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AFSCME Legislative Update – Transportation Funding

Posted by Chris Liebenthal on June 7, 2010

AFSCME Council 11 Green Sheet

State Transportation Funding

Defining the Problem

Wisconsin’s transportation fund has been at the center of budget battles for each of the last four biennial budgets.  The fund, currently slated at over $5.4 billion for the current two year budget, faces many challenges if it is to maintain the state’s infrastructure in coming years.  Based on the State Highway Plan 2020, released in 2000, Wisconsin is under funding transportation to the tune of $1.5 billion annually.  Without a commitment by the legislature and the next Governor to find a new, sustainable, revenue source for transportation funding, Wisconsin’s infrastructure will continue to suffer significantly.

Much has been made over transfers and borrowing from the transportation fund by the legislature and governor during the last four budgets.  The transportation fund is a segregated fund, about 30% of which comes from the federal government.  The rest of the revenue is raised through registration and licensing fees along with the state gas tax.  It is separated from the general fund, which is supported by revenue generated primarily from income and sales taxes.  Many have criticized the transfers from the transportation fund to fill deficits in the state’s general fund.  They say these transfers created the current instability in the transportation fund, and weakened public support for raising needed revenue for transportation projects.

While it is true that transfers have created an overall net negative impact of $301.2 million to the transportation fund since 2003-05, they are not the main cause of the overall problem.  To be sure, those transfers contributed to the current situation.  But at an average reduction in transportation dollars of only $37 million annually over that 8 year time period, the transportation fund would not be in a notably better condition if those transfers had not occurred.  The real issue for those concerned about transportation projects, including state aid to local governments, is revenue.  Below are some highlights, or lowlights, of problems facing Wisconsin’s transportation fund.

Revenue Cuts and Others Pressures on the Transportation Fund

Gas Tax Indexing

The repeal of gas tax indexing in 2005 has created a compounding problem for the transportation fund.  When the automatic inflationary increases in the gas tax were repealed, it was estimated that the transportation fund would lose approximately $30 million in new revenue annually.  This means in the first year of the biennium the gas tax would generate $30 million less than it would have were indexing still in place.  In the second year it would generate $60 million less (the lost $30 million from the first year, plus an additional $30 million in the second).  This lost revenue continues to compound each year, with the transportation fund currently collecting about $8 million less per month, or approximately $200 million total, during this biennium than it would have had indexing not been repealed.  All of this damage was done to save Wisconsinites $4.00 a year in average yearly gas tax increases.

Federal Aid

The federal gas tax has not been raised since 1993.  Unlike income or sales taxes that are based on a percentage of wages earned or goods purchased, the gas tax is a fixed amount per gallon.  If you bought 300 gallons of gas in 1993 and 300 gallons of gas in 2010, you would pay the exact same amount in federal gas tax.  In order for the federal gas tax to have the same purchasing power as it did in 1993 it will need to be raised nearly 10 cents a gallon.  Without an increase in the federal gas tax, the federal Highway Trust Fund will face a shortfall of $65 billion by 2015 just to maintain transportation programs enacted through 2010.

Construction Inflation

Even had indexing remained in place, the transportation fund would have seen the buying power of the gas tax diminish.  Indexing was tied to changes in CPI, however construction inflation has risen significantly faster than CPI in recent years, with some estimates coming in as high as 11% increases in the last year.

Fuel Efficient Vehicles

While more fuel efficient vehicles are good for the pocket book, they are causing havoc with the primary funding source of transportation needs in our state.  According to the Bureau of Transportation Statistics, the average fuel efficiency of a U.S. passenger car increased from 20.6 mpg in 1993 to 22.5 mpg in 2007. Therefore, the driver of the “average vehicle” is paying approximately 8.5 percent less in federal gas taxes than they did in 1993.  In addition to the short term fix of getting our federal and state gas taxes back in line, the decline in fuel consumption means both state and federal officials need to get serious about new ways to fund our transportation system, or risk bankrupting both the state’s transportation fund and the Federal Highway Trust Fund in the not too distant future.

Aids to Local Governments

This is where AFSCME members, and the people for whom they provide services, have seen the biggest impact.  This past state budget cut annual funding for the State Highway Maintenance Program by $10.7 million.  State Highway Maintenance is the line item in the transportation budget from which Routine Maintenance Agreements (RMA’s) are funded.  RMA’s are agreements between the state and counties in which the state contracts with the county to maintain the state system in the county.  Historically, this means everything from plowing the roads in the winter, to maintenance work in the summer.

It is currently estimated that to properly maintain the state’s system RMA funding needs to be approximately $180 million annually.  However, due to the cuts in State Highway Maintenance and increases in the cost of road salt and other maintenance materials DOT has only $120 million for RMA’s.  As a result the state has contracted with many counties to clear the roads in the winter, and then significantly cut back, and in some cases altogether eliminate, funding for summer time maintenance of the state system.

The impacts of under funding RMA’s run wide and deep.  In the short term roads won’t be properly maintained causing additional wear and tear on vehicles, as well as potentially dangerous and extensive damage due to potholes and other highway dangers.  These roads will deteriorate more rapidly as maintenance is delayed, allowing ice, water and summer temperatures to cause more rapid deterioration of the state’s infrastructure.  Finally, without summer road work to keep county street and highway crews working year round some county highway departments will be forced to make cuts to their crews.  This will jeopardize the ability of county crews to provide adequate maintenance and emergency response on county systems, as well as conduct winter snow and ice removal operations not only for the county, but for state and municipal systems as well.

Going Forward – The Need for More Revenue

AFSCME has lobbied for increasing revenue to the transportation fund in each of the past three budgets.  Among the items AFSCME has supported are reinstating gas tax indexing, adopting a 2.5% assessment on oil company profits, and increasing vehicle registration and title and driver license fees.  Of these only the fee increases have been adopted by the legislature.

The repeal of gas tax indexing, coupled with the failure of the legislature to adopt proposals such as the oil assessment, means it is time for the legislature and next Governor to consider serious new revenue options.  Proposals such as a Vehicle Mile Traveled Assessment, or even toll roads, need to be on the table for any an all serious candidates for state office.  Candidates unwilling to properly consider these options are essentially forcing the state to make more decisions such as under funding RMA’s and watching Wisconsin’s infrastructure quickly deteriorate.

AFSCME should endorse candidates in the 2010 election cycle who are serious about fixing the problem in the state’s transportation fund.  AFSCME members, especially those working in the area of transportation, need to talk with candidates in their areas about the need for increases in both the state and federal gas taxes, as well as  the need to find new, long term, sustainable funding sources

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