Tuesday, July 14, 2015

Foolishness in Transportation funding in Madison and DC

One item that has gotten a lot of attention at the state level is the transportation budget, which caused major strain between Governor Scott Walker and the Republicans that ran the Legislature. Walker’s original DOT budget called for no increase in gas taxes or fees, but also didn’t cut back on highway spending, resulting in a proposed $1.3 billion in borrowing over the next two years. This led to a revolt by legislative Republicans, including open arguments between party members as the budget was debated, and it delayed the budget’s passage past the start of the new Fiscal Year on July 1.

The final result cut Walker’s planned borrowing by $800 million, from $1.3 billion to $500 million, with $350 million in additional borrowing set aside if it is deemed to be needed and OK’d by the Legislature at a later date. But GOP legislators did not reduce the borrowing by raising revenues, but instead by cutting and delaying highway projects.

That choice, along with other decisions being made (and not being made) in Washington D.C., is putting this state’s infrastructure on a very rocky road indeed.

Interestingly, one part of the highway funding equation that wasn’t changed by the Legislature involves the federal side of the transportation budget. That was kept at the same levels as Walker’s budget, although a little more than $78 million were shifted around into more local and state highway projects vs SE Wisconsin freeways. But having all that federal money between now and the middle of 2017 is far from certain, as the U.S. Highway Trust fund is slated to run out in 2 ½ weeks, and there is no agreement in place to extend it. Heck, one of Wisconsin’s own just asked for an increase in IRS enforcement to get by for the next 5 months.
The $8.1 billion plan, released Monday night, relies largely on revenue gained by giving the IRS more information about mortgages, more time to investigate certain tax avoidance and new rules to prevent people from understating income on inherited property.

The plan is House Republicans’ effort to prevent highway funding from lapsing at the end of the month. Senate Republicans are pursuing their own longer-term plan.

The move by Ways and Means Committee Chairman Paul Ryan, a Wisconsin Republican, is meant to buy time for a more ambitious bipartisan plan that would link major international tax changes with a one-time, multiyear infusion of cash into infrastructure.
Don't worry Pau-lie, I won’t tell Grover Norquist that you’re asking for stronger regulations as a way of raising revenues (wink).

Back in Wisconsin, the newly-signed state budget relies on $1.42 billion from the Feds in highway aids (that's provision 3 in the Legislative Fiscal Bureau's paper), and $1.655 billion in overall federal funding, so they clearly are counting on that money being there for the next two years. It’s a “hope and pray” strategy that is in marked contrast to what Gov Walker trotted out in his veto message when it came to discussing whether to take federal money for something else.
This budget maintains our commitment to preserve Medicaid as a safety net for our state's neediest by providing health insurance coverage for everyone living in poverty, despite the continued instability of the Affordable Care Act.
Instability? Under current law, Obamacare will cover Medicaid expenses by 100% until 2017, and still covers up to 90% through 2020. That seems a whole lot more stable than the billions of dollars Walker is counting on getting in highway funding. But I digress.

Even with the reliance on federal dollars, the newly-signed budget reduces highway spending from $1.46 billion in Fiscal Year 2015 to $1.02 billion in Fiscal 2017. Despite that disinvestment, Walker made a statement in his veto message that highways are important.
Further, we are continuing to make prudent investments in Wisconsin's infrastructure by prioritizing major highway projects and comprehensive upgrades to the maintenance of the state highway system. This will ensure the movement of manufacturing and agricultural products to market efficiently.
Really? Is that why you just signed a budget that hacks at least $450 million out of the highway budget you sent to the Legislature in February, and possibly cuts as much as $750 million (if the $300 million in contingent borrowing isn’t allowed)? And even with that cut in projects, the amount of total debt is going to keep increasing, and the money needed to pay off that debt will take up a larger amount of future DOT budgets? In the case of transportation, actions seem to be speaking louder than words for Scotty.

In its analysis, LFB gave a list of the “prioritizations” that have to occur because of these hundreds of millions of dollars of cuts in highway funding, and they’ll cause a whole lot of delays in needed projects throughout the state. I’ll begin this list with the delays on the main highway to the largest private-sector employer (Epic Systems) in the county that’s adding more people than any other in Wisconsin.

Projects delayed by 2 years
USHwy 18/151 (Dane County)
Verona Road/Madison Beltline

US Hwy 10/441 (Menasha-Appleton)
Winnebago CTH CB to Oneida Street

ST Hwy 15 (Outagamie County)
ST Hwy 76 to New London

ST Hwy 23 (Sheboygan-Fond du Lac)
ST Hwy 67 to US Hwy 41

Illinois State Line to Madison Beltline

We didn’t have to do these delays, but GOP idiocy in Congress and at the State of Wisconsin is causing it. Bruce Thompson’s excellent analysis of highway spending and financing in Urban Milwaukee goes over how the refusal to raise gas taxes at the state and federal levels has caused us to underfund our roads and bridges.
However, since 1994 [the federal gas tax] has stayed flat at 18.4 cents per gallon. With inflation, it has declined to 11.5 cents in 1994 dollars. If the cost of building roads is considered, the decline is even greater. In effect the buying power of the federal gas tax has dropped by more than half. As a result, the federal highway fund is due to run short of its commitments in the near future, yet Congress has been reluctant to increase the tax.

The decline in the purchasing power of the gasoline tax is compounded by two other factors. One is a substantial decline in per capita miles traveled in the last decade, as shown on the next graph, based on Federal Highway Administration figures.

Secondly, cars on the road have become more fuel-efficient. While a good thing from most perspectives, less fuel use means less money for highway construction and maintenance. And with electric vehicles the amount paid drops to zero.
The same pattern that we see in DC has continued in Wisconsin, where the gas tax has not been raised since 2006, when indexing for inflation was ended upon pressure from AM talk radio and others who shrieked that it was a “backdoor tax increase.”

And because the Republicans in the state Legislature refused to raise any taxes or fees, despite the increased need to do so just to keep the amount of maintenance and repair at the same levels, you can expect more bumps in your travels in Wisconsin. This isn’t a good thing in a state that already has the 3rd-worst roads in the country, with 71% of roads listed in mediocre or poor condition. And in the past few months, this already-bad situation is set to worsen because we have a Governor with delusional dreams of becoming president combined with an equally foolish GOP-run Congress that decides to live in a bubble-world where taxes can never be raised in order to pay for needed roads.

Can we get the adults back in charge, please?

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