While rising gasoline prices threaten Connecticut families’ summer travel plans, the trend is putting pressure on the state’s transportation program as well.
Gov. Ned Lamont’s budget director said Thursday that certain gasoline and sales tax receipts could “soften” this summer if prices remain elevated or turn worse in the coming months.
And a key business leader warned that the state’s transportation construction dollars likely won’t stretch as far, as the cost of diesel fuel, liquid asphalt and other petroleum-related products surge along with gasoline.
“I think we are, unfortunately, all at the whims of the federal government and the decisions of our current president, and this is a situation where we are all suffering,” Lamont’s budget director, Office of Policy and Management Secretary Josh Wojcik, said Thursday.
According to AAA, the average price of regular gasoline stood Friday at $4.55 nationally and $4.64 per gallon in Connecticut, with the latter up 60% since the U.S. and Israel went to war with Iran on Feb. 28.
That created a brief surge in the state’s $2.3 billion Special Transportation Fund, thanks to a percentage-based tax that reflects changes in the wholesale price.
But that tax also has a cap, which has been in effect since March 31. In other words, tax receipts from this source are maxed out — unless motorists start driving more.
That’s unlikely given current prices, not to mention a new forecast posted Wednesday on X by GasBuddy. The popular gasoline price-forecasting service projected an average retail price nationally of $4.80 per gallon between Memorial Day and Labor Day, provided supply lines from the Persian Gulf remain blocked.
But a continuation or worsening of high prices likely will start taking a toll on Connecticut’s second tax on gasoline — a fixed, 25-cents-per-gallon retail levy, Wojcik said.
He noted that also could cut into sales tax receipts from new vehicle purchases.
These two sources, collectively, are to generate more than $615 million for the STF in the next budget cycle, which starts July 1.
Why does that matter?
The fund is key to Connecticut’s efforts to rebuild its aging network of highways, bridges and rail lines — an initiative that was challenged even before the war with Iran started.
Roughly 40% of the STF is tapped for yearly principal and interest payments on the $1 billion-plus Connecticut borrows annually — and pairs with hundreds of millions on federal grants — to upgrade infrastructure. The rest covers operating costs for the Departments of Transportation and Motor Vehicles and supports public transit programs.
Lamont failed to convince lawmakers during his first two years in office in 2019 and 2020 that fuel and sales tax receipts were no longer sufficient to support a modern transportation system and that highway tolls were needed.
Legislators did create a highway mileage tax on certain commercial trucks, but that generates a small fraction of what tolls would produce.
The administration hasn’t renewed its push for tolls but began warning lawmakers one year ago that the transportation fund was on a collision course with insolvency by 2030.
Last November, one year after proposing greater borrowing to accelerate the infrastructure rebuild and ease congestion, the administration projected that effort would have to be rolled back due to financial concerns.
After borrowing $1 billion for transportation work in 2024-25 and pushing it to $1.3 billion this fiscal year, the administration had planned to reach $1.4 billion in the budget cycle that starts July 1.
But last fall, the Office of Policy and Management reported annual borrowing would drop to $1.2 billion starting in July, fall to $1.1 billion in the 2027-28 fiscal year and remain at that level for at least two more budget cycles.
The head of the Connecticut Construction Industry Association said Thursday those borrowed dollars may not buy as much as they did just a few months ago.
Contractors rely heavily on diesel fuel to power trucks and other heavy equipment, said association President Don Shubert. And the average price of diesel in Connecticut still at $5.81 per gallon on Friday, according to AAA, more than $2 greater than the pre-war price.
The cost of liquid asphalt and other petroleum-based products used in many construction projects also is up significantly.
Large construction projects often are scheduled to run for three to five years, Shubert said, adding that firms cannot anticipate huge cost increases that develop in just two months.
“If you take into consideration the inflation we’re seeing now, you’re going to have a reduction in the program” even if the state maintains its levels of construction spending, he added.
Wojcik said he doesn’t believe the potential weakening of gasoline and sales tax revenues would create insurmountable challenges. “We want to continue to make important transportation infrastructure investments,” he said.
But he also said it’s hard to forecast, given how much depends on President Donald Trump’s administration and the Persian Gulf conflict.
Lamont and state legislators took one step to shield Connecticut’s transportation program when they enacted the new state budget earlier this month.
Current law normally allows the state treasurer to use certain surplus dollars from the transportation fund to pay down transportation construction debt at an accelerated pace.
But Lamont and lawmakers captured $100 million of likely surplus from this fiscal year’s STF and transferred it to the fund in the budget cycle that starts July 1, ensuring it still would be available to mitigate problems created by surging gasoline prices.
Rep. Maria Horn, D-Salisbury, co-chairwoman of the Finance, Revenue and Bonding Committee, said there are advantages to paying off debt quickly, but lawmakers also want to shield the transportation rebuild and construction work from the economic chaos created by surging fuel prices.
“We were worried about the solvency of the [transportation] fund,” she said.
