Indiana’s Gas Tax Holiday could cost Marshall County Highway Department up to $1.5 million

A three-month tax holiday on gasoline that is saving drivers nearly 62 cents per gallon could come at a steep cost to the Marshall County Highway Department, officials warned this week.

During a special joint work session between the County Commissioners and County Council on Tuesday afternoon — and again at the Council's regular meeting Tuesday evening — local leaders grappled with the potential financial fallout from the state-mandated tax suspension, which eliminates both the $0.36-per-gallon Excise Tax and the $0.26-per-gallon Gasoline Usage Tax on fuel sales.

Highway Superintendent Jason Peters told council members the impact on Motor Vehicle Highway (MVH) funds could be severe. "Due to the suspension of the gas tax, our MVH funds could go down drastically," Peters said. While he acknowledged some uncertainty in the final numbers, Peters said he has heard projections as high as a 50% decrease, which would translate to an estimated $1.5 million loss in revenues for the department.

State reimbursement remains a possibility, Peters noted, as he has heard the state may cover the shortfall using funds it currently has on hand — but with no timeline attached.

Council President Tim Harmon said the picture came into sharper focus after a conversation with State Senator Mike Bohachek. "He told me in August that the county can expect a 50% reduction," Harmon said.

Running his own calculations, Harmon added up revenue from Local Road and Streets (LRS) funding and the two MVH funds, arriving at a combined monthly average of $507,000 across the three sources. Despite the daunting numbers, Harmon struck a cautiously optimistic tone. "We have a good amount of reserve in the General Fund to handle this, I think," he said. "The state has a pretty good surplus this year, and I think they would use some of that surplus to reimburse us."

Peters echoed the need for fiscal discipline regardless of outcome. "Going forward, I know we need to watch our spending so we don't get behind the 8 ball," he told council members.

During the joint work session, Harmon noted that while the Highway Department holds money across three separate funds, the state has placed strict controls on how each may be spent. He suggested the county reach out to state legislators to request that restrictions on those funds be loosened, giving the department more flexibility to weather the shortfall.

Commissioner Stan Klotz offered another avenue for relief, reporting that he had spoken with a contact at the Association of Indiana Counties (AIC) who indicated that discussions are already underway with Governor Mike Braun about providing reimbursements to counties at a later date. Klotz also noted that the county recently received $1.4 million in supplemental distribution funds that could be deployed to help bridge the gap in the interim.

AIC has also floated the idea of a fund-to-fund loan drawn from the Rainy Day Fund — though that option comes with a significant condition: any borrowed amount would have to be repaid before the end of the calendar year.

Commissioner Jesse Bohannon framed the central question facing county leaders plainly: "Do we deem this to be a rainy day and choose to dip into some of our surpluses and follow through with our road plan this year and face reduced revenue from the state — or do we pull back in fear that they aren't going to reimburse us later?"

Bohannon recommended using supplemental distribution funds over the next year or two to replenish whatever is drawn from the rainy day fund, or scaling back this year's road improvement plan. Fully funding that plan as originally envisioned leaves the highway department roughly $1 million short under current conditions.

No final decisions were made at Tuesday's meeting. County officials indicated they will continue monitoring guidance from state lawmakers and the governor's office before committing to a course of action.