DOT revenues low in 2020, but it might be worse in 2021

 

After finding out that Wisconsin’s General Fund tax revenues held up surprisingly well for the 2019-20 Fiscal Year, this week we got a look at the Transportation Fund, which is the main source of funds for road projects and other WisDOT programs. And the events of the last year led to an odd mix of news on that front.

Preliminary information regarding transportation fund revenue collections for 2019-20 is now available. According to the Department of Transportation (DOT), net transportation fund revenue collections after transportation revenue bond debt service is paid, totaled $1,893.3 million in 2019- 20, which was 6.2% higher than net transportation fund collections in 2018-19. The revenue increases over the prior year are the result of the transportation tax and fee increases included under 2019 Act 9.

The final estimate of net transportation fund collections estimated under 2019 Act 9 was $1,990.6 million. Preliminary actual transportation fund collections were $97.3 million, or 4.9%, below the estimate.

The Legislative Fiscal Bureau says that all of the shortfall (and then some) came as a result of people driving less as COVID-19 kept people home, and that the increases in license and title fees didn’t translate into the $158 million in additional revenue that LFB predicted…at least through June 2020.

What's especially concerning is that this decline only reflects about 3 1/2 months of the COVID World. 12 months of depressed travel and reduced title transfers would likely cause a bigger hole for year 2 of the WisDOT budget, and unless there is a significant infrastructure package coming from DC, it'll put a crimp in the plans to spend more on making up for the Scott-hole backlog that developed on the state's roads from 2011-2019.

We would have been in an even deeper hole from FY 2020, except that the state's Petroleum Inspection Fund gave $67.6 million to the Transportation Fund, $16 million more than expected. The Petroleum Inspection Fund is collected with a 2-cent-per-gallon tax on gasoline and other related products, and part of it is used to clean up abandoned gas stations and other places that have gas tanks in the ground. But some of that money also goes to WisDOT, and here's the LFB's description of how that works in 2 different ways.

As provided under current law, revenue from the petroleum inspection fund (PIF) would be used to support transportation programs. This includes a provision of 2017 Act 59, under which the DOA Secretary, beginning on June 30, 2020, and on June 30 of each subsequent fiscal year, is required to transfer the unencumbered balance of PIF to the transportation fund, except for an amount equal to not less than 5% of the gross revenues received by PIF during the fiscal year in which the transfer is made. However, under Act 9 [the 2019-21 Wisconsin State Budget], revenue from one cent of the two-cent petroleum inspection fee on gasoline, diesel, and other petroleum products will be deposited directly to the transportation fund, effective July 1, 2020. As shown in a separate item, the net effect of this action and the current law transfer willbe an increase of $2,290,100 SEG-REV to the transportation fund in the biennium. In total, this provision will result in an estimated $38,900,000 associated with one cent of the fee being deposited directly to the transportation fund. As provided under current law, estimate PIF transfers of $45,292,600 in 2019-20 and $16,703,100 in 2020-21. In addition, the ongoing statutory transfer from the PIF to the transportation fund of $6,258,500 annually will continue.

So because there was apparently a lot of money left over in the PIF on June 30, that gave the $16 million boost to the Transportation Fund. But now that left-over money is gone, and because 1/2 of the PIF Tax is now going directly into WisDOT's pockets, there won't be much to be sent over in June 2021. That wouldn't be a problem, except that if travel and gas usage stays low in FY 2021 (and there's no reason to think it won't), then there's less money going in to the Transportation Fund from the PIF, which creates another loss of revenue for the 2nd year of the 2019-21 budget.

If that's the case, then there's going to be the need for those funds to be made up in some other fashion in early 2021, and for the 2021-23 budget. Otherwise, road projects won't get fixed, and we will be having this scene for longer than we should, because the State of Wisconsin won't have enough money to get everything done at once.