Bond rating firm not alarmed by gas tax suspensions

Analysis differs from what Mass. officials have been saying

IN CONNECTICUT, Democratic Gov. Ned Lamont and the Democrat-controlled legislature responded to the sharp runup in fuel prices by passing a law suspending the state’s 25-cent excise tax on gasoline and eliminating bus fares statewide for a three-month period running from April 1 to June 30. For good measure, the Connecticut legislation tossed in a one-week sales tax holiday on clothing and footwear under $100.

Similar measures have been approved in Maryland, Georgia, and New York. Many other states, including California, are considering proposals that would offer some relief to residents.

In Massachusetts, calls on Beacon Hill for doing something similar have been dismissed as gimmicky and fiscally irresponsible. James Aloisi, the former secretary of transportation, said the push for suspending the gas tax is nothing more than a political stunt.

But now a Wall Street bond rating firm is suggesting the fiscal impact of a temporary gas tax suspension may not be that bad. On Tuesday, S&P Global Ratings said temporary state gas tax suspensions are unlikely to lead to rating changes on highway user tax-supported debt.

“To the extent that a temporary gas tax cut was made permanent, or debt service coverage was lowered to levels below an additional bonds test, further review could be warranted,” S&P said. “A greater risk is the potential long-term threat of reduced gas consumption from electric vehicles.”

The S&P analysis is very different from what Massachusetts political leaders have been saying.

“I think eliminating the gas tax in the long run would probably cost the Commonwealth a lot more money than they would save,” said House Speaker Ron Mariano. “When you look at what it will do to our bond rating and what it will do to the price of us borrowing money to finance the road and bridge projects that this money is committed to, we find ourselves in a very, very precarious situation.” 

Senate President Karen Spilka warned a suspension of the gas tax would “most likely have a detrimental effect on our bond ratings” and suggested the better response would be to purchase an electric vehicle and avoid gas stations altogether.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

“I’ve spoken to some people who own total electric vehicles, and they are not paying as close attention as you and I might be to the price of gas,” Spilka said. 

Gov. Charlie Baker, after initially signaling he might be open to eliminating the state gas tax temporarily, shifted gears and instead continued pushing for a package of tax cuts he included in his budget proposal for fiscal 2023. The House, at least so far, has rejected the governor’s approach as well. The House Ways and Means Committee will release its state budget proposal Wednesday.