S.D. ponders future of roads as Democrats spar over gas tax holiday

Hillary Clinton favors suspending the federal gas tax for three months this summer.

By DENNIS GALE
The Associated Press

5/1/2008

SIOUX FALLS, S.D. — As South Dakota lawmakers wonder what the future holds for highway repairs, the campaigns of the two Democrats vying for delegates in the state's June 3 presidential primary sparred Thursday over the worth of a summer vacation from the 18.4-cent-a-gallon federal gas tax.

The federal highway trust fund, which helps states pay for road work, gets money from the 18.4 cent-a-gallon federal gasoline tax.

Federal money typically has paid for 75 percent of highway construction in South Dakota, but those funds are uncertain in tight budget times. Officials have predicted federal gas tax revenues could be $4 billion to $5 billion short by the end of next year, and state officials across the nation worry federal road aid may decline.

South Dakota has spent much of its highway reserves in recent years to get work done before inflation drove construction costs higher. The state road reserve fell from about $90 million three years ago to $13 million last year.

Democratic presidential hopeful Sen. Hillary Clinton favors suspending the federal gas tax for three months this summer.

Her rival, Sen. Barack Obama, has called it a gimmick.

As the campaigns ramp up their fight in South Dakota, Obama supporters provided state Sen. Alan Hoerth of Aberdeen and Federico Pena, former energy and transportation secretary during the Bill Clinton presidency, to reporters by telephone to debunk the tax holiday.

The federal trust funds to South Dakota would drop about 28 percent, said Hoerth, a member of the Legislature's Appropriations Committee.

Figures provided by the Obama campaign quoted the American Road and Transportation Builders Association says saying a gas tax holiday could cost South Dakota more than $46 million in federal highway funds and threaten more than 1,600 South Dakota highway-related jobs.

"Our history has been in the past that we currently receive $2 for every $1 that we put in, which has funded the state highway fund about 75 percent of our construction and maintenance costs," Hoerth said. "Of course, a substantial reduction of funding would be just devastating, specially during the summer."

Pena said the federal gas tax amounts to about 30 cents a day for the average driver. If the gas tax is dropped for three months, consumption and demand will rise — as will oil prices, he said.

Whenever demand goes up, the price of a barrel of oil goes up," Pena said. "It could go up to $150 or even more."

He also said it would give oil companies a chance to take advantage of the situation and raise gas prices at the pump to make even a little more money.

Clinton's campaign provided a release that said she would pay for the temporary suspension of the gas tax and the 24.4 cent-a-gallon tax on diesel by enacting a windfall profits tax on oil companies.

"This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways," the campaign release said.

"I think a windfall profits tax is certainly an option that we should examine very carefully, and it could be very beneficial," Pena said.

But the real question, he said, involves who is likely to get the job done as president: "Is it a candidate who has been receiving money from oil and gas companies and from their lobbyists and their PACs or is it someone like Barack Obama, who has said 'I'm not going to receive any money from those PACs and those corporations because I want to be independent.'"

The Los Angeles Times has said Obama got $46,000 from oil company executives, family members and employees in March.

"He might say he'll stand up to the oil companies, but he’s the only candidate who voted for the Bush-Cheney energy bill that was written by energy lobbyists and has been called the best energy bill corporations could buy," said Phil Singer, a Clinton campaign spokesman.

"With gas prices this high, talk is cheap. The American people need solutions."