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Transportation funding lags needs
Photo: Road construction and repair costs have climbed faster than the revenue to fund them. (BusinessNorth photo)
Wisconsinites this fall will go to the polls statewide to decide whether their lawmakers should be prevented from raiding the transportation fund, one of several factors that is leaving the state with substandard roads and highways.
Getting a constitutional question on the ballot is difficult, at best. The measure first must be considered and approved during two legislative sessions. But in Wisconsin, there was considerable momentum: For a decade, hundreds of millions of transportation dollars were transferred into K-12 education and other general fund accounts.
“We have significant stretches that are in rough shape. Portions of our interstate system need to be rebuilt, which is very costly. Truckers and others are experiencing problems,” said Craig Thompson, executive director of the Wisconsin Transportation Development Association.
The same is true at the county level, said Douglas County Board Chairman Doug Finn.
“We have huge needs,” he said. “I get more complaints about highways than just about anything else.”
According to a 2013 report by the Wisconsin Legislative Fiscal Bureau:
• $675 million was transferred out of transportation in the 2003- 2005 biennial budget.
• During the 2005-2007 period, $427 million was moved from transportation to the general fund.
• Between 2007 and 2009, another $162 million was moved to general spending from transportation.
• From 2009-2011, the transfers totaled $125.6 million. During the 10-year period, the transfers totaled $1.4 billion.
Transportation spending, however, didn’t stop. State highways and county roads still had to be maintained, and new projects needed to be launched. The transferred money was replaced through borrowing, but not dollar-for-dollar. Through a variety of bond issues, the state borrowed $1.1 billion in one decade. When other transfers are factored in, the transportation fund suffered a $100 million loss in 10 years.
Meanwhile, all that borrowing is taking a toll, the 2013 report indicates. In 2002, 7.6 percent of the transportation budget was needed for debt service. In one decade, that nearly doubled, reaching 13.4 percent.
“The use of bonding has grown at a faster rate than revenues,” the report said.
The proposed costitutional amendment was advanced by Wisconsin legislators in 2011 and 2013. If approved in November, it would require the state gas tax, license registration fees and other transportation revenue be deposited into a fund administered by state transportation executives for the exclusive purpose of funding interstate, state and county roads. It would prohibit any transfers or lapses from the fund.
Wisconsin faces transportation challenges that extend beyond political budget manipulation. Revenue isn’t keeping pace with costs, a problem that was examined during 2012 by a special commission. Without additional funding, members of the 10-member group found:
• The percentage of Wisconsin’s state highway system in poor or worse condition will increase from 20 percent in 2014 to 42 percent in 2023.
• Planned major highway projects, which have already been identified as necessary to enhance safety and support economic growth, will be delayed six years, resulting in a 22 percent congestion increase.
• Conditions at Wisconsin’s commercial ports will continue to deteriorate. The state’s ability to attract and retain industries that rely on efficient bulk freight movement will be hurt by decaying and inefficient harbor infrastructure and a lack of coordinated harbor plans.
• The potential of the state’s commercial ports as a source of economic development will remain under utilized as the pace of needed investment slows.
“The state’s decades-old transportation funding model is not keeping pace with current or future needs. The state has chosen to address its transportation funding shortfall with increased debt through bond issuance—a path that is unsustainable over the long term,” the Wisconsin Transportation Finance and Policy Commission said in its January 2013 findings.
The impacts already are being felt by trucking firms in the form of delays and a growing number of weight restrictions, Thompson said. County Highway ‘C’ in Douglas County – a key road on which logs are hauled across the border to the Sappi pulp and paper mill in Cloquet, Minn. – is among roads that desperately need maintenance, according to Finn.
Three factors contribute to the inability of state highway funding to keep pace with transportation costs: improved motor vehicle mileage, no change in the fuel tax and no growth in the number of vehicle miles traveled.
The first two factors are indelibly tied. As gas mileage increases for motor vehicles, less gas is sold and tax collections decline. On a federal level, the Congressional Budget office estimates fuel tax revenues will decline 13 percent by 2022 and 21 percent by 2040.
Meanwhile, Wisconsin’s fuel tax, formerly indexed to keep pace with inflation, was frozen in 2006 at 30.9 cents per gallon. Adjusted for inflation, it’s worth about 26.6 cents today.
Until the year 2000, the number of vehicle miles driven nationally had been increasing annually, which fueled the increase in fuel taxes collected. Thereafter, the growth flattened out. Since 2007, the number has declined by 8.4 percent, contributing to the gap in fuel tax revenue.
Combined, those factors led state lawmakers to increase the use of debt to fill the revenue gap. To repay that debt, $762 million was allocated in the 2011-2013 biennial budget. If that trend continues for another decade, the portion of transportation fund revenue devoted toward debt service will rise to 24 percent.
It’s been a year since the Wisconsin Transportation Finance and Policy Commission made recommendations to address the problem. They include increasing the fuel tax, raising the registration fee on cars and light trucks, raising the registration fee on commercial weightbased trucks, raising the driver’s license fee, repealing the trade-in sales tax exemption – even establishing road tolls.
All have been met with opposition. Thompson believes the funding situation might improve if support from the business community is present. Some groups, including Wisconsin Manufacturers and Commerce and several local Chambers of Commerce, already have joined the movement.
“Existing funding mechanisms really aren’t matching our needs,” said Douglas County Administrator Andy Lisak. “The revenue isn’t going to be there if we rely on traditional revenue sources.”
State Sen. Bob Jauch (D-Poplar) said a local funding option is on the table in northwestern Wisconsin. When delegates attend the annual Superior Days legislative lobbying effort this year, they’ll seek permission to levy a one-half percent sales tax dedicated to raising money for transportation projects. The initiative is supported by the Superior-Douglas County Area Chamber of Commerce.
“That would bring in about $3.3 million,” Finn said. It would need to be approved by a referendum of voters, said Jauch, and would sunset every six years unless again endorsed by voters.
As for the constitutional amendment, “It won’t solve the funding issue, but it will give people more confidence about future funding,” Finn said.Previous BusinessNorth Exclusives Articles:
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