Indiana lawmakers on April 21 approved legislation that will provide $1.2 billion annually in new transportation funding beginning in 2024.

House Bill 1002 will:

  • Increase state motor fuel taxes by 10 cents-per-gallon (effective July 1, 2017) indexed to inflation for the next seven years (capped at a 1 cent increase per year);
  • Gradually shift the entire sales tax on gasoline from the General Fund to the State Highway Fund, beginning in 2020 (currently, only 14.286 percent is deposited into the motor vehicle highway account and 85.714 percent is deposited into the General Fund);
  • Create a new $15 annual vehicle fee;
  • Institute a $150 annual fee for electric vehicles and $50 for hybrid vehicles;
  • Permit the Indiana Department of Transportation to study tolling as a possible future revenue source, and submit a waiver asking the federal government to allow the state to approve tolling.

The bill, which includes the first state gas tax increase since 2003 (legislatively approved in 2002), was proposed by Indiana House Republicans on Jan. 4 and originally passed the House 61-36 on Feb. 16. The Senate voted 34-13 on April 4 to advance an amended version of the legislature’s transportation funding plan, which added a cigarette tax (a proposal Gov. Eric Holcomb (R ) strongly opposed), phased out a moratorium on corporate income taxes, and required Indiana businesses and workers get priority on projects. The House and Senate called a conference committee to negotiate a compromise on the bill, and an agreement was announced April 19. On April 21 the House voted 69-29 to approve the measure, followed by the Senate shortly after midnight on April 22 with a vote of 37-12 for final approval.

The bill now goes to Gov. Holcomb, who had highlighted transportation infrastructure improvements as one of the five pillars of his 2017 legislative agenda. Upon announcement of the compromise the governor stated, “I congratulate state lawmakers—particularly House Speaker Bosma, Senate President Pro Tem Long, state Reps. Soliday and Brown, and state Sens. Kenley and Crider—for their plan that will strengthen our global reputation as the “Crossroads of America.” This plan provides the tools necessary to maintain what we have, finish what we started, and invest in the future.”

Upon passage of HB 1002, bill sponsor Rep. Ed Soliday’s (R-Valparaiso) said, “We have a responsible 20-year plan that supports safe roads and bridges and gives a lot more money for local infrastructure. This comprehensive legislation is backed by years of data, providing a historic investment for state and local infrastructure without creating unnecessary debt. This measure is based on compromise and a lot of people working as a team to produce the largest investment in Hoosier history that will have countless positive benefits for our economy for decades to come.”

Update: Gov. Holcomb signed HB 1002 into law on April 27.