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Governor's Column: Road Funding



            Office of Gov. Dennis Daugaard

500 E. Capitol Ave.

Pierre, S.D. 57501






FOR IMMEDIATE RELEASE:  Wednesday, May 21, 2014

CONTACT:  Tony Venhuizen or Kelsey Pritchard at 605-773-3212


EDITORS/NEWS DIRECTORS:  Please consider the following column from Gov. Dennis Daugaard. This week’s column is being issued early due to Memorial Day Weekend.



Road Funding:  Looking To The Future


A column by Gov. Dennis Daugaard:


South Dakota is fortunate to have a good state highway system. In a recent column, I wrote that our state highways are in good condition, compared to recent times, according to the state Department of Transportation’s criteria for evaluating roads. Local and county highway conditions vary.


Highway construction and maintenance are funded with dollars from multiple sources. License plate fees are primarily used for local and county roads. Our major source of funds for state highways is the state motor fuel tax, or “gas tax.”


The state gas tax is unusual, because it is imposed PER GALLON, rather than PER DOLLAR. Here’s an example. If you buy a gallon of milk for $3.50, you will pay a state sales tax of 4 percent, or 14 cents. If you get a better deal and pay only $3 for that gallon of milk, your 4 percent tax is only 12 cents. The sales tax paid varies, based on the purchase price.


The gas tax works differently. Our state gas tax is 22 cents per gallon, regardless of the purchase price. If a gallon of gas is $3, you pay 22 cents per gallon. If prices go up to $4 a gallon, you still pay 22 cents per gallon.


That might not seem like a big deal, but over time it can create a big problem. The state gas tax rate was last set in 1999, when the price of gas was about $1.50 a gallon. In the fifteen years since, the effect of inflation means that gas tax only buys half as much road construction as it did in 1999.


This is an even bigger problem because we use petroleum-based products to build our roads, and to run road construction equipment. Thus, the price of gas is very closely tied to the cost of highway maintenance and construction. As the price of gas has gone up over the past fifteen years, our costs have also gone up – but we continue to collect the same 22 cents per gallon.


Why then are our state highways are in such good condition? When the Great Recession hit in 2008, our federal government responded with a number of spending strategies to stimulate the economy, including a massive, one-time federal investment in roads.


Our state highways are in good condition today because we used our share of those federal dollars to accelerate highway construction plans. This was helpful, but those were one-time funds. 


With highways, as with our homes or cars, “a stitch in time saves nine.” Regular maintenance pays, and it is much cheaper to maintain a good road than to repair a bad road. Our state needs a plan to keep our state highways in good condition.


You may wonder why I’m raising this as an issue. Our state highways, as well as county and township roads, are the network that allows our ag producers, manufacturers and tourism industry to thrive. 


Over the next year, a legislative study committee will be meeting to evaluate South Dakota’s long-term needs for state and local transportation funding. In the past, I have promised to oppose tax increases, and I have kept that promise. As we consider our future transportation needs, however, I want to participate in the discussion without taking any options off the table, including proposals to restore the purchasing power of the gas tax.


Should we settle for lower quality highways, or convert some paved roads to gravel? Should we shift some costs from the state highway system to the counties? Should we consider restoring the purchasing power of the gas tax?


I don’t know the answers to those questions, and public input will be important to this discussion. I want South Dakotans to know that we are considering every option so that we can maintain an excellent transportation system.