Is a Gas Tax Increase or a License Renewal Fee Increase Being Considered?
MacIver News Service | April 30, 2013[Madison, Wisc…] The Joint Committee on Finance will be in session on Tuesday to vote on parts of Governor Scott Walker’s proposed 2013-2015 budget, including the Department of Transportation’s (DOT) budget, which is expected to end the biennium in a deficit.
New projections show that instead of ending the 2013-2015 biennium with a $12.6 million surplus, DOT will end with a $63.5 million deficit. This is based off of new calculations from the Legislative Fiscal Bureau (LFB) that were released on Friday.
Before the new estimate, the Governor’s original transportation budget proposed to spend $1.72 billion in the first year and $1.62 billion in the second year on transportation projects and department needs.
LFB’s analysis states “revisions in economic forecasts and lower-than-expected revenue collections through the first several months of 2012-13 have dampened the outlook for revenue collections, primarily from the motor fuel tax, in the 2013-15 biennium.”
Revenue from the motor fuel tax is expected to be $42.5 million lower in 2013-2014 and $42.8 million lower in 2014-2015. LFB projects that from 2012 to 2015, Wisconsin drivers will consume nearly 350 million gallons less than previously estimated due to higher fuel prices, lower disposable income, and more efficient vehicles.
Another critical source of funding for the transportation budget is bonding. Major transportation projects have typically been funded through bonding, and supporters have stated that because of historically low interest rates, it is best to borrow the money now for these types of, as the LFB describes them, “megaprojects.”
Walker’s budget proposes $794.2 million in transportation bonding, and an additional $200 million in General Fund-Supported bonding. This bonding will be used to pay for major highway development across the state, and construction on larger projects like the Zoo Interchange and Hoan Bridge in Milwaukee.
The amount of transportation bonding is still a decrease from Governor Jim Doyle’s last budget by more than $165 million. Doyle also raided the transportation fund for hundreds of millions of dollars, which Walker has been paying back. According to LFB, by the end of the biennium, the transportation fund will have been made whole again.
There are two ways to reduce DOT’s deficit, according to LFB. DOT can reduce its spending, or raise its revenues. The Transportation Finance and Policy Commission, created in the previous budget, suggests that revenues generated are not sufficient for the planned transportation expenditures.
Their plan, released in January, would raise taxes and fees by $639.1 million including, but not limited to, a five-cent per gallon gas tax increase, a $20 drivers license fee increase, and a 73 percent heavy truck registration fee increase.
As the MacIver News Service reported back in January, Legislative leaders were cool to the Transportation Finance and Policy Commission’s idea to raise the gas tax or mileage-based registration fees.
A budget paper released from LFB claims that reducing bonding will not do enough to solve DOT’s budget issues because of already high debt service payments. “A decision to reduce current bonding without changing transportation fund revenues would have a limited impact on the percentage of transportation fund revenues devoted to debt service,” the LFB paper reads.
Officials from DOT spoke with the Milwaukee Journal Sentinel on Monday about the Walker administration’s plan to eliminate the deficit. According to the article, their plan would cut spending by $93.5 million:
• Delay work on parts of the I-94 North-South and Zoo Interchange projects, saving $33 million.
• Delay the Ryan Road Interchange until the 2015-’17 budget, saving $19 million.
• Delay work on the Zoo Interchange, saving $14 million. The Department believes this would not delay the final completion of the project provided the money was restored in the following budget.
• Cut money for repairing state highways by $12.3 million.
• Reduce major highway program spending by $7.3 million.
• Cut transportation aid to local governments by $4.3 million.
• Decrease money for the Hiawatha service to Chicago by $1.1 million.
• Cut routine highway maintenance by $2.5 million.
JFC will decide how to eliminate the deficit during debate on Tuesday. Will they follow DOT’s plan to cut major construction projects? Will they propose a tax and fee increase? Or will they put off smaller projects across the state with less of an impact on major infrastructure?
In addition to bonding for road construction, the Governor’s budget also calls for $60 million in bonding for the freight rail preservation program. This program’s main function is to maintain low-traffic rail lines that may otherwise become abandoned or fall into disrepair.
This program had bonding authority totaling $66.5 million combined in the eight budgets from 1993 to 2007, and in Doyle’s last budget, it was increased to $60 million. Walker cut that in half in the 2011-2013 budget, but has since returned it to $60 million for the 2013-2015 proposed budget.
According to LFB, “When fully issued, annual debt service on the proposed $60,000,000 in bonds would be approximately $4.2 million.”
JFC will begin debate on these items at 10am on Tuesday. For live updates from the JFC session, follow @MacIverWisc on Twitter and check back often for full analysis.