13 States to Watch in 2012: Transportation Funding

I spoke recently with Governing magazine for an article on “Legislative Issues to Watch in 2012.” Transportation funding is likely to be one of those issues in many states this year. As legislative sessions get underway in some parts of the country this month, here’s a look at a few states it might be worth keeping an eye on in 2012.

  • Arkansas, where voters will decide in November whether to approve a constitutional amendment that would raise the state’s 6 percent sales tax to 6 ½ percent to fund a $1.8 billion program to connect the state with four-lane highways.
  • California, where some are saying it’s long past time for a gas tax increase there. They haven’t had one since 1994 and they’re looking at a $300 billion deficit between what they need to address infrastructure needs and what they expect to bring in.
  • Colorado, where state and regional transportation officials are looking at asking voters to approve new taxes in 2012 to improve roads and help complete the FasTracks rail lines in Denver. The gas tax in Colorado hasn’t increased in nearly 20 years.
  • Florida, where the state department of transportation is seeking more authority from state lawmakers to expand the use of toll roads, aiming to use the money for new road or bridge projects or for adding tolled express lanes to some major highways.
  • Georgia, where they’re going to ask voters to decide on a series of regional referenda which would fund transportation projects with a 1 percent sales tax. Two things to watch there will be the public education campaigns this year to convince voters and to inform them about the specific projects they would be funding and also whether those opposing the tax increases can gain any traction. Will voters vote to raise their taxes if they know exactly which local and regional projects their tax money is going towards and that it’s not going to support projects and services in some distant corner of the state that they’ll never use? A lot of states will be watching the outcome in Georgia very closely.
  • Maryland, where Gov. Martin O’Malley and Senate President Thomas V. “Mike” Miller are going to likely push for a 15-cent gas tax increase that was proposed by a blue ribbon commission there. The state hasn’t raised its gas tax in 20 years and the increase would give Maryland the highest gas tax in the nation. But O’Malley has said a one-time hike likely won’t be enough to solve the state’s long-term funding problems so he also supports another commission recommendation: indexing the tax rate to inflation. The commission also proposed a 50 percent increase in car registration fees and higher titling taxes. But some lawmakers in the state question whether additional revenues are needed at all, arguing that state officials in recent years have shifted millions in dedicated transportation funds to other projects.
  • Michigan, where Gov. Rick Snyder has put forward a plan to restructure the state gas tax as a percentage of the price of fuel and allow municipalities to raise vehicle licensing fees. Also in Michigan, Republican Sen. Howard Walker of Traverse City has proposed repealing the state’s 19 cents per gallon gas tax, but adding to the 6 percent sales tax, with proceeds going to the Michigan Transportation Fund. Walker’s argument is that everyone benefits from the roads not just those who use them. But that may be anathema to anyone who supports a user pays/user benefits model in transportation funding.
  • Missouri, where the state department of transportation is said to be exploring the possibility of doubling the state gas tax over 10 years to help pay for a widening of I-70 between St. Louis and Kansas City. But without adjusting the tax to account for inflation and without additional funding sources such as tolling revenue or another tax increase of some kind, the gas tax increase by itself could fund truck-only lanes on I-70 but little else during that decade. Gov. Jay Nixon has said tolling on I-70 is not in his short-term plans. Tolling on I-70 would require special federal permission since it is an existing interstate.
  • New Jersey, where Gov. Chris Christie has declined to consider a gas tax increase but he wants the legislature’s permission to borrow several billion dollars to fund road and bridge projects.
  • New York, where Gov. Andrew Cuomo wants to overhaul the state’s tax system and use public-private partnerships (P3s) to fix infrastructure. He also wants to create an infrastructure fund to finance the repair and development of highways, bridges and major construction projects. Two Republican Senators (Charles Fuschillo of Merrick and Marty Golden of Brooklyn) are also calling for a law to allow the state to utilize P3s to help finance and deliver road and bridge improvements. They’ve sponsored S. 5445 to give the state the authority that 31 other states and Puerto Rico already have.
  • Oklahoma, where Gov. Mary Fallin has a plan to fix all 706 structurally deficient bridges on the state highway system by 2019. She’s asking the legislature to increase the amount of state revenue set aside for road and bridge repairs by $15 million a year and raise the road and bridge maintenance cap for the eight-year period to $550 million. She expects that can be done as a result of expected growth in state revenue from anticipated increases in economic activity and that no tax, toll or fee increases will be necessary.
  • Virginia, where Gov. Bob McDonnell and Transportation Secretary Sean Connaughton have pursued a number of different strategies in the past couple of years: from creating an office of public-private partnerships to revamping the state infrastructure bank to using audits to turn up unused transportation funds. And despite everything that they’re doing, Connaughton said recently that Virginia’s going to be out of state money to build new roads by 2017. One of the major initiatives lawmakers in Richmond will consider this year is whether to incrementally increase the portion of the state sales tax that is dedicated to transportation to .75 from .5 over the next eight years, starting with a hike to .55 percent for the upcoming two-year budget. That’s expected to generate an estimated $110 million in new transportation funding for maintenance. McDonnell also wants to increase to 75 percent the share of year-end surpluses diverted to transportation, dedicate portions of tax revenue growth attributable to transportation infrastructure projects back to transportation (a version of tax increment financing or TIF), and dedicate to transportation the first 1 percent in revenue growth over 5 percent each year. The TIF proposal would be somewhat unique and innovative since it is something normally done at the local level to pay debt service on infrastructure. There is some question about how the state would capture tax revenue that is already theirs for transportation projects they initiate. Local governments might revolt if they determine they stand to lose their share of taxes from a project.
  • Washington,  where a task force appointed by Governor Chris Gregoire has recommended that the state raise $20 billion during the next 10 years to fund the  transportation system. Revenue options likely to be considered include adding 15 to 20 cents per gallon to the state’s 37.5-cent fuel tax rate, which could raise between $3.3 billion and $4.7 billion. Also: a 10 percent increase in the gross vehicle weight fee for trucks, $100 fees for electric vehicles, a statewide motor vehicle excise tax, and a VMT tax. Washington is probably going to do more tolling too, although maybe not right away. Voters in November nixed a ballot initiative that would have severely limited the use of tolls. Any package of revenue options will likely go to the voters: lawmakers need a two-thirds majority to pass taxes but only a simple majority to send a tax package to voters. The governor’s task force had a survey done recently that showed 59 percent would support increasing transportation taxes and fees to fund infrastructure.