Minnesota Legislature approves transportation budget, fuel tax increase

Minnesota state lawmakers have reached agreement on a two-year, $1.3 billion transportation budget that creates new revenue to repair roads and bridges. The deal includes a fuel tax increase.

The state has not increased transportation revenue since 2008. The action followed the Interstate 35W bridge collapse in Minneapolis.

Nearly two decades later, the Minnesota Department of Transportation says there is a $27 billion gap over the next 20 years that must be addressed.

Transportation tax and fee increases

The legislature voted along party lines to send to Gov. Tim Walz a two-year spending plan that allows the state to address road, bridge, and transit needs.

The final version of HF2887 emerged from a conference committee made up of select members from both chambers to hash out differences.

Rep. Brad Tabke, DFL-Shakopee, said the bill is a major victory for the state.

“This transportation bill will help every mode and every county in the state of Minnesota,” Tabke posted on Twitter.

Lawmakers agreed to add a new 50-cent fee to retail deliveries in the state that total more than $100. The fee will be collected on everything from Amazon deliveries to food deliveries.

House lawmakers previously approved a 75-cent delivery fee on all retail deliveries. The Senate did not include a delivery fee.

Also included in the final version is a 0.75% metro area sales tax increase to cover Twin Cities transit improvements.

Another provision routes vehicle repair and replacement parts purchases to the state’s road fund. The money now is sent to the general fund.

Most vehicle registration fees, driver’s license fees, and new vehicle sales tax will also increase.

The final version earmarks the biggest portion of funds – $194 million – for passenger rail linking the Twin Cities and Duluth.

The Corridors of Commerce program would be allotted $153 million. The House initially authorized $50 million for the program while the Senate designated $350 million.

Another $200 million is earmarked for state road construction projects. Local road and bridge projects are slated to receive $36 million.

Most new taxes and fees will take effect on Jan. 1. The delivery fee will begin collection on July 1, 2024.

Fuel tax

The most controversial provision in the bill is a fuel tax increase that was added while in conference committee.

The provision allows the 28.5-cent excise rate on gas and diesel purchases to be indexed to inflation. There is a 3% cap on annual increases.

The change is estimated to increase the excise rate by a nickel over four years.

Critics say it was wrong to add the provision to the bill at the last minute without allowing both chambers to fully discuss the option. They add that the tax and fee increases in HF2887 are unnecessary because the state has a $17.5 billion surplus.

It doesn’t matter what feel-good name you call a gas tax increase, it’s still jacking up costs on Minnesotans while the state sits on a $17.5 billion surplus. #mnleg https://t.co/96UMOOUW1u

— MN House Republicans (@mnhousegop) May 18, 2023

Also of note

The final version also includes a requirement to study speed cameras. Starting Aug. 1, holding a cellphone while driving also will be prohibited.

One more notable provision clarifies that drivers must move over for any vehicle stopped along the roadside with lights flashing. If lights are not flashing, the move-over requirement would still apply when at least one person is “visibly present outside the vehicle on or next to a street or highway having two lanes in the same direction.”

State law now applies the protection to stopped emergency vehicles with flashing lights activated. Vehicles covered under the rule are ambulance, fire, law enforcement, maintenance, construction vehicles and tow trucks.

The move-over rule revision takes effect July 1. LL

More Land Line coverage of Minnesota news is available.