Wednesday, May 22, 2013

Your primer on DOT budget items

Tomorrow features a number of topics for the Joint Finance Committee to deal with, in a classic case of "cram as much BS together as you can so you can't focus on one thing". Near the top of the list will be discussions about the Department of Transportation's funding for highways and transit. So let's dive into these two topics, see what direction the Governor has chosen, and how that translates over into other parts of the budget.

To review, the General Fund is taken from regular income taxes, sales taxes, corporate taxes, and pays for much of the state government's core services, like schools, prisons, Medicaid, general Shared Revenues for local governments etc. The Transportation Fund is derived from items such as gas tax, vehicle registrations, and license fees, and is a set-aside for roads, highways, and aid to local communities for transportation purposes like street repair and transit. With that in mind, we'll start with the Transit budget paper, which is a heavy-detail write-up that not only goes into the history of transit funding for Wisconsin, but also compares a few other aspects of Transportation Finance. First of all, the Governor's budget keeps the 10% cut given to local transit aids put into law in 2011, meaning the local communities had to make up the difference in either higher local taxes, higher fares, or cuts in service). The only difference from that formula involves moving a little over $277,000 out of the $106 million of transit aids to what is basically a urban system tier (i.e., anything in the area of a decent-sized Wisconsin city outside of Madison Metro and the Milwaukee County Transit System), and taking that money away from rural areas.

The other big change is that for the second budget in a row, Gov Walker wants to move the Transit funding out of the Transportation Fund, and stick it into the General Fund. The LFB paper explains some of the ramifications of such a move, and also gives an overview of the types of money-shifting that Gov Walker is proposing to send more money to the Road Builders to beef up the Transportation Fund at the expense of the General Fund.
...Unless readdressed by a future Legislature, this action would result in the state's mass transit assistance program being funded from the general fund on an ongoing basis, and would result in an ongoing reduction in appropriations for this purpose from the transportation fund.

The proposed conversion of the mass transit operating assistance program funding from the transportation fund to the general fund is one of a number of related proposals being made under the Governor's budget. In addition to the current law deposit of 0.25% of general fund taxes to the transportation fund (estimated at $35,127,000 in 2013-14 and $36,302,500 in 2014-15), the Governor is proposing additional, one-time transfers of general fund revenues ($23,000,000 in 2013-14) and segregated fund revenues ($16,000,000 annually from the petroleum inspection fund) to the transportation fund. Finally, the budget would fund a portion of the Zoo Interchange construction project with $200 million in general fund-supported borrowing.

The use of general fund revenues and general fund-supported bonds has been justified as a means of compensating for past transfers out of the transportation fund. However, under provisions of the bill the cumulative use of general fund revenues and bonds would exceed the accumulated previous transfers from the transportation fund by the end of the 2013-15 biennium.
That's right, the old right-wing radio screech of "Doyle raided the Transportation Fund and we're not even close to paying it back," is FALSE. In fact, the paper illustrates just how these "raids" happened, and notes that much of it was offset at the time by having the General Fund pay back the Transportation Fund by borrowing funds.

Transfers between General Fund and Transportation Fund
2003-05 $161 mil LOSS for Trans. Fund ($682.6 mil to Gen Fund, $565.5 mil from Gen Fund borrowing to pay back, $41.9 mil paid by Trans. Fund for debt service)

2005-07 $181.7 mil LOSS for Trans. Fund ($431.7 mil to Gen Fund, $250 mil from Gen Fund borrowing to pay back)

2007-09 $112.0 mil LOSS to Trans. Fund ($162 mil to Gen Fund, $50 mil from Gen Fund borrowing to pay back)

2009-11 $79.1 mil GAIN for Trans. Fund ($125.6 mil to Gen Fund, $204.7 from Gen Fund borrowing to pay back)

2011-13 $275.5 mil GAIN for Trans. Fund ($115.4 mil FROM Gen Fund, $160 mil from Gen Fund borrowing)

2013-15 $400.9 mil GAIN for Trans. Fund ($94.3 FROM Gen Fund, $106.4 mil for Transit aids, $200 mil Gen Fund borrowing)

And this doesn't count the additional debt service that the General Fund has taken on from the borrowing they had in order to help pay back the Transportation Fund. So we were probably near even before Walker released his 2013-15 giveaway Transportation budget. In addition to that, I'll also point out that the biggest years of the "Doyle raids" were in his first term, when the Legislature was entirely controlled by Republicans. Funny how that detail slips past the Sykes types.

Speaking of the Highway funding budget it seems to have re-caught the attention of the Journal-Sentinel (as usual, they decide to go into this stuff at a point where it's hard for the outcry against this policy to reach critical mass until it's too late). The article seizes upon the $400 million in transfers and fund-shifting mentioned in the LFB memo on Transit, and also discusses the additional borrowing that is slated to take place inside of the Transportation Fund - bills that will have to be paid off in future years.

The LFB has papers on the three huge highway projects in SE Wisconsin that are in Walker's budget - one on the Zoo Interchange and I-94 freeway work south of Milwaukee , one on the Hoan Bridge and related work on I-794, and work on I-94 between the Zoo and downtown.

For the Zoo and the I-94 South work, the plan is to borrow from the General Fund and the Transportation Fund, and pay for most of the costs later. To clear up confusion, in these summaries GPR is General Fund, and SEG is the Transportation Fund.
Authorize $200,000,000 in general fund-supported, general obligation bonds for southeast Wisconsin freeway megaprojects and authorize $107,000,000 in transportation fund-supported, general obligation bonds for the Zoo Interchange and I-94 North-South freeway projects. Decrease base funding by $1,076,300 SEG in 2013-14 and $37,576,300 SEG in 2014-15 in the southeast Wisconsin freeway megaprojects appropriation, amounts that would be reallocated within the transportation budget. Increase funding by $1,666,700 GPR and $3,717,000 SEG in 2014-15 to reflect estimated debt service payments on the bonds, based upon the Department of Administration's bond issuance assumptions for the Zoo Interchange and North-South freeway projects.
There's also about $182 million of federal money thrown in there for this budget, and the LFB adds that under this plan, Transportation Fund debt service will rise from just over 13% of costs when Walker took office, to 18.5% by the end of FY 2015.

And oh yeah, there's more debt to come. Did I mention that there's at least $1.75 BILLION left to spend on these projects over the next 4-year Governor's term if they keep these projects on schedule under Walker's current budget?
To complete the Zoo Interchange in 2018, the Department's schedule calls for $640 million in the 2015-17 biennium and, preliminarily, $306 million in the 2017-19 biennium. The North-South freeway would need an estimated $397 million in 2017-19 and $356 million in 2019-21, to keep that project on schedule for completion in 2021.
Uh oh, looks like more General Fund raiding to come, doesn't it?

The Hoan work is much of the same story - $236 million in 2013-2015, and paid for largely through borrowing $200 million of those dollars from the Transportation Fund, with $25 million of the rest coming from the feds, and only $11 million being paid up front through the Transportation Fund. The LFB estimates that once all those bonds are handed out, state taxpayers will be on the hook for $14.5 million in a year in debt service to pay the Hoan work back over several years.

Hmmm, and let's add in the fact that we already have a $55 million Transportation Fund deficit for these next 2 years, which would grow to $161 million if they move Transit back to the Transportation Fund. So what gets cut from the Scott Walker Payback Fund to the Road Builders and what stays? And will DOT funding be helped out by a raid of funds from the UW System to fill these gaps, as I predicted last month? The UW System just so happens to be placed on tomorrow's schedule earlier this week.

I know JFC can seem awfully dry at times, but this meeting could be a big one when it comes to finding out just what priorities this state decides to fund over the next 2 years. I'd recommend giving it a look-see.

1 comment:

  1. Noting the date on this piece its interesting to note that just the other day Walker repeated this claim of replacing what Doyle took when he was in Appleton where one of the now delayed projects is irking the locals....