Higher gasoline prices might pump up state tax revenue - That would help with budget gap, unless drivers cut back on fill-ups

www.democratandchronicle.com THE ASSOCIATED PRESS

(February 23, 2003) — ALBANY — From Albany to Buffalo, motorists are feeling the unwelcome pinch in their wallets as gasoline prices at the pumps continue their spike of recent weeks. Motorists’ losses could be New York’s gain. The state could receive a surge in revenue if the cost of gas and diesel fuel maintains this trend, because the state charges 4 percent sales tax on gas sales, or 8 cents a gallon if the average price of motor fuel reaches $2 a gallon. On a 10-gallon fill-up, that could be a tidy 80 cents for the state. Analysts blame the price boost on tensions in the Middle East and a strike in Venezuela that has crippled that nation’s petroleum industry. This turmoil is potentially good news for New York state, which is struggling to plug an $11.5 billion hole in its budget over the next 13 months. Even without the price surge for most of this fiscal year, the state expects to raise more than $500 million from its motor fuel tax. But while prices at the gas pump might inject much-needed revenue into state coffers, the harsh winter New York is suffering through is increasing the cost to the state of heating its buildings. So far this winter, the state has spent $3.82 million to heat the state Capitol and the sprawling Empire State Plaza complex in Albany where 16,000 state employees report to work. That’s an increase of more than 50 percent compared with the same period last year, when the state spent $2.13 million. “Because of the colder temperatures and the longer winter that we’re experiencing, our costs this winter are higher because of the increased demand for fuel,” said Jennifer Meicht of the Office of General Services. The state heats its buildings with a combination of oil and natural gas, depending on price and supply and demand. Last winter, the state used only gas, which is environmentally cleaner and cheaper, to heat buildings. This month, the state paid $1.12 a gallon for heating oil, up from 89 cents in October 2002. Last week, the U.S. Energy Department, citing low stocks -- as well as higher natural gas prices -- said heating bills could be 50 percent higher this year than last winter. If the cold winter persists, refiners will need to keep up the heating oil supply and postpone their push to making gasoline. If so, gasoline inventories may not recover, leading to higher gas prices this spring and summer, analysts said. Across New York, gas prices have reached new highs. In the Albany area, the average price for a gallon of regular unleaded gas Saturday was $1.70, up from $1.16 a year ago, according to the American Automobile Association. In Buffalo, it was $1.74 a gallon, up from $1.17. In New York City, it was $1.81, up from $1.29. In Rochester, regular gas was $1.73 a gallon Thursday vs. $1.19 a year ago. The Pataki administration disputes that the state benefits from higher gas prices at the expense of motorists. Officials contend that drivers tend to purchase less gas as prices skyrocket, essentially offsetting a revenue surge when gas prices spike. Robert Sinclair Jr., a spokesman for the American Automobile Association of New York, disagreed. He said that, contrary to popular belief, people don’t buy less gas when prices are expensive but rather shop around. “In the United States, we are tied to our vehicles, so folks don’t have a choice.”