You wouldn’t know a contested hike in state taxes on fuel began Tuesday by scanning local gas stations.
Average gas prices in Rhode Island dropped 1 cent per gallon from Monday, and were 2 cents less than the daily average in neighboring Massachusetts, according to AAA.
Yet the extra 3-cents-per-gallon tax — bringing the per-gallon tax to 41 cents — drew sharp criticism from Gov. Dan McKee. The gas tax was already scheduled to rise by 1 cent per gallon, from 38 to 39 cents, on July 1 before the legislature stepped in to aid the Rhode Island Public Transit Authority (RIPTA).
In a June 25 press conference, McKee blasted lawmakers for “unnecessary” tax and fee increases in the approved fiscal 2026 budget, including on gasoline.
House Speaker K. Joseph Shekarchi countered that the revenue from the extra tax on motorists was crucial to shoring up the state’s cash-strapped public bus system.
“RIPTA can’t afford service cuts,” Shekarchi said in an interview Tuesday. “They’re a lifeline for a lot of people.”
But the road to fiscal solvency for RIPTA requires more than raising prices at the pump. Looking to close a remaining $10 million fiscal 2026 shortfall, RIPTA is eyeing service cuts and fare increases, with a series of public hearings starting July 28.
Annual revenue from the state gas tax is already falling amid a rise in electric vehicles and a work-from-home culture that decenters driving. Transit advocates insist the state needs to look for alternative solutions.
“The gas tax is a losing proposition when relying on it to fund transportation infrastructure or public transit because it’s a melting ice cube,” said John Flaherty, senior adviser for Grow Smart RI. “The question is how to fund public transportation in a more stable and robust way, without there being a lot of pain and tradeoffs.”
McKee says the pain has already begun. He insisted the hike in state gas taxes would hurt working families while putting Rhode Island “out of line” with neighboring states.
Before Tuesday’s increase, Rhode Island already ranked 14th among states for motor fuel taxes, according to the Tax Foundation. Massachusetts remains at 27 cents per gallon, while Connecticut sits at 52 cents per gallon, including a state excise tax and a separate, 8% wholesale tax on petroleum products.
Flaherty acknowledged that Rhode Island’s higher gas tax, compared with Massachusetts, might sway drivers to fill up across state lines. Others may not even notice.
“Some people won’t give it another thought, they just go where it’s convenient,” Flaherty said. “Then you have people who have apps on their phone to check the price at every gas station.”
Shekarchi is among the latter, favoring Harss gas station on Warwick Avenue in Warwick for its competitive prices. He was unsympathetic to McKee’s declaration that raising gas taxes would hurt working families.
“I drive down West Shore Road in Warwick and pass 10 gas stations,” Shekarchi said. “The cost varies by 10 to 12 cents, depending on where you go.”
Will motorists even notice?
Compared with a new, $4 per person monthly fee on state health insurance premiums, the gas tax increase is not a noticeable burden for most people, said Michael DiBiase, president and CEO of the Rhode Island Public Expenditure Council.
The business-backed policy group typically opposes tax increases that could jeopardize the state’s economic standing. But DiBiase supported the move to raise gas taxes to create a sustainable revenue source for transportation — something the state has been sorely lacking.
In the fiscal 2025 budget, lawmakers used one-time federal pandemic aid to help RIPTA fill its deficit, making a return to the table inevitable.
The gas tax is a losing proposition when relying on it to fund transportation infrastructure or public transit because it’s a melting ice cube.
Throughout the 2025 session, lawmakers considered a host of ideas for more alternative RIPTA funding sources — a straight allocation of general revenue, money from fees on rideshare companies, a mileage-based user fee, and a greater share of the state gas tax.
Lawmakers last updated the state’s century-old gas tax in 2014, calling for a biennial adjustment in the per-gallon rate based on the Consumer Price Index. But subsequent adjustments only considered inflation from the year immediately prior, rather than the two prior years.
Sen. Samuel Zurier, a Providence Democrat, introduced legislation to ensure that the two prior years are included in biennial inflation adjustments. Zurier’s bill failed to advance out of committee, but he viewed the budget provision increasing the gas tax for RIPTA’s benefit as achieving the same goal.
Zurier sponsored a second bill, which also stalled in committee, to increase RIPTA’s share of gas tax revenue.
A short history of the gas tax
Money from the motor fuel tax has historically been divided across a host of state agencies and programs. More than half of funds go to the Rhode Island Department of Transportation, with a 27% share to RIPTA. Other beneficiaries include the Rhode Island Bridge and Turnpike Authority, the Office of Healthy Aging, and the Underground Storage Review Board, which receives half of a 1 cent-per-gallon environmental fee tacked on to state gas charges to address underground storage tank leaks. The other half of the 1-cent environmental fee has gone to RIPTA since 2009. A portion of the gas tax revenue is also used to pay down debt service on state transportation bonds backed by future federal highway funding.
The inflation adjustment approved in 2014 has gradually increased the per-gallon tax, from 33 cents when it took effect on July 1, 2015, to 38 cents as of July 1, 2025, according to the Rhode Island Division of Taxation. All of the extra revenue has gone to the state transportation agency, which received 21.25 cents per gallon in fiscal 2024. RIPTA, by comparison, has flatlined at 9.75 cents per gallon — including its 50 percent share of the environmental fee — since fiscal 2010.
With the extra 2 cents per gallon tax that began Tuesday, RIPTA now receives 11.75 cents in tax revenue on every gallon of gas, which is estimated to generate $8.7 million in fiscal 2026. An increased share of the state’s Highway Maintenance Account, funded by vehicle registration fees, will bring in an extra $5.9 million for RIPTA in fiscal 2026, for a combined $14.8 million boost in the state budget.
Shekarchi backed the pair of structural changes to state funding as “the most fair” option for helping to close RIPTA’s deficit.
“I stand behind it,” he said. “I’d do it again tomorrow.”
Efficiency study or ‘downsizing study’?
But Shekarchi also echoed McKee’s emphasis on a not-yet-complete study of agency operations to address the remaining shortfall.
“RIPTA has to run efficiently,” Shekarchi said, naming a slight increase in ridership fares, smaller buses and trimming management as potential ways to cut agency costs. He singled out the agency’s partnership with Rhode Island FC, offering free bus rides to attendees at the soccer team’s home games at its new Pawtucket stadium, as a questionable choice given its financial straits.
“That needs to be justified,” he said.
Shekarchi also flagged the agency’s decision to hire a lobbyist to advocate for its funding needs during the 2025 session. RIPTA hired New Harbor Group on May 23, with an $175 hourly rate, according to the state’s public lobbyist tracker. An initial filing from May 2025 shows RIPTA did not give New Harbor any money for lobbying work that month.
David Preston, president of New Harbor Group, said the firm’s agreement with RIPTA is for public relations, not lobbying. Seth Klaiman, executive vice president for New Harbor, registered as a state lobbyist for RIPTA as a precautionary measure due to conversations with lawmakers about the agency’s budget, Preston said in an email Tuesday afternoon.
Cristy Raposo Perry, a RIPTA spokesperson, did not directly respond to Shekarchi’s comments.
“We appreciate the continued support of the Speaker and the General Assembly,” Raposo Perry said in an emailed statement Tuesday. “We remain focused on using these resources as effectively as possible, guided in part by an ongoing efficiency study focused on optimizing operations. Our top priority is to grow ridership and ensure that public transit continues to align with and support the state’s broader economic goals.”
Flaherty suggested the oft-audited quasi-public agency has little if any operational wiggle room, evidenced by the study consultant recommending service cuts and layoffs to address the immediate, remaining agency shortfall.
“I honestly don’t look at this as an efficiency study, I look at it as a downsizing study,” he said. “It’s a roadmap of sorts about what services the agency can cut first while minimizing pain or damage.”
Even with the extra gas tax money, Flaherty feared deeper cuts ahead, especially given the state’s own projections for diminishing gas tax revenue. Estimates adopted by state budget analysts in May projected the revenue stream will drop by more than $7 million through the end of the decade. The estimates do not reflect the extra 2 cents per gallon included in the fiscal 2026 budget, which will appear in biannual projections in November.
Flaherty backed a “value capture” approach already used by other local and state governments in which area-specific taxes and fees on land and development near transit are used to pay for transit operations. Zurier, meanwhile, planned to spend his summer break researching what he suspects is an increasing share of state funds for federally funded highway projects, outstripping spending for public transit.
Shekarchi said he was open to ideas for more funding for RIPTA.
“Every year, everybody comes asking for more money, no matter who it is,” he said.
This story was originally published by the Rhode Island Current.
