It's not just the gas tax that's paying for Wis roads these days

The COVID World has changed how much people drive, and that has an effect on transportation policy and funding. The Wisconsin Policy Forum went over the revenues in the state's Transportation Fund, and noted that when it came to the gas tax revenues and registration fees, there was a shortfall of more than $166 million in Fiscal Year 2020 compared to what was budgeted.

You would think that would cause significant cutbacks in road building, but there wasn’t a need to cut back on projects in the last year. That’s because of provisions that GOPs and Governor Evers signed off on in Evers’ first budget which still allowed more money to come into WisDO than there was before.

This came largely from increasing vehicle registration fees for the first time since 2008, and vehicle title fees for the first time since 2011. This generated a sizable increase in revenues from these fees, as shown in Figure 1. Combined revenue from vehicle fees increased from $704.3 million to $839.2 million in fiscal year 2020.

These figures do not include local vehicle registration fees imposed by municipal or county governments, also called wheel taxes, which increasingly have become an option for financially strapped local governments in recent years.

Meanwhile, consumption of motor fuel declined for the first time since 2013 – as did state fuel tax revenues, which dropped from $1.07 billion in Fscal 2019 to $1.02 billion in fiscal 2020. The impact of this trend, coupled with recent vehicle fee increases, is a fundamental shift in the revenue mix for the transportation fund.

You can see that state registration fees now raise almost as much money for the Transportation Fund as the gas tax does (and likely more when you add in local wheel taxes). Given the increase in working from home and more fuel-efficient and electric vehicles, the Policy Forum notes that there might be a permanent shift in how WisDOT can get funded.

Figure 2 shows Federal Highway Administration (FHWA) preliminary estimates of VMT on all roads in 2020 in 12 North Central US states, including Wisconsin, relative to recent prior years. During September, October, and November, the most recent months for which we have estimates, the FHWA data for all 50 states estimate VMT was down a combined 9.5% from those same months in 2019….

State officials are forecasting less driving in the upcoming 2022 fiscal year. In late 2020, WisDOT projected fuel tax revenues would remain below 2020 levels for the next two years. Total revenues in 2022 are projected to be the lowest since 2013.

That decline in driving habits could change the policy decision if there’s a need for more money to be put into the transportation system.

In the short term, the state is slated to get more money available from DC, which would more than cover the shortfall from state sources that happened in Fiscal Year 2020. The stimulus bill that was signed in late December added $188 million in federal transportation funds for Wisconsin road projects, and an additional $80 million for transit.

In addition, there should be more coming through a Biden infrastructure bill that will be coming in later months. So even with the lower amount of driving in the COVID and post-COVID worlds, Wisconsin should be able to do plenty with roads. Wisconsin could even use their current budget surplus in the General Fund to give a one-time boost to the Transportation Fund, and do a mini-stimulus themselves.

But if this state's gas tax is not raised, then it becomes imperative to not be as reliant on that dwindling source of revenue as it declines. And what road we take toward WisDOT sustainability is something to look for as Governor Evers releases his budget on Tuesday.