Transportation Funding Commissions II

In a 2012 Capitol Research brief and The Book of the States article, CSG’s Sean Slone took a look at the work of transportation funding commissions that concluded their work in 2011 in four states: Iowa, Maryland, Pennsylvania and Washington. This brief examines the work of five more commissions that issued their recommendations in 2012.
 

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Executive Summary:
With states continuing to face gaps between their transportation needs and the revenues they have to spend trying to meet them, some have turned in recent years to transportation funding commissions and task forces to develop recommendations for closing those gaps. These are diverse groups of stakeholders, policymakers and private citizens tasked with reaching consensus in an era when that has become increasingly difficult in the halls of power. For the past several years, the economic and political considerations involved in infrastructure investment have stymied forward motion in unprecedented ways at both the state and federal levels.

The work of the commissions in five states that met in 2012—Minnesota, Missouri, South Carolina, Vermont and Wisconsin—has resulted in five reports that, while often very different in the approaches taken, have remarkable similarities in the conclusions they’ve drawn and the avenues they’ve recommended pursuing. 
 
The states that convened these commissions in 2012 are among the many that saw significant activity on the transportation revenue policy front in the 2013 legislative session. While the final legislative results have been somewhat mixed, if 2012 is any indicator, we haven’t heard the last of the states highlighted in this brief. Maryland, which had a commission in 2011 but failed to get a transportation revenue package through the legislature in 2012, experienced greater success in 2013. Commission chairs and members interviewed for this brief said final reports are increasingly becoming thought of as not the end of the process, but the beginning of one. They appear likely to serve as educational tools in the hands of stakeholders and policymakers to help lay the groundwork for future policy actions. 
 
An analysis of the commissions’ final reports and conversations with commission members reveals a number of things about the process by which these panels went about their work, the principles they established to guide their work, the revenue and policy options they put forward and the outcomes of those recommendations so far. Those reports and conversations convey a sense about how states view the future of the gas tax, what they believe it will take to convince the public that more transportation revenues are needed and which revenue mechanisms could help states achieve a more sustainable transportation future. It also becomes clear that many believe it will take an all-hands-on-deck approach involving myriad solutions and mechanisms at the state, federal, regional, local and individual project levels to help meet the nation’s transportation needs going forward. While sometimes idealistic in the vision for their states, these commissions are clear in their assessment that there are no silver bullets and no easy solutions, but that an ever-expanding toolbox of options is available to draw upon in varied combinations to meet their objectives.
 
Process of Transportation Funding Commissions
Each commission took a slightly different approach in the process and the final product they produced:
  • Some (Minnesota, Wisconsin) took a scenario-based approach, identifying what the state could accomplish at different investment levels.
  • While some (South Carolina) took into account the political feasibility of their recommendations, others (Minnesota) did not.
  • While one state (Wisconsin) made very specific revenue recommendations, the other states assessed a variety of options or produced a menu of revenue mechanisms and left it up to others to combine those options into a policy approach with specific revenue levels The commission members believe both approaches were valid and gave their reports credibility and staying power.
  • Commission members said they aimed for simplicity and readability in their final reports.
  • In addition to identifying needs and revenue options,commissions also concerned themselves with the potential ramifications of inaction. 
  • Commission members said final reports are often just the beginning of a process, helping to frame the debate. Often, they said, the case must be made to the public and to policymakers long after the final gavel has come down.
  • Commission members said they aimed to build their reports for the long term and for an extended shelf life. 
  • Commissions found that even when a commission has done its job, the numbers are clear, the problem is apparent, the long-term outlook appears bleak, the clock is ticking, and the policy options are well-defined, policymakers can decide to kick the can down the road one more time because of economic and budgetary realities, reluctant governors or any number of other factors.
Principles of Transportation Funding Commissions
While each state faces unique transportation and political challenges, the commissions expressed many of the same principles with which to evaluate revenue options. Commission members said they wanted funding solutions that not only had significant revenue potential, but also were:
  • Fair and equitable;
  • Implementable;
  • Diversified;
  • Efficient in the cost of collections;
  • Sustainable for the long term;
  • Indexed to inflation;
  • Reflective of the “user pays, user benefits” principle—Transportation users need to see a direct connection between the fees they pay and the transportation facilities they use.
  • Easy to understand and market to the public and policymakers;
  • Supportive of preserving the existing transportation system;
  • Supportive of a multi-modal transportation system;
  • Supportive of transportation projects that assist with economic development and economic growth;
  • Measurable and transparent;
  • Targeting specific outcomes; and
  • Dedicated to transportation and not easily diverted to other budget priorities.
Funding & Finance Options
While these commissions are working from the same playbook in the funding options they have to consider, particularly when it comes to those mechanisms that can produce significant revenues, there are some interesting differences in how they view different options.
 
Some of the findings from these panels:
  • Most states likely won’t be able to tap general fund dollars to supplement transportation funds in the coming years due to other ever-increasing budgetary needs in areas like health care and education. 
  • While tolling and public-private partnerships—P3s—may be an option for some states and some projects, others will have a more difficult time pursuing those options due to small populations (Vermont) and political opposition (South Carolina). Most recognize that public-private partnerships cannot be the entire solution to funding needs and that they don’t represent “free money.” Some states (South Carolina) recognized a need for revised legislation with regards to P3 oversight. Others mentioned that federal regulations remain an obstacle to tolling on some roads. But the South Carolina commission also recognized that most of their 20-year needs involve the maintenance of existing roads or upgrades of local roads, projects that will likely not be suitable for tolling.
  • States are looking to give local government more tools to address transportation needs, particularly oft-neglected transit systems.
  • Several states expressed an interest in empowering regional transportation districts to levy sales taxes to help them address their specific needs.
  • The commissions recognized that mileage-based fees will more than likely be the future of transportation funding. But while they think a transition to such a system is inevitable (perhaps in less than a decade), they don’t think that transition is imminent. Technological, administrative and privacy concerns—among other issues—remain to be resolved. Some believe those issues would be best addressed at the federal level. Interim steps to a mileage-based system, however, could be considered in some states. Wisconsin’s commission proposed a mileage-based registration fee based on odometer readings as a low-tech step toward such a system.
  • Commissions gave some attention to user fees for alternative fuel, electric and non-motorized vehicles. Though they are not likely to produce significant revenues anytime soon, they could help level the playing field by getting owners of those vehicles to pay their fair share for upkeep of the nation’s roads.
  • Several states supported sales taxes or a mix of sales and increased gas taxes, but commission members expressed caution about temporary sales tax increases. They are, by definition, not sustainable and can put long-term projects in jeopardy if those revenues won’t be available in the out years as a project is completed.
Outcomes of Commission Recommendations in 2013
  • In each of the five states, lawmakers considered transportation funding legislation in the 2013 legislative sessions.
  • Vermont saw perhaps the most success with lawmakers approving increases in gas and diesel taxes. 
  • Some of those involved with state commissions and at state departments of transportation now find themselves charged with selling their recommendations to a larger audience in anticipation of a push for legislation in 2014.
  • Some commission members expressed their belief that stopgap solutions, temporary taxes and general fund transfers can be counterproductive since they do little to address long-term shortfalls and often hinder more significant solutions later if politicians can claim “we did something on that last year.” 
  • Some state departments of transportation used commission findings to implement process and project development improvements, efficiency efforts and other changes that did not require a vote of the legislature.
  • Some commission members saw it as an accomplishment that their final reports got the information out about what the future would look like for their states under different revenue scenarios and that their final reports can now be used to lay the foundation for an ongoing debate and help to build an eventual consensus.
How States View the Future of the Gas Tax
  • The gas tax is still seen by some as at least part of the short-term solution to help meet transportation needs. That’s despite the reality that raising gas taxes in many states in recent years has been difficult.
  • Some commissions believe it may be possible to prolong the life of the gas tax by indexing it to inflation, blending in a sales tax and by diversifying transportation revenue sources.
  • Commissions recognize the gas tax is not the long-term solution due to increasing fuel efficiency, people driving less and other factors. 
Shoring Up the Public Trust
  • Commission members said an important part of making the case for new transportation revenues involves shoring up public trust in government agencies and in transportation decision making. 
  • Commissions thought it was important that new revenues be dedicated to transportation so taxpayers can have faith their money will be used as intended and that what they’re paying resembles a “user fee.”
  • Several states recommended taking actions to protect state transportation trust funds from raids by state government to fill other budget holes.

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Transportation Funding Commissions II