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Green Sheet On Advisory Referendums – Segregation of Transport Funds

Posted by Chris Liebenthal on September 22, 2010

This November, voters in over 50 counties will be asked to weigh in on the question of whether to amend the Wisconsin Constitution to prohibit the transfer or use of money in the transportation fund for purposes not related to transportation.

The questions may be worded slightly differently in different counties, but AFSCME opposes the referendum push for several reasons.

First, remember TABOR? It was only five years ago that AFSCME helped defeat the misguided “taxpayer bill of rights”, another proposed constitutional amendment which proposed restrictions on the use of state tax revenues. TABOR would have handcuffed elected officials in the difficult task of funding vital public services during their budget deliberations.   In our view, the same argument applies to the proposed amendment on the use of transportation dollars.

Second,  the amendment delays real action. While this fall’s referendums are not binding, the plan is for them to serve as a spring board to legislative action.  However, the problems faced by counties and municipalities to repair and maintain their roads are real and must be dealt with today.  Maintenance for the state system is underfunded by $60 million, or one-third of the total needed revenue, in addition to significant shortfalls in aids to maintain local roads.  Passing a Constitutional amendment would take at least  two consecutive sessions of the legislature and is only complete following a statewide referendum.  The entire process can take up to five years.  The state will have passed at least two state budgets during that span.  In the mean time, the effort will provide cover for politicians who do not want to address the real problems local governments are facing today.

Third, Council 40’s Street and Highway Advisory Committee, representing 7,000 street and highway workers in counties and municipalities in 71 of Wisconsin’s 72 counties, met in August and voted to oppose these referendums. The committee carefully considered many factors in reaching this recommendation.

A fourth reason to oppose the transportation fund referendum rests in a larger debate about the reasons for the lack of revenue in the transportation fund.  While AFSCME is sympathetic with the calls the preserve the transportation fund for transportation purposes only, this effort will not magically result in more money in the fund to pay for critical, overdue road maintenance needs.  Further, the referendum diverts attention from the bigger problem, which is the lack of revenue for transportation services.  And it does not highlight the fact that other critical services such as health care and education also face more devastating budget cuts

Momentum for these referenda comes primarily from public sentiment opposed to decisions made by lawmakers over the years to move funds from the transportation fund to cover shortfalls in the general fund.  Critics point out that over $1.2 billion has been moved to the general fund over the last eight years.  What they often fail to mention however is that approximately $900 million of that funding was replaced with bonding that the general fund is paying off.  The net effect of these transfers and borrowing is that the transportation fund has been decreased by an average of $37 million annually over this time period.  This is a significant amount of money to be sure, but just over 1% of a fund that spends $2.75 billion annually.

In reality, the much bigger problem facing the transportation fund is the inability of the fund to grow under its current revenue sources.  State income and sales tax are applied as a percentage of income earned or goods purchased.  This of course means that if your income goes up, or the price of goods and services increase, the amount of revenue generated by the state increases accordingly.  However, the state gas tax is a fixed amount, currently 30.9 cents per gallon.  Since gasoline consumption remains essentially flat from year to year due to more fuel efficient vehicles and a relatively steady population in Wisconsin, transportation revenues generated from the gas tax do not increase.  At the same time the cost of building and maintaining roads in Wisconsin has increased at a rate significantly higher than inflation in each of the past five years.

In 2005, the Republican-controlled Assembly and Senate ended gas tax indexing.  Under the old indexing law, the gas tax was automatically increased to keep pace with inflation, thereby addressing the problem outlined above.  This cost the average Wisconsinite about $4.00 a year in increased gas taxes.  While the impact on the consumer pocketbook was small, the impact on the transportation fund has been great devastating.  Repeal of indexing has cost the transportation fund $190 million in the current state budget alone.  That number grows by over $30 million each year the state goes without indexing.

Essentially, while the transfers from the transportation fund have not helped the problem, they are not the primary cause for the decline in the purchasing power of the transportation fund.  These referenda propose a solution without identifying the real problem.

The Legislature and Governor’s Duty to Govern

At the same time, as a principle, many people believe that funds collected by the state in the form of gas taxes should be dedicated solely for transportation purposes.  This makes sense as the gas tax was created as a user fee to fund the cost of building and maintaining roads, and is dealt with as a segregated fund in the budget process.  In an ideal world this would probably be the case.  But the question asked by these referenda applies to all circumstances, not just in an ideal world.

It is the responsibility of the state legislature and the governor to govern.  Every two years they have the responsibility to pass the state budget.  They engage in a deliberative process that takes six months at a minimum, and often times longer, to determine the best ways to allocate the resources available to the state.  Prior to the creation of gas tax indexing, there were instances of the state’s general fund being used to make the state’s transportation fund whole.  The decisions to borrow from the transportation fund in recent budgets was based on efforts to preserve vital public services across the state and use the flexibility of the transportation fund to help the state navigate through difficult times.  Of course it is incumbent upon our elected officials to use this ability sparingly, but the ability to check any abusive use of the transportation fund already exists at the ballot box every time our officials come up for election.

A constitutional amendment commits future legislatures and governors to the policy wishes of elected officials and opinion makers of today.  It is best to leave decisions of this nature to the people entrusted with governing at the time the decision needs to be made

Referenda on November 2nd

AFSCME is not engaged on a statewide or even county-by-county campaign to turn out opposition to the advisory referendums this fall.  However, in discussing this issue with your fellow AFSCME members, friends and family, we hope that you will vote against the referenda.  In addition, it is important for us to focus on creating pressure on those running for office to come up with real solutions to the revenue problems for the state’s transportation system.  Ask them how they plan to develop a permanent revenue source that can keep pace with the inflationary costs of building and, most importantly, maintaining our state’s infrastructure.


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