Patrick, Nichols: Put Car Sales Tax Toward Roads

Lt. Gov. Dan Patrick publicly backed a plan Wednesday to boost transportation funding by billions of dollars a year by dedicating some of the sales tax already collected on car sales to road work.

Patrick said he supported a proposal from Senate Transportation Chairman Robert Nichols, R-Jacksonville, that would ask voters to amend the Texas Constitution to dedicate any vehicle sales tax revenue beyond $2.5 billion annually to the state's highway fund. Nichols' plan would start in fiscal year 2018; until then, all of the vehicle sales tax collected — about $4 billion annually — would continue to go to the state’s all-purpose general fund.

“This is a very sound approach that Sen. Nichols has and we are going to move the bill,” Patrick said.

Nichols estimated that his measure, Senate Bill 5 and Senate Joint Resolution 5, would provide about $2 billion a year to transportation beginning in 2018. That figure is expected to grow to $3 billion over the next decade — the result of growth in the state’s population (and a corresponding rise in car purchases) and inflation, which should lead to Texans paying more sales tax on those purchases.

“The important thing is in time it grows and it grows at approximately 3.5 percent,” Nichols said.

Nichols said Texans will appreciate the logic of the sales tax they pay on vehicles going to road work. He said his proposal will be worded to ensure that the money would only go to “non-tolled roads and bridges.”

A key benefit of the proposal would be that the revenue stream is fairly predictable, giving the Texas Department of Transportation the lead time to plan projects more efficiently, said Nichols, a former member of the Texas Transportation Commission, which oversees the agency.

“It’s not so much how much they get next year or the year after,” Nichols said. “TxDOT needs to know six years out, eight years out so we can do the long-term projects that are needed in this state.”

Both Patrick and Gov. Greg Abbott had expressed support for Nichols’ plan on the campaign trail.

Adding to the proposal’s momentum, Senate Finance Chairwoman Jane Nelson, R-Flower Mound, has signed on as a co-author to Nichols’ bill, a marked contrast from the 2013 session. That year, then-Senate Finance Chairman Tommy Williams was the most outspoken opponent of dedicating the vehicle sales tax to the highway fund.

Williams, who is no longer in the Senate, said at the time that the plan would become problematic for future legislatures. He said that over time, the portion of state tax revenue that got automatically dedicated to roads would balloon. He was widely viewed as the main impediment to Nichols’ proposal reaching Gov. Rick Perry's desk. 

“It’s easy and appealing unless you’re writing the budget,” Williams said in 2013.

Some Democrats have also expressed concern that permanently dedicating such a large portion of the state's sales tax to roads could hamstring future legislatures. 

TxDOT has said it needs between $4 billion and $5 billion a year in additional funding to keep congestion from getting worse as the state’s population grows. In November, voters overwhelmingly approved Proposition 1, which amended the constitution to dedicate some oil and gas production taxes to transportation. That measure has already given TxDOT more than $1.5 billion in revenue, with more expected to come. However, that funding stream will dry up whenever the current oil drilling boom ends.

Additionally, state leaders have expressed an interest in boosting TxDOT's funding by $600 million annually by finding other ways to fund non-transportation-related expenses currently funded by the gas tax.

Speaking with reporters on Wednesday, Nichols and Patrick also expressed concern over troubles TxDOT has had with its tolling operations. TxDOT signed a five-year $100 million contract with Xerox last year for the company to take over the state's tolling operations, including billing and customer service. The new system has been riddled with problems, which have frustrated and confused drivers. Last week, TxDOT and Xerox officials said the company was training more people for its Texas call centers to address long wait times. TxDOT has fined Xerox $177,000 in damages related to the contract, TxDOT spokeswoman Veronica Beyer said.

“TxDOT was assured by Xerox that the problem would be solved,” Nichols said. “I think they threw a lot of manpower at it, but they did not fix the fundamental problem, so we’re back to the drawing board.”

Nichols said both TxDOT and Xerox have been invited to the Senate Transportation Committee meeting on Feb. 11 to respond to problems with tolling operations.