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ODOT budget bill contains potential veto targets

Lawsuit looms over use of proceeds from fuel tax

Both Republican-controlled houses of the Ohio General Assembly voted unanimously Wednesday to adopt a $7.8 billion, two-year budget for the Ohio Department of Transportation, but a pair of provisions in the bill could be killed by line-item vetos when Democratic Governor Ted Strickland sits down to sign the measure later this week.

In addition, the elimination from the final version of the bill of a proposal to earmark the proceeds of the state's new Commercial Activity Tax on motor fuels for highway construction appears likely to provoke a legal challenge.

Ohio's Constitution gives the governor the authority to veto any single provision in an appropriations bill and a spokesman for Strickland said two provisions in the ODOT budget bill (House Bill 67) are in the crosshairs.

The first provison requires ODOT to build those highway projects designated as Tier I projects by the Transportation Review Advisory Council on December 20, 2006, and prohibits the department from undertaking any other major projects until those Tier I projects are under construction.

Republicans on a House-Senate conference committee that produced the final bill said this provision was necessary to ensure that local communities that have planned and lined up funding for their share of these Tier I projects will not suddenly see their projects postponed by changing priorities.

Other legislators warned that tying the department's hands would eliminate the flexibility inherent in the TRAC process and could lead to other "unintended consequences."

The second provision, which also was inserted in conference committee on Tuesday, proposes to repeal the governor's authority to increase the rate of the new Commercial Activity Tax (CAT).

When the tax was enacted in 2005, the initial rate was set at 0.26%, with the proviso that the administration could adjust the rate if revenues from the gross receipts tax came in 10% above or below estimates.

Republicans on the conference committee contended that since the administration's projections are that CAT revenues will exceed projections through 2010, the governor does not need the authority to increase the rate.

Missing from the final version of the bill passed Wednesday was a provison adopted in the House of Representatives that would have given ODOT the proceeds from collection of the CAT on motor fuels beginning July 1.

Petroleum products were exempted from the CAT when it was created two years ago. Lifting that exemption is expected to generate nearly $200 million in revenue over the next two years, revenue that Strickland is counting on to help balance his General Revenue Fund budget.

The state Constitution provides that, "No moneys derived from fees, excises, or license taxes relating to registration, operation, or use of vehicles on public highways, or to fuels used for propelling such vehicles, shall be expended for other than costs of administering such laws, statutory refunds and adjustments provided therein, payment of highway obligations, costs for construction, reconstruction, maintenance and repair of public highways and bridges and other statutory highway purposes . . . . "

At least one construction industry organization has already vowed to file a lawsuit challenging the administration's plan to divert the CAT tax proceeds on motor fuels to the General Revenue Fund. By law, such a lawsuit must be filed during the month of July 2007.

Other notable provisions contained in the ODOT budget bill include:

  • Creation of the position of Inspector General within ODOT to investigate "wrongful acts or omissions" committed by department personnel.
  • Reduction in the motor fuel "shrinkage allowance" enjoyed by petroleum wholesales and retailers, with the $30 million in proceeds going to fill a hole in the budget of the Ohio Highway Patrol. A task force was appointed to study ways of financing the patrol's long-term operations from sources other than the state's gasoline tax.
  • Creation of an Ohio Transportation Task Force to study "the state's ability to provide for the safe and efficient movement of freight within this state during the next two decades," including the state's policies on transportation infrastructure
    development, funding, and investment.

In order to take effect on July 1, the start of the state's new fiscal year, the budget bill must be signed into law no later than March 31.

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