WisDOT funding not as big a deal for 2021-23. But still much to figure out

In recent years, transportation funding has been a central issue in Wisconsin budgets. But not as much this year, as Medicaid, K-12 and federal stimulus funding have gotten the big headlines so far. But that doesn't mean the Joint Finance Committee won't have some important decisions to make when it talks about WisDOT tomorrow.

Let's start with how the state's Transportation Fund sets up for the next two years. Oddly, the GOP-run Joint Finance Committee’s choice to wind the budget back to base levels actually raises state spending for WisDOT, and the LFB says it has left the Transportation Fund in a deficit that has to be fixed for 2021-23.

AB 68/SB 111 reduced base level funding for the Department from $2,044.5 million to $1,890.6 million in 2019-20 and $1,958.6 million or by -$239.9 million in the 2021-23 biennium. Much of the base level funding reductions were made to the state highway rehabilitation program SEG appropriation, which the Governor replaced with $278.5 million in recommended general obligation bonding. Under the ASA 1/SSA 1, as amended by Committee actions, DOT appropriations and reserves are at $2,005.0 million in 2021-22 and $2,022.2 million in 2022-23 and at $27.3 million in 2021-22 and $27.8 million in 2022-23 for other state agencies appropriated SEG funding from the transportation fund. These appropriation levels are higher by $107.5 million in 2021-22 and $54.5 million in 2022-23 for DOT appropriations and reserves and by $0.06 million in 2021-22 and $0.05 million in 2022-23 for other state agencies compared to AB 68/SB 111.

It’s worth noting that this assumes zero new borrowing for highway work, which is unlikely to be the case after tomorrow.

State highway spending in Wisconsin is generally split into three areas – highway rehabilitation (resurfacing and reconstructing current roads), major highway development outside of the Milwaukee metro area, and Megaprojects in Southeastern Wisconsin.

The bulk of the spending is in rehabbing current state highways, at a rate of nearly $1 billion a year. But there are significant differences between how Governor Evers wanted to pay for that $1 billion, and where WisGOPs have put the budget to before tomorrow’s meeting. For example, Evers planned to use less State money, slightly more Federal money, and then borrow $139.25 million for the rest.

Evers also planned to use more Federal dollars and borrowing on major highway development outside of the Milwaukee area, while the current base budget only assumes that we will use the $16.9 million a year in bonding that already exists.

The Legislative Fiscal Bureau included a list that WisDOT provided which goes over those major development projects, and what their costs are. As you can see, most of it would go toward expanding and improving I-43 north of Milwaukee

On the flip side, the LFB tells us that two huge SE Wisconsin projects that went on for the previous decade are basically over.

There are two, ongoing southeast megaprojects that have been enumerated in statute: (a) the I-94 North-South freeway project, construction of which began in 2009; and (b) the Zoo Interchange project, construction of which began in 2013. The I-94 North-South freeway project involved reconstruction of existing lanes and interchanges and the addition of a fourth lane in each direction from the Mitchell Interchange in Milwaukee County to the Illinois state line. As of February, 2021, total inflation-adjusted project costs are estimated at $1,602.5 million, of which only $0.5 million is expected to be encumbered in 2021-22, after which the project will be officially complete. The mainline on I-94 was opened to traffic in May, 2020, which is generally consistent with the public's perception of project completion. In 2012-13, DOT began the reconstruction of the Zoo Interchange at the junction of I-94, I-894, and USH 45 in western Milwaukee County. As of February, 2021, total inflation-adjusted project costs of the Zoo Interchange project are estimated as $1,541.5 million, of which $160.0 million is expected to remain in the 2021-23 biennium. The Department let the final component of this project, known as the "north leg" in October, 2020, and anticipate the mainline to be open to traffic in October, 2023. Neither of these projects need additional funding in the biennium to be completed.

As a result, Governor Evers planned to use less money for the Megaprojects around SE Wisconsin. But because the WisGOPs have the budget “rolled back” to base levels, we currently have a lot more money slated to go to that part of the WisDOT budget than Evers is asking for.

But don’t take that to mean that Evers isn’t planning on more highway work in the 414 and 262 in coming years. As the LFB notes, Evers is planning on moving forward on the I-94 expansion in and around Miller Park AmFam Field, and the project may be enumerated in this biennium. But the big bucks (and traffic tieups) won’t happen for at least 2 years.

The project's September, 2016, federal record of decision indicated that the total, inflation-adjusted cost was estimated at $1.1 billion. As part of the 2019-21 biennial budget, $20.0 million was provided to the Department to reinitiate work on the project. In July 2020, the Governor announced that DOT would seek federal approval to resume the I-94 East-West corridor project. In April, 2021, it was announced that a supplemental environmental impact statement would be conducted due to changes since the project was approved in 2016. This could allow for a federal record of decision in late 2022 or early 2023, and the beginning of construction in 2023 or 2024.

It’ll be intriguing to see if the GOPs on Finance allow the I-94 project to move ahead and/or enumerate it tomorrow. They could also block it, defer it, or even speed it up by throwing more money into it. Given that even Lt. Gov Barnes along with environmental groups have questioned the need for the I-94 expansion, it’ll be something to look for, even if the big costs aren’t part of this budget.

It is noteworthy that there are few discussions of revenue enhancements for WisDOT in the 2021-23 budget, as both Evers and the WisGOPs seem satisfied with the moves made in 2019 on title fees and registration fees that raised hundreds of millions of dollars. And of course, the biggest variable involves what might be added from the Feds with stimulus and infrastructure packages that come out of DC, which would allow a lot more projects to be moved up the chain and/or save state funds for those projects.

But just because those big issues are unlikely to be addressed tomorrow, there's still a lot that needs to be sorted out with transportation funding. So let’s see how the WisDOT budget deficit and their future highway plans are handled in Finance.