20 States to Watch in 2013: Transportation Funding

With the days of 2012 dwindling to a precious few, it’s time to look ahead to 2013 and what could be on the horizon for states seeking funding solutions to their infrastructure needs. Could 2013 be the year states move to increase their gas taxes or fees or enact other revenue raising measures? A number appear poised to do so. But, it should be said, that appeared to be the case at the beginning of this year too (see my not very prescient January blog posts here and here). Nevertheless, there is certainly a lot of transportation talk in state capitals in advance of 2013 legislative sessions. So, with no risk of damaging my already abysmal record of prognostication, here’s my list of states it might be worth keeping an eye on next year.

  • Connecticut: The Hartford Courant reported last week that Gov. Dannel Malloy and state Transportation Commissioner James Redeker were both among the speakers at a recent transportation forum. “Fewer (federal) dollars will be coming to our state,” the Governor noted. “What do we do about falling gas tax revenues?” In his remarks, Redeker referenced a backlog of more than $3 billion in needed bridge, highway and transit repairs. “There’s a funding dilemma coming,” he said. Former state transportation commissioner Emil Frankel, now a visiting scholar at the Bipartisan Policy Center (and past speaker at CSG Transportation Policy Academies) said the state must look to develop new revenue sources including tolling and other direct user fees. Raising the state gas tax or passing a supplemental gas tax should also be considered, panelists said.
  • Indiana: In 2006, the state of Indiana received $3.8 billion when it leased management of the Indiana Toll Road to a private concessionaire for 75 years. That helped fund dozens of other transportation projects around the state as part of Indiana’s Major Moves road plan (a new study concludes the deal, while good for short-term gain, was a long-term bad deal for taxpayers. Though others contend the study is flawed). But much of that money the state received in the deal has now been obligated and the state is seeking new answers for how to meet its transportation needs going forward. State transportation officials say Indiana now faces a $200 million annual shortfall in funds needed to maintain highways and bridges, The (Fort Wayne) Journal Gazette reported recently. That money is needed to save $2 billion in more extensive repairs over a 20-year period. Among the transportation revenue ideas under consideration: raising the state’s 18 cent-a-gallon gas tax, indexing the tax to inflation, increasing license plate fees, and creating a new taxing system based on how much drivers use the roads. Lawmakers next year could also consider a plan to let voters decide in a referendum whether to authorize local governments to enact an income tax increase to pay the local share of a 10-year, $1.3 billion transit plan for Marion and Hamilton counties, about half of which would be federally funded, The Indianapolis Star reported last month.    
  • Iowa: Gov. Terry Branstad told attendees at a town hall this summer that he sees legislative support for raising the state’s gas tax in 2013, according to The Sioux City Journal. The governor said he believes increasing the fee by between 8 and 10 cents a gallon over three years could receive public support if coupled with decreases in property and income taxes. But according to more recent reports, state legislative leaders are skeptical about how a gas tax increase might fare. Specifically, they expressed concerns over how revenues might be divided among urban and rural needs. A citizen advisory commission in Iowa issued a series of recommendations last year for dealing with a transportation funding shortfall in the state. You can read more in my Capitol Research brief on “Transportation Funding Commissions” from April.
  • Maine: When the Maine section of the American Society of Civil Engineers issued a Report Card for Maine’s Infrastructure recently, it gave an overall grade of C-minus. Maine roads rated a D. The low rankings, which reflected few changes from a 2008 report, prompted some Democratic leaders to call for making infrastructure improvements a priority in the next legislative session, the Maine Public Broadcasting Network reported this month. New Democratic Senate President Justin Alfond told the network the state cannot afford to ignore needed repairs and upgrades to infrastructure. But Gov. Paul LePage has said he won’t use new voter and legislature-approved bonding authority to borrow money for infrastructure projects until state spending is reduced to his satisfaction.
  • Maryland: The Baltimore Sun and The Washington Post reported last week that business leaders and county officials want to see Gov. Martin O’Malley and legislators get behind an effort to increase the gas tax or find another way to raise hundreds of millions needed for transportation projects in the state. O’Malley is said to still be formulating his 2013 legislative program. Senate President Thomas V. Mike Miller has said he’s willing to make a push for new transportation revenues but he wants to see direct involvement from the governor in rounding up votes in the General Assembly. Meanwhile, at least one Tea Party-affiliated group is already mobilizing in opposition to any gas tax increase, The (Annapolis) Capital Gazette reported last week. Some are concerned that O’Malley is entering the legislative session without a general to lead the charge on transportation, The Baltimore Sun reported Saturday. Nearly five months after Beverly Swaim-Staley stepped down as Maryland’s Secretary of Transportation (and eight months after she announced her retirement from the post), the governor has yet to name a replacement. Maryland’s 23.5 cent gas tax was last raised in 1992. Maryland was one of several states that turned to a specially appointed task force last year to make recommendations about transportation funding. The state was one of four profiled in my April 2012 Capitol Research brief on “Transportation Funding Commissions.” Also, State Sen. James Rosapepe and Del. Brian Feldman are expected to push for a constitutional amendment that would allow the governor and lawmakers to piece together specific plans to fund transportation projects and seek approval from voters in a ballot referendum, much as Georgia did with limited success this summer, The (Gaithersburg) Gazette reported earlier this year.
  • Massachusetts: Gov. Deval Patrick plans to put “a long-term financial plan on transportation” before the state legislature in 2013, The Lowell Sun reported this month. The state’s highway system faces a $240 million operating shortfall for the next fiscal year. At the same time, the Massachusetts Bay Transportation Authority (MBTA) which operates Boston’s public transportation system is facing a $130 million deficit. Patrick previously sought a 19 cent-a-gallon gas tax increase in 2009 to help avert toll increases, pay off debt from the Big Dig and reinvest in roads and bridges but it received stiff opposition from the legislature. 
  • Minnesota: Last month the Minnesota Transportation Finance Advisory Committee, a panel established by Gov. Mark Dayton in January, issued its final recommendations for the next 20 years to fund and finance the state’s highways, roads, bridges, public transportation and air, rail and port facilities. Among the revenue options the panel put forward: increasing motor vehicle registration fees, increasing the per-gallon excise tax rate on motor fuels, increasing the transit-dedicated sales tax in the Twin Cities area, enabling local option sales taxes for transportation, employing value capture concepts around transportation improvements, exploring tolling options targeted for new capacity, exploring public-private partnership opportunities, monetizing existing transportation assets to generate revenue and continuing the state role in general obligation bonding for transportation projects. It appears that Dayton has already ruled out one of those options, McClatchy Newspapers reported last week. “I don’t support a gas tax increase at this time, because I think there’s not public support for it,” Dayton said. “I don’t see it as providing nearly the amount of money necessary to make significant and really identifiable progress.” Dayton didn’t rule out increasing taxes of some sort for highways. He said it will be up to his newly appointed transportation commissioner, Charlie Zelle (who served on the governor’s task force), to sell a transportation funding plan by going around the state over the next couple of years and engaging local chambers of commerce and other influential stakeholders.  
  • New Hampshire: State lawmakers could consider legislation in 2013 that would allow the commissioner of the state department of transportation to sell naming rights for state overpasses and bridges in order to increase transportation revenues. Ohio and Virginia have launched similar efforts, the AASHTO Journal reported this month. The New Hampshire Union Leader also reported on the possibility.
  • New Jersey: Some transit advocates in the Garden State are asking Gov. Chris Christie to get behind a gas tax increase to help pay for repairs to a transportation network damaged by Hurricane Sandy, The Philadelphia Inquirer reported. New Jersey’s gas tax is 14.5 cents a gallon and hasn’t been raised since 1988.
  • North Carolina: The Associated Press recently looked at where incoming Gov. Pat McCrory (the longtime Charlotte Mayor) stands on transportation issues: “Don’t punish cities that must spend lots of money improving interstates, he says. Develop decades-long construction plans. Keep politics out of funding road projects and work with the private sector. And don’t be afraid to try something risky, like the Republican did in 1998 by lobbying for a referendum by voters that raised the local sales tax to help build Charlotte’s first light rail line.” Transportation advocates in the state are reportedly encouraged that the governor-elect, who championed transportation’s ability to improve the economy as Mayor of Charlotte, could endorse more sustainable transportation revenue sources and win support from legislators. But, as a Business Journal article pointed out earlier this fall, North Carolina’s gas tax is already among the highest in the nation and while the state has turned to tolling to help finance some projects, they have faced challenges with a couple of toll road projects.
  • Ohio: Gov. John Kasich has decided against an Indiana Toll Road-style lease or privatization of the Ohio Turnpike to raise money for highway and bridge projects in the Buckeye State. Instead, Kasich is proposing that the Turnpike be renamed the “Ohio Turnpike and Infrastructure Commission” and given expanded authority to borrow $1.5 billion backed by future tolls. Federal and local matching money could generate an additional $1.5 billion, Kasich said last week. There is more about the governor’s plan on the Ohio Department of Transportation website. Kasich’s plan, components of which will require legislative approval, would adopt the first of three options for the Turnpike outlined in a study produced for the state by KPMG Corporate Finance. The study, which was in the works for a year, described the alternatives as “status quo with increased bonding capacity” (the one selected by the governor), a “public option” that would have seen the Ohio Turnpike Commission remain independent but align more closely with the state DOT, and the “public-private option” which would have seen the Turnpike leased to a private entity for a maximum 50-year term. 
  • Oregon: A group of 40 volunteers is currently participating in the Oregon Department of Transportation’s latest test of a road usage charge system based on miles driven. The state previously studied collecting revenues via such a mechanism in 2007. The latest pilot project focuses on “choice, transparency, ease of use and protection of personal privacy,” according to the project website: “Pilot participants choose from 5 different plans involving a range of technologies and methods for reporting and paying. They can choose the way in which miles are logged (Smartphones, geographic positioning system (GPS) devices, or simple reporting devices) or can opt out of in-vehicle technology altogether. Pilot participants can also choose to pay a flat annual charge in lieu of a per-miles-traveled basis. Payment options include check or credit/debit card.” ODOT is working with a private company called Sanef to process payments and provide mileage reporting devices for the test. Volunteers taking part in the test, some of whom are state and local government officials, are blogging about their experiences with the system. The pilot will continue into next month and ODOT will put together a report for the state legislature on its findings. ODOT Office of Innovative Partnerships Manager Jim Whitty expects the legislature to consider a bill applying mileage fees to high fuel efficiency vehicles next spring.
  • Pennsylvania: Gov. Tom Corbett is expected to unveil his long-awaited transportation funding plan in mid-January. The Pittsburgh Post-Gazette reported earlier this month that the governor is considering all of the recommendations of an advisory commission that issued a report in August 2011 (also profiled in my Capitol Research brief earlier this year). The governor’s plan could include an increase in one component of Pennsylvania’s gas tax, the oil company franchise tax, The Philadelphia Inquirer reported this month. Some lawmakers are hoping to address public transit separately from other transportation infrastructure. State Senate Transportation Committee Chairman John Rafferty is also said to be putting together this own package of bills to raise the revenues needed to complete $2.5 billion in needed road and bridge repairs in the state, The (LeHigh Valley) Morning Call reported last month. In an interview with The (Harrisburg) Patriot News earlier this month, Pennsylvania Transportation Secretary Barry Schoch discussed why it has taken the governor so long to address transportation funding: “We know that we need to increase spending, but we need to cut the recurring costs of government. So having worked for 28 years in this industry, I told (the governor) I think there is stuff we can do to be a better business partner for the business community and things we can do to reduce the recurring costs of providing these services. The Transportation Funding Advisory Commission report had three components: a modernization one, a funding/financing side and a legislative component. While the governor and I have been criticized for not moving quickly enough on the funding side, one of the first things we needed to do was get our house in order. That’s why we did the modernization component first. We also worked with the Legislature to pass the P3 legislation [Public-Private Partnerships] and red-light camera legislation. So we’ve made progress.” The modernization effort includes a new website, Modern PennDOT, which describes nearly 50 initiatives completed or underway. The Pittsburgh Post-Gazette had more about how PennDOT is using the website to make the case to the public about the agency’s efforts to stretch transportation dollars.
  • South Carolina: The Transportation Infrastructure Task Force this month issued its final report after a year-long effort. The report said the state needs to raise $29.3 billion in new revenue over the next 20 years to pay for highway repairs, bridge replacement and mass transit or risk irreparable harm to the state’s economy. It outlines the economic and political forces affecting current transportation revenues in the state and suggests a series of potential revenue enhancements. Though it offers no recommendation of one revenue source over another, it lists among the options: a gas tax increase (the rate in South Carolina is 16.75 cents per gallon, the fourth lowest in the nation), indexing and removing the sales tax exemption on gasoline, and increasing driver’s license fees, automobile and truck registration fees. Among the other options listed: tolling, public-private partnerships, increasing the sales tax on vehicle purchases, alternative fuel vehicle user fees and vehicle miles traveled fees. But some legislators question whether transportation funding will be addressed during the 2013 legislative session. Senate President Pro Tem John Courson said recently that Medicaid expansion will be the big issue for lawmakers next year, the Associated Press reported.      
  • Vermont: A seven-member special committee on transportation funding is expected to tell Vermont lawmakers next month that the state faces a funding shortfall for road and bridge construction and repair of about $250 million a year over the next several years, the Associated Press reported last week. In a draft of their final report, the committee lists 15 different revenue options for addressing the shortfall, including: raising the state gas tax, levying a property tax on vehicles based on their value, and enacting a vehicle miles traveled tax based on annual odometer readings. But, as an article in the Vermont Digger points out, the revenue measures would raise only about $135.44 million of the $250 million annual shortfall.
  • Virginia: Gov. Bob McDonnell is working on a transportation funding plan for consideration by the General Assembly next year. Indexing the state gas tax to inflation is reportedly on the table as part of the plan, according to recent news accounts. But, in a letter to legislators last week, anti-tax crusader Grover Norquist called such a move a “job-killing tax increase” and said lawmakers who supported the indexing would be in violation of Norquist’s “Taxpayer Protection Pledge.” Virginia’s gas tax of 17.5 cents per gallon has remained the same since 1986 and is lower than that of neighboring states. McDonnell said recently that while other taxes, such as the sales tax and income taxes, fluctuate with economic activity, the gas tax has not. The governor has promised a transportation funding plan that would generate at least $500 million a year in additional funding by 2018. McDonnell this week proposed a series of state budget amendments that included a proposal to redirect $48 million in general funds to transportation, The Washington Post reported. Meanwhile, State Sen. John Watkins is proposing a 5 percent tax on the wholesale price of gas, which he wants to offset by reductions in the state income tax. Watkins said the plan would generate $750 million more annually for transportation, a quarter of a billion more than McDonnell’s plan, WAMU Radio reported. House Speaker Bill Howell said last week that he’s not sure there’s enough time in the General Assembly’s winter session to address the transportation funding issue and that he’d prefer a shift of general fund revenues to transportation over any kind of tax increase, The (Fredericksburg) Free Lance-Star reported.
  • Washington: Gov. Chris Gregoire, who did not seek re-election this year and is preparing to leave office, is still required by law to deliver a proposed budget by December 20 and she has promised it will include an increased investment in transportation to rival a 2005 deal that included a 9.5-cent gas tax increase and other revenues. That deal generated $7 billion to fund about 200 transportation projects over the course of 16 years. The state still faces needs in funding basic infrastructure maintenance and is trying to come up with ways to pay for major projects such as the Columbia River Crossing in Vancouver. Gregoire has said another gas tax increase could be in the mix. “The only things that give you a decent amount of money are things like the gas tax,” she told reporters last week. Gov.-elect Jay Inslee has not said whether he’ll support Gregoire’s proposal. Larry Ehl at Transportation Issues Daily reported recently on “The Transportation Crisis Facing Washington’s Next Governor.” Washington State was one of several that turned to a specially appointed task force last year to make recommendations about transportation funding. The state was one of four profiled in my April 2012 Capitol Research brief on “Transportation Funding Commissions.”

     Update 12/19/12: Gregoire's budget proposal, released Tuesday, recommends a new wholesale excise tax on motor fuel be used not for transportation projects but to fund yellow school buses for Washington public schools, The Seattle Times reports: "Drivers would pay an added 5 cents a gallon July 1, rising to 8 cents in mid-2015 and 12 cents in mid-2017, if the oil industry were to pass the tax entirely to consumers." The move would free up an estimated $906 million to be spent in classrooms instead of on the buses (a state Supreme Court ruling requires the state to increase K-12 funding). But the newspaper notes that "Such a tax could make it harder for the Legislature to rescue the ferry system and underfunded road projects ... The Legislature also would have a harder time relieving an expected $200 million shortfall in toll revenue for the Highway 99 tunnel." House Transportation Committee Chair (and 2012 CSG Transportation Policy Academy attendee) Judy Clibborn told the newspaper that using a transportation-related tax to fund school buses wouldn't leave "any room to do transportation for the rest of your state." Larry Ehl on the Transportation Issues Daily blog writes that "The Governor is not proposing a gas tax increase, which would be constitutionally directed to highway safety, maintenance, preservation and expansion projects. She is not proposing an increase to transportation-related fees, which could have been directed to transit and other non-roads projects and programs." The reason is a lack of consensus among stakeholders about a funding proposal, Ehl says: "If there was consensus, she'd propose the tax increase package to the Legislature. There was no consensus, so there's no tax increase proposal." Instead, Ehl writes, Gregoire provided a five-page Budget Policy Brief that lays out the urgency of investing in Washington's transportation system. A list of "viable potential sources of funds" in the brief includes a fuel tax increase, a statewide motor vehicle excise tax, an increase in the weight fee for heavy trucks dedicated to freight investments, and tolling. "Legislative action in 2013 is essential for maintaining and boosting Washington's economic competitiveness," the brief reads. "Transportation advocates must come together to provide the Legislature with a multi-faceted transportation proposal that addresses operations and maintenance of the system and of critical economic corridors." In other words, the governor has left the future of transportation funding in the hands of Inslee, the legislature and transportation stakeholders.

  • West Virginia: The West Virginia Blue Ribbon Commission on Highways, established earlier this year by Gov. Earl Ray Tomblin, is slated to issue its report to the governor in 2013. The commission, which includes state officials, members of statewide constituency groups, city and county officials, members of the legislature, and members of the general public, is looking at new ways the state could pay for transportation projects and establish a long-term funding plan. The revenue plan could include diverting state general revenue funds to the state road fund or increasing gas taxes or other fees, The Charleston Daily Mail reported last week. The governor has pushed back the deadline for the commission to issue its report from February 1 to May 1 to allow them more time to formulate a comprehensive plan. The commission will also hold public hearings next year. The commission is divided into three committees. The infrastructure committee, which is expected to complete its work next month, is focusing on the highway system’s maintenance and construction needs. The revenue committee will come up with a way to fund the system. A third committee is charged with selling the plan to lawmakers and the general public.
  • Wisconsin: The Badger State will become the latest to go the commission route when the Transportation Finance and Policy Commission makes its revenue recommendations to Gov. Scott Walker in January. The Janesville Gazette reported recently that among the ideas under consideration is a five-cent gas tax increase, raising the $75 annual vehicle registration fee, eliminating the sales tax exemption for trade-in vehicles, creating regional transportation authorities with new taxing powers, and (eventually) collecting a new miles driven fee. Walker reportedly doesn’t favor a gas tax increase or the addition of toll lanes to meet the state’s funding shortfall. The Milwaukee Journal-Sentinel reported recently on how transportation advocates could use a late winter or spring public relations blitz to make the case to the public for additional transportation revenues. Among the arguments they plan to highlight: Wisconsin drivers pay less in a year to use Wisconsin’s highway system than they pay for cable television or internet service. Also, Wisconsin’s gas tax is now a smaller percentage of the retail price of gas than it was in 1929.  
  • Wyoming: Bills to increase the state gas tax by 10 cents a gallon and motor vehicle registration fees by $10 will be considered in the 2013 legislative session, the Associated Press reported this month. Both measures were endorsed by the Legislature’s Joint Revenue Committee. But while Gov. Matt Mead has expressed support for the fuel tax increase, he does not support the registration fee increase. A fuel tax hike does have support from a diverse collection of interest groups including the Wyoming Business Alliance, Wyoming Taxpayers Association, Wyoming Association of Municipalities, and the Wyoming Trucking Association. An editorial this week in the Laramie Boomerang said a gas tax increase for Wyoming seems inevitable. Wyoming’s 14 cents-per-gallon fuel tax hasn’t been increased since 1993 and is considerably lower than that of surrounding states.