State Transportation Funding Efforts Get Assist

Massachusetts state Sen. Thomas McGee had a cautionary note for attendees at a recent conference in Denver on state transportation funding efforts.

“It’s not just about reaching the finish line,” he said at the conference hosted by Transportation for America. “It’s about where you go from there.”

The Bay State “reached the finish line” in 2013 when lawmakers overrode Gov. Deval Patrick’s veto to enact a funding package that included a 3 cent-a-gallon gas tax increase, an indexing mechanism that would tie future increases to the rate of inflation, a $1 per pack cigarette tax and the application of the state sales tax to computer software and services. 

But just two months after the computer sales tax took effect, lawmakers voted to repeal it after technology and business leaders raised objections. Then, just last month, Massachusetts voters approved a ballot measure to eliminate the automatic indexing of the gas tax. Proponents of the measure had argued raising the tax without a vote of the legislature constituted taxation without representation. State transportation officials say the repeal undercuts the 2013 funding bill and will cost the commonwealth $1 billion in transportation revenue, as well as the ability to borrow even more to fund future transportation projects. 

If lawmakers need to increase the gas tax in the future, they will need to vote to do so, something that has proved politically challenging in the past.

“I said to one of my colleagues on the transportation committee ‘let me get this straight: I’ll vote to raise it next year. You’ll vote against it. You’ll spend the money that we raise … and then you’ll run against me and say I’m a tax-and-spend liberal.’ And he just smiled,” McGee said. “It’s really frustrating because this really should be a bipartisan issue in my opinion.”

The Massachusetts experience is not unique, said Stephanie Pollack, associate director of research at Northeastern University’s Dukakis Center for Urban and Regional Policy in Boston. States have rolled back a portion of their transportation revenue packages fairly regularly, she said. 

“When we win these battles, it’s two steps forward and one step back,” she said. “If you think about how education reform, affordable housing or other issues work, they’re not, you do it once and then you don’t do it anymore. It’s every year. And that’s actually the future of transportation finance. … We all have to be in this for the long haul.”

More Expected for 2015

The Transportation for America conference not only highlighted states like Massachusetts that have experienced past success in approving transportation funding packages, but also offered advice for states that could look to follow in their footsteps in 2015. The number of those states could be high if early indicators are correct. States like Georgia, Iowa, Louisiana, Minnesota, New Jersey, South Dakota, Texas and Wisconsin all appear poised to debate packages in the new year. One state—Michigan—could even wrap up a funding measure before the curtain falls on 2014. Legislation supported by Gov. Rick Snyder to eliminate the current gas tax, charge a tax on gasoline wholesalers instead and increase rates over four years has been passed by the Senate and awaits action in the House this month.

With Congress seemingly unable to pass anything but short-term, temporary funding for transportation, some states are seeking to move forward to address the significant transportation challenges they face with innovative funding strategies. 

California, which has unfunded needs totaling $295 billion through 2021, has turned to local sales tax ballot measures. Alameda and Monterey counties both voted to raise sales taxes for transportation purposes last month. The state also has tapped cap-and trade revenues to help fund high-speed rail, transit and other infrastructure projects. 

But Will Kempton, the former Caltrans director who now leads the advocacy organization Transportation California, said at a time the state is embarking on its heaviest political lift, there appears to be no silver bullet revenue solution on the horizon. The only viable approach is likely to be a combination of new revenue streams. The state likely will need to pursue short-term or interim measures until a more permanent mechanism is developed and implemented, Kempton said. 

Some hope the state can recapture revenues from truck weight fees that now go to debt service on transportation-related bonds. Transportation officials also hope to get back money they’ve loaned to the state’s general fund over the years. Additional bonding and the expansion of the state’s authority to enter into public-private partnerships also are being discussed.

California also is making moves on what could become a longer-term solution. This year, state lawmakers approved legislation to create a pilot project to explore the viability of mileage-based user fees. 

“If this is going to be the future direction, let’s get started,” Kempton told attendees.

California’s neighbor, Oregon, already is getting started. In July 2015, the state launches its road usage charge program under which 5,000 volunteers will pay 1.5 cents per mile and receive a refund of the state gas tax. The state will certify private sector firms to collect mileage data, process the new tax and do the account management. Volunteers will have a choice of how their mileage is reported.

James Whitty, who oversees the program for the Oregon Department of Transportation, told Denver attendees he expects other states to access Oregon’s system for additional pilot programs around the country over the next five years. He also believes once the latest experiment proves successful the Oregon legislature could mandate the mileage-fee system for certain types of vehicles. Within 10 years, Whitty sees a multi-state coalition of Western states adopting a system based on the Oregon program and predicts the development of a commercial road usage charge market as available technology and provider choices multiply.

New Network to Assist Funding Efforts

Transportation for America officials used the Denver conference, which was attended by representatives of 30 states, to announce the launch of a new network to support state efforts to pass transportation funding legislation while improving spending accountability. 

“They say that states are the laboratories of democracy,” Transportation for America Chairman John Robert Smith said in a statement released by the organization. “And many are proving right now how to stand in the gap created by federal inaction. But to fulfill their homegrown solutions, they need help with everything from finding innovative revenue sources to crafting political strategies and legislative language. Our hope is that this new network will help replicate success across the country and empower states and regions that want to make this happen.”

The organization plans to have a significant presence in state capitols come January, assisting transportation coalitions and policymakers with their campaigns to seek additional transportation funding in legislative sessions.

“We don’t want this to be the ending,” Geoff Anderson, president and CEO of Transportation for America’s parent organization, Smart Growth America, said during the Denver conference. “We want it to be the beginning.”

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