Friday, November 6, 2015

Recap of Wednesday's big credit card purchase for road repair

Wanted to clean up from Wednesday’s Joint Finance Committee meeting and specifically the road funding part of the meeting.

First of all, the committee did take up JFC co-chair/State Rep. John Nygren’s idea to vote on all $350 million over two years in one bill, splitting it up into $200 million borrowed in year 1 of the budget, and $150 million million in year 2. The idea behind Nygren’s motion likely has something to do with not having to come back next year and vote on the issue again closer to the 2016 elections, to spark the rubes’ attention. All 6 of the JFC’s Republican members of the Assembly voted for it, all 6 of the JFC’s Senate Republicans voted against it, and the four JFC Dem members let the GOP off the hook by voting for the measure, allowing it to pass 10-6, and not have to be voted on by either full house of the Legislature.

As I mentioned on Tuesday, while I understand the Dems’ desires to get these projects done and seem like the adults who still care about what happens to this state, I think it’s bad politics that doesn’t improve your party’s chances at election in this day and age when you’re in the minority. That notwithstanding, let’s look at what Nygren’s motion allows, according to
*Debt service on the first $175 million in bonds would be paid for by the general fund with the second $175 million covered by the transportation fund.

*The $150 million for use in 2016-17 would have to be reduced if transportation fund revenues exceed current projections.

*$150 million of the money would be used for the state highway rehabilitation program, while $200 million would go to the major highway development program.

*If revenues for 2016-17 came in higher than expected, the first reduction would be in bonding for the major highway development program.
The measure also seems to put the last $175 million of the borrowing onto the Transportation Fund, with the possibility of that number being reduced further if the gas taxes and vehicle registrations continue to exceed expectations (seems likely with the country seeing the highest number of car sales in years) . But that still means $175 million of the funds being borrowed for this year will have to be paid back out of the General Fund, at a tune of $12.5 million a year starting next year, lowering the cushion in the current budget, and increasing the structural deficit in future budgets.

The repayment of that debt led to an interesting question from State Sen. Jon Erpenbach during the discussion on the road borrowing where he asked if Transportation Fund money could later be used to replace General Fund debt in these projects. You may remember that moving money from the Transportation Fund to the General Fund is generally illegal, after voters approved the Road-Builders’ Constitutional Amendment in 2014 (you still can move General Fund money to Transportation, which is why the amendment was BS). However, Erpenbach noted the language in the amendment, may give an opening for this specific situation, and an opinion from then-Attorney General J.B. Van Hollen (listed as part of the briefing sheet on the amendment) seems to also indicate some wiggle room.
In essence, the proposed amendment would change the Wisconsin Constitution to require that revenues generated by specified uses of the state transportation system be deposited into a transportation fund and expended only for transportation-related purposes.

A “yes” vote on this question would establish a department of transportation and a transportation fund in the state constitution. The current Department of Transportation and transportation fund exist only under statute. A “yes” vote would mean that all funds collected from taxes or fees in existence after December 31, 2010 for the licensing of motor vehicle operators, for the titling, licensing, or registration of motor vehicles, for motor vehicle fuel, or for the use of roadways, highways, or bridges, and from taxes and fees levied or imposed for aircraft, airline property, or aviation fuel or for railroads or railroad property would be deposited in the transportation fund or with certain authorized parties, such as a trustee for the benefit of the department of transportation. Funds in the transportation fund may not be lapsed, further transferred, or used for any program that is not directly administered by the department of transportation in furtherance of the department’s responsibility for the planning, promotion, and protection of all transportation systems in the state (except for programs with an appropriation from the statutory transportation fund as of December 31, 2010). The proposed amendment does not define “transportation systems.”
I’d think that highway repair would certain be part of the DOT’s responsibility, and changing the funding source of a road project is different than using Transportation Fund money for reasons other than Transportation, so that may be an option to pursue in the future, in order to free up that $12.5 million in the General Fund. The Transportation Fund just revealed it had an extra $140 million in its bank at the start of this fiscal year, so the money should be there if they want to use it.

Of course, the Road Builders’ Amendment was a GOP response to Gov. Jim Doyle’s “raids”, where he used $1.4 billion in transfers from the Transportation Fund in the state budget to fill holes for schools and other General Fund needs without having to raise taxes. What is often not mentioned in WisGOP Bubble-World or AM radio is that the General Fund has more than paid back those “raids”, as shown in the chart on Page 5 of the LFB’s summary of the recent road borrowing bill. With this latest $175 million, we have now borrowed $1.56 billion from the General Fund to pay for DOT highway projects since 2003 - more than Doyle’s transfers that went the other way.

And since Gov Walker and WisGOP came to power in 2011, there has been an additional $450.2 million in General Fund cash that has gone to the Transportation Fund, meaning that the Transportation Fund has GAINED $565 million since 2003 (and before interest on that $1.56 billion borrowed, by the way). So the next time some righty tries that lame “B-b-but Doyle” talking point, give that loser the facts.

There is also the looming problem of higher debt service and added needs crowding out spending in future budgets. The Wisconsin Budget Project has a great summary of the Transportation Fund’s future funding issues, and notes that none of this was close to being solved by this recent spate of borrowing. You’ll see how the amount of money needed to pay off the DOT Fund’s debt has jumped in recent years, and this graph does not reflect the $175 million in extra DOT Fund borrowing that went through this week.

As I mentioned earlier this week, the future needs are even higher than what we’re paying for, as the LFB notes that even with the added spending, the amount of state highways listed as “fair or above” will fall from 83% to 69% over the next 10 years. And while the delays on several major highway projects in South Central and Northeast Wisconsin are reduced from 2 years to 1 year with this new money, to get all of them back on track will take $142 million in extra funding for the next budget.

So while I guess it’s nice that more of our road needs will be taken care of after Wednesday’s Joint Finance meeting, it didn’t come close to solving the growing problems that exist. And because of that, I would have preferred that the JFC rip up the Governor’s request for more borrowing, and produce with a new bill that would have taken care of more of those needs, while not kicking the can down the road to do so. And if that meant using the current Transportation Fund balance, or raising gas taxes or fees, so be it- it would have been worth it.

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