Wednesday, March 27, 2019

A few words on Evers' budget for WisDOT

The Journal-Sentinel headline mentions “gas tax to go up nearly a dime a gallon.” And that’s accurate, but as Patrick Marley notes, it’s actually two different provisions that hit in two different years.
To put more money toward roads, Evers would raise the gas tax by 8 cents a gallon initially and another 1.6 cents by early 2021. In all, the gas tax would go up 9.6 cents by then, from 32.9 cents to 42.5 cents.

In an attempt to keep gas prices down, Evers is also proposing eliminating the state's minimum markup law on gasoline. That law requires retailers to increase the price of gas in most cases by 9.18 percent above the average wholesale price.

Evers contends that change would lower gas prices by 14 cents a gallon — meaning overall gas prices would fall even with his proposed increases in the gas tax. How the situation would actually play out remains unclear because retailers don't have to raise their prices if they are matching competitors' prices.
In looking at the Legislative Fiscal Bureau’s summary, the estimation is that the indexing will hit in April 2020, and will raise the tax by 0.8 cents in that year and 2021. Put together, it would add $526.5 million to the Transportation Fund during the 2019-21. Add in increases in heavy truck fees, title fees and having a law that allows the state to finally collect on Scott Walker’s hybrid tax, and that’s another $81.9 million.

The other funding change is changing a money source by using left-over funds from the state’s gas tank cleanup and inspection fund, and not transferring anything from the General Fund.
The Governor's recommendation would eliminate the annual transfer of 0.25% of general fund taxes to the transportation fund, which would otherwise occur in each year of the 2019-21 biennium. Compared to current law, this provision would reduce the transportation fund balance by $87,817,100 in the biennium and increase the general fund balance by the same amount.

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. DOA estimates transfers of $53,677,500 in 2019-20 and $45,025,600 in 2020-21. In addition, the ongoing statutory transfer from the PIF to the transportation fund of $6,258,500 annually would continue.
This will end up reducing money in the Transportation Fund by $31.1 million in the next budget, but it also keeps nearly $88 million in the General Fund for other needs.

Marley notes that Evers plans to start up work on widening I-43 between Glendale and Grafton in the next 2 years, and also will finish up other major projects that are underway.
The influx of cash Evers included in his budget would allow other large projects to stay on their current schedules — including the north leg of the Zoo Interchange in Milwaukee, which is to be finished in 2023.

Under his plan, state Highway 441 in the Fox Valley would be completed by 2020, Highway 15 in Outagamie County would be completed in 2021, Highway 23 in Sheboygan and Fond du Lac counties would be completed in 2023 and Highway 50 in Kenosha County would be completed in 2023.
But the total funding on the major projects is still slightly less than what was used in 2018-19. Evers’ major change is to use the extra money to bulk up spending on everyday highways, bridges and rail that have been left behind during the Age of Fitzwalkerstan,

Funding for DOT major infrastructure programs 2019-21 vs base
State Highway Rehab (non-freeway work) +$252.5 million
Freight rail preservation +$18.0 million
Major Interstate/High-Cost Bridge work +$11.0 million
Major Highway Development -$40.8 million
SE Wisconsin Megaprojects -$2.7 million

Interestingly, the Evers budget counts on a cut of $27.3 million in Federal highway aid, citing “some uncertainty” about how much will be sent to the state from DC over the next 2 years, especially with the current highway bill expiring in September 2020. If those numbers stabilize, or if President Trump ever puts money behind what Candidate Trump claimed he would do on infrastructure, then there is more money that can be used for other purposes.

Another place where Evers’ budget includes more funding is through assistance to local communities to fix their roads and provide transit.

Funding for DOT aid programs 2019-21 vs base
General road aids to counties and municipalities +$66.2 million
Harbor Assistance grants $24.0 million
Mass Transit aids to localities +$13.8 million
Transit buses and other capital assistance +$10.0 million
Other transit aids +$7.6 million
Local Roads Improvement Program $1.9 million

That would take some pressure off of property taxes that otherwise have to pay for these services (or have those repairs and services cut).

Lastly, the debt story is markedly different than the Walker years. As the Evers Administration noted in January before they submitted the budget, paying off debt has taken up an increasing amount of the Transportation Fund’s costs in recent years, and was slated to take up more for the next 2.

As a result, increased amounts of money to deal with this debt was baked in for much of 2019-21, as the LFB projected millions more were needed in the current budget just to make our payments.

“Baked in” debt service increases, 2019-21
Transportation Fund $43.4 million
General Fund $16.4 million
TOTAL $59.8 million

This is what we're left with after 8 years of a governor who had the following philosophy when it came to paying for the roads.

So that’s where part of Evers' proposed tax and fee increases go to, but the higher revenues also allow Evers to limit borrowing for the 2019-21 budget to the lowest levels in years, at $338.25 million. Interestingly, $131 million of that is not for roads, but for rail, harbors, and bridges, which is a sizable increase from the $26.1 million borrowed for those forms of transportation in Walker’s last budget.

Because of Evers’ plans to not borrow much in the budget, and because of the extra money coming in due to the gas tax and fee increases, the chunk of the Transportation Fund dedicated to paying off debt will decline.

Debt service as % of revenue in Trans Fund
2017-18 18.7%
2018-19 19.4%
2019-20 17.8%
2020-21 17.8%

You can see the mess in transportation funding that Evers is trying to clean up, especially due to Scott Walker's decision to follow the wishes of out-of-state no-tax ideologues instead of taking care of the roads his constituents have to travel on. And you can see how the Evers budget adds revenues and thereby lowers debt now, and in the future. Given the conservative estimates of federal highway funding, it also seems likely to have more flexibility later in the budget cycle, if the Feds hold up their end of the bargain in the coming years and don't make the cuts that Evers is budgeting for.

So if passed, it appears that Governor Evers' budget will make the Transportation Fund more sustainable, and start to reduce the massive backlog of maintenance and other road projects that piled up in the Age of Fitzwalkerstan. It's just a matter if you can stand to pay another 8-9.6 cents a gallon over the next 2 years, and avoid fewer Scottholes and repairs in return. Grover Norquist and the Kochs may not like that, but it seems like a pretty good deal to me.

1 comment:

  1. Solid analysis. Thank you. I'm always more knowledgeable after reading here - sometimes a little - often times a lot.

    I've said it before, but I feel the need to repeat it. Good transportation infrastructure is an almost universal benefit to the residents of the state.

    Even if you don't drive a car, virtually any service or product you might purchase relies on that infrastructure. The customers who patronize the business you run or work for rely on it to get to you or have you get to them. Emergency services vehicles. Buses. Trash. Recycling. Pizza.

    Funding sources for transportation should be expanded to reflect this broad based public good and level out the problems associated with the volatile gas tax revenue.

    I have no problem with using the gas tax and DMV registrations as revenue sources per se, but I think it would be helpful and reasonable to spread it around more than we do.