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Gov. Bill Haslam, left, and John Schroer, right, commissioner of transportation, listen to a discussion during a meeting of Haslam's 15-stop transportation funding tour Thursday, Aug. 13, 2015, in Nashville. (AP Photo/Mark Humphrey)

NASHVILLE — During informal discussions with Republican lawmakers about fuel tax increases he's likely to propose this year, Tennessee Gov. Bill Haslam and state Transportation Commissioner John Schroer have "kicked around" a 9-cent increase in the gas tax and a 12-cent boost on diesel, a top lawmaker says.

"Those are the numbers that the governor and TDOT have kicked around — but not in a formal proposal," Senate Republican Caucus Chairman Bill Ketron of Murfreesboro said in a recent interview. "It may be in his proposed budget."

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Republican Gov. Bill Haslam speaks at a news conference at the state Capitol in Nashville, Tenn., on Dec. 1, 2015. (AP Photo/Erik Schelzig)
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Tennessee Transportation Commissioner John Schroer.
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Other lawmakers have cited similar figures, sometimes a bit lower, but spoke on condition their names not be used.

Ketron said whatever figure Haslam, also a Republican, eventually settles on, the fuel tax increase proposal "is going to be the biggest issue the governor tries to pass" during the 110th General Assembly which begins Jan. 10.

Asked about the figures cited by Ketron and others, Haslam Press Secretary Jennifer Donnals would only say "the governor continues to have meetings and discussions with legislators and as he has said, will announce a comprehensive proposal at the appropriate time."

Tennessee's gas tax, created in 1924 solely to pay for roads, is now 21.4 cents per gallon while diesel is 18.4 cents per gallon. There has been no increase since 1989.

Each penny of the gas tax raises $30.7 million for the state and local government. Each penny of the diesel tax raises $10.1 million. The state Department of Transportation's total state revenue is $844.5 million, according to the TDOT website, and, according to legislative documents, includes vehicle registration taxes and some other levies.

Haslam, who first began talking about an increase in 2015, has said higher vehicle fuel efficiency combined with higher costs to build and maintain roads are putting the state's interstates and roads, along with local transportation, further behind. The state currently has a $6 billion backlog in previously approved transportation projects that will take years to complete.

Moreover, Haslam has argued, there are billions of dollars worth of additional projects waiting approval but have no funding in sight.

But the governor's push for new transportation funding is being complicated by an estimated $1 billion surplus in one-time from other taxes, primarily the state's sales tax and franchise and excise taxes on businesses. Those taxes are used for areas including K-12 and higher education, health care, housing felons and building prisons and hospitals for the mentally ill and group homes for some disabled Tennesseans.

But that and projections of up to $800 million in additional new revenue in these and other new non-transportation related taxes in the upcoming Fiscal Year 2017-2018 has a number of Republicans alarmed that their constituents won't understand the fuel taxes were always intended as a user fee.

As a result, many GOP lawmakers are saying a tax cut is needed in these other taxes to "offset" any fuel tax hike. Republicans have already eliminated the inheritance tax and are phasing out the Hall Income Tax on interest and stock dividends.

Some Republicans are now looking at the state's franchise and excise taxes on corporations while others want to look at cutting the state's 7 percent sales tax, which along with up to 2.75 percent in local government option taxes, is one of the highest in the nation.

Meanwhile, a few caution that Tennessee government could be setting itself up for trouble when the nation's next recessions strikes the economy.

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