June 13, 2023 | By MacIver Staff
Policy Issues
State Budget

Budget Blog - The Mysteriously Missing Road Funding Debate

The gas tax debate didn’t exactly end. It just evolved.

The idea of increasing Wisconsin’s gas tax has been a hot button issue in recent state budget debates, but not this year. Judging from Transportation Secretary Craig Thompson’s testimony to the Assembly last month, it might be off the table for good.

Thompson told the Assembly Committee on Transportation that Wisconsin’s transportation fund has been flush with cash ever since the state increased license and registration fees in 2019. That year, the price of annual registration price for cars went from $75 to $85, and title fees went from $69.50 to $164.50.

The fund got another boost in 2021 when the federal government passed the $1.2 trillion Bipartisan Infrastructure Law. That will send an additional $200 million in federal aid to Wisconsin annually through 2026. Prior to its passage, Wisconsin planned on receiving a total of $1.8 billion in federal aid for the 2021-23 state transportation budget.

Thompson said all this has led to massive increases in transportation funding since 2019. Assuming the legislature adopts Gov. Evers’ current transportation budget plan, “General transportation aid (GTA) is up 22%, state highway rehabilitation is up 37%, local road and bridge is up 93%, and the local road improvement program is up 157%,” according to Thompson.

Transportation spending was actually flat from 2019-21 to 2021-23. Both budgets spent about $6.6 billion on transportation. Evers’ 2023-25 budget would spend $7.5 billion. That’s an increase of about 14%.

The largest chunk of that comes from the federal government, which is expected to increase its transportation aid to Wisconsin by $441 million over the biennium. Gov. Evers wants to borrow $274 million in general obligation bonds and $167.7 million in revenue obligation bonds for transportation. Revenues are expected to grow from the gas tax by $104 million, from registration fees by $22.2 million, and by title fees by $28.7 million.

The massive increase in bonding is quite the departure from Evers’ previous position. He and special interests argued borrowing money to pay for roads was irresponsible. The only alternative was to raise the gas tax and it became a key issue in the 2018 gubernatorial campaign. Scott Walker was against it, while Evers supported it. That earned Evers the support of the special interests that helped him win the election.

Afterwards, Evers launched a “Transportation Task Force” consisting of government officials and lobbyists who all agreed that Wisconsin needed a higher gas tax. They also wanted higher title and registration fees. Evers was all on board. His 2019-21 budget proposal sought to increase the gas tax by 10-cents a gallon, and it would automatically increase with the rate of inflation.

The gas tax did not make it into the final budget, but the title and registration fee increases did. Two years later, with Evers’ reelection campaign on the horizon, the governor did not reintroduce his gas tax proposal and the lobbyists were all mysteriously mute on the issue. Sec. Thompson was now saying the gas tax might not be the most reliable revenue source in the future. He repeated that opinion to the Assembly last month.

“As more EVs come online about the sustainability of the transportation fund, I do think that is the $64,000 question across the country right now,” Thompson said. “I think every state in the country is examining this very closely, because the gas tax has been a great proxy for usage and it’s been a good user fee, because the more you drive the more gasoline you need to put in your car and those gas taxes have been directed into the transportation fund. But as we see more electric vehicles and more fuel-efficient vehicles come on the road, that funding mechanism needs to change.”

EVs already pay higher registration fees, but Thompson suggested a different long-term solution. He said he’s had conversations with Assembly Speaker Robin Vos about shifting to vehicle miles travelled (VMT). That would eliminate the distinction between gasoline and electric vehicles, but it introduces new issues.

In 2021, the DOT estimated 65,003 vehicle miles travelled in Wisconsin on all roads. By 2050, it could reach 82.9 billion. Those estimates are useful for project managers, but the state would need a precise measuring method to replace the gas tax with VMT. The Rand Corporation has looked into the issue and generated seven options. Three of the options simply involve manual odometer checks. The other four require special devices, including GPS or cellular trackers. Obviously, that raises serious privacy concerns.

The risk of such devices soon being required in Wisconsin is not outlandish. First, we now know that conversations of introducing VMT fees in Wisconsin is being discussed between the Evers Administration and the State Assembly. There’s also the DOT’s “Connect 2050” plan.

Connect 2050 is the state’s long-range plan established goals and objectives for Wisconsin’s transportation system for the next 25 years. The final plan was completed last year, with initial updates planned through 2025. Connect 2050’s number one objective is to “pursue sustainable long-term transportation funding.” The report doesn’t provide a solution or action plan. It only defines that as its number one problem that needs a solution. VMT fees were brought up.

When lawmakers and government officials will reintroduce their next transportation funding plan is unknown. They choose not to do so for this budget, but who knows what’s already in the works for next the budget. One thing is clear, the gas tax debate didn’t exactly end. It just evolved.

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