Testimony of Gordon Proctor
Director Ohio Department of Transportation
Subcommittee on Clean Air, Wetlands, Private Property and Nuclear Safety
Committee on Environment and Public Works
United States Senate
June 14, 2000

Chairman Inhofe, members of the committee, I am Gordon Proctor, Director of the Ohio Department of Transportation. Thank you very much for this invitation to testify before the committee. I would especially like to thank Senator Voinovich for helping to provide me this opportunity to address an issue that is of particular importance to Ohio.

The committee today is discussing the role of ethanol as a motor fuel and a fuel additive. Coming from an agricultural state, I understand the importance of ethanol's use to the agricultural industry. I also am aware of ethanol's role as a fuel oxygenate, and as a domestically-produced energy source. I am not here to speak against ethanol or the strategy of promoting its use.

As a state director of transportation, I would point out to the committee an unintended consequence that has befallen Ohio as a result of increasing ethanol consumption. Under the funding formula adopted in the Transportation Equity Act for the 21st Century, TEA-21, Ohio's federal appropriation is determined in large part by our contribution to the Highway Trust Fund. At the time of enactment, this was a welcome move for Ohio, and one that Ohio supported. However, there was a consequence that neither Ohio, nor apparently the appropriators, anticipated.

This consequence was the dramatic increase in the use of ethanol caused by national market forces. I am neither an ethanol nor petroleum expert, but apparently because of continued depressed corn prices and because of the continued federal tax reduction on ethanol, the use of ethanol-blended gasoline in Ohio has soared from 19 percent to more than 40 percent of all gallons of gasoline sold at the pump. Because ethanol-blended fuel is taxed differently from petroleum fuels, the increase in ethanol use has significantly decreased the amount of revenue credited to Ohio in the Highway Trust Fund. As you know, there is a 5. 4 cent per gallon federal tax break on each gallon of ethanol-blended gasoline sold. In addition, 3.1 cents of the tax that is collected on ethanol is credited to general revenue funds and not to the Highway Trust Fund. In other words, Ohio's contribution to the Highway Trust Fund is reduced by 8.5 cents for each gallon of ethanol-blended fuel sold in Ohio. I expect ethanol use will continue to increase and will continue to reduce Ohio's trust fund contributions.

The sums involved are substantial. For Ohio, these reduced contributions to the Highway Trust Fund reduce Ohio's federal highway funding by $185 million annually. To put that number in perspective, it equals 21 percent of Ohio's total federal obligation ceiling, it equals two-thirds of our state's entire new construction budget and it equals the amount ODOT budgets for routine bridge repair and replacement for an entire year.

The situation appears to be unique to Ohio because we are both a large consumer of ethanol and a donor state. For donee states, other provisions in TEA-21 appear to mitigate the effect of rising ethanol use because those states' appropriations are not tied directly to their Highway Trust Fund contributions.

Please let me emphasize. I am very appreciative of Congress's efforts on behalf of TEA-21 and the unprecedented appropriations the Act has provided. Let me also emphasize, that Ohio has received the minimum appropriations guaranteed by the Act. I do not want to imply otherwise. What Ohio has not realized, however, is a commensurate increase of growing Highway Trust Fund dollars because while fuel consumption in Ohio has risen, our contributions to the Highway Trust Fund have been stunted by the way ethanol is taxed.

This situation exacerbates Ohio's donor state status. We in Ohio have the tenth largest highway network, the fifth highest volume of traffic, the fourth largest interstate highway network and the second largest inventory of bridges in the country. While our traffic and congestion have risen, our federal receipts have not risen commensurately because of the unintended consequence of the ethanol issue.

I would ask for your consideration in two ways. First, I would ask, in any future consideration of highway funding formulas, that the use of ethanol be taken into account. Although it is national policy to encourage ethanol use, the cost of this policy is not spread uniformly across the states. Secondly, I would request, at the appropriate time and in the appropriate legislation, that the 3.1 cents of the ethanol tax that is credited to the general fund be redirected to the Highway Trust Fund. At least, that effort would continue directing transportation tax receipts into the Highway Trust Fund where they would accrue to Ohio.

Mr. Chairman, thank you again for this opportunity. I am grateful for the committee's time and its attention. I would be happy to answer any questions the committee may have.