburban and jump into a Honda Civic," he said.

Still, he said, states "clearly" are concerned about the run-up in fuel costs because the increases affect all areas of state operations. At the basic level, any department that needs to heat buildings or use vehicles could be affected.

The vast majority of states crafted their budgets while gas prices already were climbing. Those budgets took effect in July, so it's too early to tell how large of an effect escalating fuel costs will have, Perez said. "Nobody has a bare fuel budget at this point," he said.

In Maine, budget officials predict that higher fuel prices will cost state government an additional $3 million to $4 million.

Before Katrina ever threatened, Arkansas Gov. Mike Huckabee (R) already had directed his Cabinet officers to look for ways to reduce travel in light of higher gas prices. But he also raised the mileage reimbursement rate for state employees.

"We didn't want them to lose money doing their job," Huckabee spokesman Jim Harris explained.

Some oil-rich states actually have benefited from the price hikes. Oil taxes and royalties make up more than four-fifths of Alaska's general funds. High oil prices should boost Alaska's bottom line by more than a third, or roughly $600 million, for the current fiscal year, according to the Alaska Division of Legislative Finance.

But many politicians have used high gas prices to put pressure on the party in the driver's seat in their state capitols.

Republicans in the Wisconsin Assembly called on Democratic Gov. Jim Doyle to let them debate a temporary rollback of taxes on gasoline during a fall special session.

The GOP leader in the West Virginia Senate is leading a similar effort because, without action, the state's wholesale gas tax will increase by 5 to 8 cents a gallon in January. The wholesale tax, which is based on a statewide average of fuel prices, already jumped 1.5 cents this year.

"We already have a large influx of gas tax money," explained Senate Minority Leader Vic Spouse. "We have an increase. Let's keep that increase, but let's give the taxpayers a break."

It's the Democrats in Missouri, also in the minority, putting heat on Gov. Matt Blunt, a Republican, to include it on the agenda for a Sept. 6 special session.

The Democrats want to knock off 10 cents of the state's gas tax for two weeks and permanently exempt fuel for school buses. The Blunt administration quickly panned the idea as too expensive and potentially harmful to the state's credit rating.

Climbing gas prices have raised the stakes in a November election in Washington state.

Brett Bader, a spokesman for a group urging repeal of a a gas take hike recently adopted by the Washington Legislature, said most opposition to the new tax comes from voters' frustration over transportation planning. He argues that state officials worry too much about bike paths, carpool lanes and pedestrian walkways instead of relieving congestion.

Surging energy prices could help his cause.

"This adds fuel to the fire," Bader said. Voters will decide whether to repeal the tax through a ballot initiative on Nov. 8.

In North Carolina, the Legislature signed off on a measure giving NASCAR teams and airlines tax breaks on their fuel.

"It is a direct message to the motor sports industry that we are serious about making motor sports profitable and prolific in North Carolina," explained state Rep. Pryor Gibson, a Democrat who championed the measure.

Gas prices helped him sell the tax breaks, he acknowledged. "Was it the reason? No. Does it put a spotlight on an already sensitive issue? Yes."

In Michigan, House Democrats unsuccessfully called for a law mandating the use of ethanol and biodiesel, a move that would stretch gasoline supplies and help farmers in the state. Michigan Gov. Jennifer Granholm, also a Democrat, is ordering stricter inspections of gas stations.

Even when politicians do intervene, their efforts don't always pay off.

Hawaii is the state with the highest gas prices in the nation, according to the AAA.

On Sept. 1, it imposed a cap on the price of gasoline in the wholesale market, a move New Jersey legislators are now considering. But Hawaii lawmakers weren't reacting to the current upswing in prices when they wrote the law. They first passed a cap in 2002 and revamped the law last year.

Katrina hit the Gulf Coast the same week the caps finally took effect. Because the caps are based on mainland prices and are updated every week, gas prices in Hawaii could jump dramatically, too. The Honolulu Star-Bulletin predicted they would surge by as much as 27 cents, sending the price of a gallon of regular unleaded to $3.15 in Oahu.