Budget '25: Transportation Analysis

Wisconsin’s roadways can make or break a political career. It’s the main reason why Tony “Fix the Damn Roads” Evers defeated Scott “Scott-Holes” Walker in the 2018 gubernatorial election. Evers never misses an opportunity to brag about his efforts to “fix the damn roads” and to push for more road funding.

The Department of Transportation builds and maintains Wisconsin’s highway system and distributes transportation aid to local governments. It is also in charge of the DMV and the state patrol.

The current budget appropriated $7.63 billion (all funds) to DOT, which includes $398.8 million in GPR. Most of its funding comes from segregated funds, which includes license and registration fees and gas tax revenue. DOT actually requested less funding in the next budget, both all funds and GPR. Evers, on the other hand, wants to increase it to $8.5 billion (all-funds), $570.4 million (GPR).

There are 115,866 miles of road in Wisconsin. The state highway system makes up 11,746 miles, which the DOT is directly responsible for maintaining and improving. The other 104,120 miles belong to local governments.

The State Trunk Highway Program takes care of the state’s road responsibilities. (Its name and responsibilities change seemingly every budget cycle.) Funding comes from the Transportation Fund, which includes segregated funding and transfers from other sources such as GPR, FED, and bonding. The fund pays for roads and for the debt service on government bonds.

DOT engineers plan projects and privately owned road construction companies do the work. At the local level, county highway departments and municipal departments of public works are in charge. Local government employees usually conduct most of the routine maintenance (such as filling potholes).

Wisconsin’s approach to road construction highlights the perils of public-private partnerships. Conservatives often champion the concept because they envision the efficiency of private industry combined with the transparency of government. Instead, they get the efficiency of government with the transparency of private industry.

It was long suspected that the DOT was overly wasteful and inefficient, even by government standards. Those suspicions were confirmed through legislative audits in the 2010s, which came right as the road builders were lobbying for a gas tax hike. Gov. Walker choose instead to fire DOT secretary Mark Gottlieb and replace him with Dave Ross. Ross tore through the department DOGE-style upsetting the status-quo, quickly delivering results for Wisconsin taxpayers.

The roadbuilders struck back with a no-holds-barred campaign to defeat Walker during his reelection campaign in 2018, successfully recruiting more than one Republican-turned-lobbyist to help get Tony Evers elected. Evers rewarded their treachery by appointing the state’s top road lobbyist Craig Thompson to be the DOT secretary. Evers’ first term began with a large scale coordinated effort to raise the state’s gas tax. Even the DOT began openly advocating for the higher tax. Local governments, associations like the League of Wisconsin Municipalities, and the road building industry pushed the issue, but ultimately the legislature refused to include it in the budget. It’s been dormant ever since. However, Gov. Evers takes credit for “fixing the damn roads” nonetheless. That makes it difficult to build the case that Wisconsin needs to raise the gas tax or else its roads will crumble.

Bill Payers

Who should pay for roads dominates transportation funding policy discussions. The answer is always “someone else.” The state points to the federal government, and local governments point to the state. Road builders don’t really care who the “someone else” is, just as long as it means “more.” Increasing the gas tax is consistently one of their top policy objectives. Their allies include government lobbying firms like the League of Wisconsin Municipalities, the Evers Administration, and liberal groups like Wisconsin Policy Forum.

In 2019, Gov. Evers proposed increasing the gas tax by 8 cents a gallon for that year and automatically increasing it annually based on inflation. Wisconsin’s gas tax is currently 30.9 cents a gallon. The Legislative Fiscal Bureau estimates that it would be $48.1 cents a gallon if Evers’ gas tax hike had been adopted. That’s higher than Illinois’ rate of 47 cents a gallon.

The MacIver Institute generally supports user fees, because we believe that the people who directly benefit from specific government services should also help support those services. However, this is not a blank check. Fees should be reasonable, and government needs to demonstrate it is spending those funds responsibly and efficiently. (For example, after the city of New London implemented a wheel-tax, it actually cut its road budget, and MacIver called them out on it.) The DOT generally falls short, which is why we consistently oppose increasing the gas tax. The current gas tax rate is high enough.

Also, it is difficult to evenly distribute the financial burden of maintaining roads among the various groups that use them. Bicyclists and electric car drivers don’t pay the gas tax for example. Using tracking devices to charge users based on mileage is one commonly proposed solution that the MacIver Institute adamantly opposes. The idea of the government tracking our every movement is unacceptable in a free and democratic society.

Those who support raising the gas tax argue that the state shouldn’t have to borrow money to fund road maintenance. They hope to appeal to conservative sensibilities. However, roads are capital projects, and it is not a reasonable expectation for anyone to fund a capital project with only cash on hand. Bonding must be part of the funding mix to support road construction and maintenance. However, as with the gas tax, we expect the state to do so responsibly and frugally.

Funding Levels

More money for roads does not mean better roads. MacIver has argued this for years. The underlying problem is that increasing road funding does not increase actual roadbuilding capacity. Without additional capacity, the additional funds simply drive up the cost of projects. MacIver is no longer a lone voice in the wilderness on this issue.

The Illinois Policy Institute has recently observed that over the past 10 years that state increased annual road spending by $2 billion while the quality of roads steadily declines.

On the national level, the 2021 federal “Bi-Partisan Infrastructure Law” committed $1.2 trillion for all kinds of infrastructure projects, and it’s invertedly provided further evidence that more money for roads does not mean better roads. Inbound Logistics, a trade publication for that industry, recently identified this problem. “Tons of spending, combined with a lack of management and accountability, means that federal transportation funding has consistently failed to improve road conditions,” Inbound Logistics’ publisher, Keith Biondo, concluded.

The explosion of single-bid contracts in Wisconsin in 2022 adds more evidence to our argument that more road money simply means more expensive road projects. From 2021 to 2022, the total amount of single-bid contracts in Wisconsin jumped by 74%. The Legislative Audit Bureau estimates that failing to secure multiple bids for road projects drives up the cost by 6.7%.

An easy way to prevent single bid contracts is to bundle smaller projects together to attract more bidders. However, just because there are multiple bidders on a project doesn’t mean the bidding process is competitive. The Trump Administration is using AI to uncover “complementary bidding schemes.” That occurs when roadbuilding companies conspire with each other before submitting bids to artificially inflate project costs. They take turns on who gets to cash in. The administration has only investigated six states so far and discovered this practice is a big problem. (Wisconsin was not one of the states). Overall, only a fifth of projects were genuinely competitively bid.

The legislature should pursue policies that reduce the number of single-bid contracts, increase oversight of the DOT approval process, and investigate why certain companies have accrued so many single-bid contracts over the years.

Contract Reform

Oversight becomes more feasible when companies have an incentive to prevent waste, fraud, and abuse on their own. The best way the state can achieve this is through contract reform. Currently, most transportation contracts are “cost plus fee.” That means the state agrees to pay all the roadbuilders’ expenses for a project, whatever they are, and then provide the company with a pre-negotiated fee, which is its profit for the job. The company has no incentive to keep costs down, and the winning bid is simply the price floor. There are always cost overruns. Also, the network of sub-contractors and vendors increases the potential for fraud. For example, if the main contractor has an in-law who owns a concrete mixing service, and the state has agreed to pay all the main contractor’s expenses – you can see where this is going.

Under a “cost plus fee” contract, the state assumes all the risk for project overruns. The road builder has no risk, because no matter what the project ends up costing, he gets his profit. An alternative contract vehicle is “firm fixed pricing.” That would shift all the risk onto the roadbuilder. Under this model, when companies bid on road projects, whatever number they quote is exactly what the state would end up paying. Cost overruns would no longer be the taxpayers’ problem. Companies would have an incentive to complete their projects as effectively and efficiently as possible, because that would maximize their profit. Roadbuilders would naturally seek to mitigate their risk by raising their bid prices, but at the same time, competition would provide downward pressure. Oversight would be easier, because the state would simply have to monitor and assess the results, rather than the entire production process and supply chain. Roadbuilders wouldn’t have an incentive to hook-up their friends and families, to allow road projects to drag on for months, or to shrug off cost overruns. Given the problems and suspicions surrounding our current contract system, firm fix pricing makes a lot of sense.

Although groups like the Wisconsin Policy Forum continue to push for a higher gas tax and other rate hikes, no one’s talking about that in the Capitol this session (at least not openly.) The most likely decisions involving transportation include the following: how much to borrow, how much GPR should be transferred to the transportation fund, and how much additional aid should be provided to local governments.

The only road issue Governor Evers brought up in his budget speech was his plan to provide $50 million (GPR) to the Agricultural Roads Improvement Program. That program is part of the Local Roads Improvement Program and was created with a bi-partisan law in 2023. Republicans on JFC strongly support that program and will have no problem supporting that. He also wants to increase funding directly to the Local Roads Improvement Program Supplement by $100 million (GPR).

Evers’ most controversial proposals are: increase title fees by $120 and drivers’ licenses by $8.50. Evers also wants to give illegal aliens drivers licenses. Policy proposals like that are obviously non-starters.