States Face Rocky Roads in Transportation Funding

E-newsletter Issue #48 | June 10, 2010

It’s been a difficult year for transportation finance at the state level. Legislation reauthorizing federal transportation programs is not expected from Washington until next year.

It appears unlikely that states will get an infusion of cash to fund transportation projects on the order of the one they got last year with the American Recovery and Reinvestment Act. And concerns about a still nascent economic recovery and an anti-tax fervor in the electorate are making state officials reluctant to raise additional revenues to pay for projects.  

Despite all that, a handful of states are making a big splash this year in choosing to fund transportation improvements:

  • Last month, Kansas Gov. Mark Parkinson signed an $8.2 billion, 10-year transportation plan. The legislation authorizes $1.7 billion in new debt through bond sales. The Kansas Department of Transportation will also start getting revenue from a sales tax increase in 2013 and registration fees for heavy trucks will increase by $100.

  • In Vermont, Gov. Jim Douglas recently signed the biggest-ever transportation spending bill in that state—$595 million. It includes $182 million in state funding, $275 million in regular federal funding and $80 million in federal stimulus funds. The spending bill will help fund major rehab on the state’s bridges.

  • In Georgia, Gov. Sonny Perdue signed a transportation bill that gives voters the option to decide whether they want to pay more sales taxes to fund roads. Under the measure, the state is divided into regions and officials from those regions will come to agreement on which projects they want to fund. Voters will go to the polls in 2012 to decide whether they want to fund the projects in their region with a 1 cent sales tax increase. The tax hike could generate $3 billion over 10 years. Atlanta Mayor Kasim Reed was quoted by the Atlanta Journal-Constitution as saying the legislation could result in “the biggest capital investment in the last 50 years” in the state.

In other recent developments:

  • Florida Gov. Charlie Crist used the line-item veto to prevent a raid on that state’s road-building fund that would have gone to schools.

  • Arizona is among several states considering raising their vehicle registration fees this year. But state officials want to use the money not to fund highway and bridge improvements but to maintain state parks.

  • North Carolina Gov. Beverly Perdue has asked the state legislature to create a dedicated fund to build needed transportation projects. The state could generate $300 million annually to create the fund by raising driver’s license fees, ending a trade-in sales tax break on new car sales and shifting other pots of money around, the governor said at a news conference in May, according to the Associated Press.

  • In March, California Gov. Arnold Schwarzenegger signed legislation to restructure the state gas tax to allow greater flexibility in spending the revenue.

  • The Rhode Island Senate last month voted to create a commission to consider the feasibility of a state vehicle miles traveled tax similar to one Oregon has experimented with.

  • Pennsylvania has a $472 million transportation budget shortfall as a result of the federal government’s rejection of the state’s plan to add tolls to Interstate 80. Proposals on the table to fill the gap include increases in the gas tax and oil company franchise tax and new $1 entry and exit tolls at the state borders.

  • While many financially strapped states are tightening their highway construction spending, Ohio is expected to see the largest highway construction season in state history this summer, thanks primarily to not-yet-completed Recovery Act-funded projects.

But developments elsewhere in the country have some transportation advocates concerned. Anti-tax sentiments in Colorado have spawned three ballot measures that voters will consider this fall. Those measures would, among other things, prohibit the state from taking on new debt, restrict local governments’ ability to borrow, and eliminate or reduce most state and local taxes and fees on vehicles. If approved, the measures could have a huge impact on how much the state is able to spend on transportation in the future.


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