Wisconsin Council 40
LEGISLATIVE ALERT
AFSCME Green Sheet
Transportation

www.afscmecouncil40.org
 

July 18, 2008                                                                       Volume #30, Issue #22

DEFINING THE PROBLEM

Wisconsin’s transportation fund has been at the center of budget battles for each of the last three biennial budgets.  The fund, currently slated at over $5.4 billion for the current two-year budget, faces many challenges if it is to maintain the state’s infrastructure in coming years.  Based on the State Highway Plan 2020, released in 2000, Wisconsin is under funding transportation to the tune of $1.2 billion annually.  Without a significant commitment by the legislature to increase transportation revenue next session, Wisconsin’s infrastructure will suffer significantly.

Much has been made over transfers and borrowing from the transportation fund by the legislature and governor during the last three budgets.  The transportation fund is a segregated fund, with revenue raised through registration and licensing fees along with the gas tax.  It is separated from the general fund, which is supported by revenue generated from income and sales taxes.  (Both receive significant federal dollars and other revenue streams as well).  Many have criticized the transfers from the transportation fund to fill deficits in the state’s general fund.  They say these transfers created the current instability in the transportation fund, and weakened public support for raising needed revenue for transportation projects.

While it is true that transfers have created an overall net negative impact of $435.4 million to the transportation fund since 2003-05, they are really only one part of the overall problem.  To be sure, those transfers contributed to the current situation.  But even without transfers, the transportation fund would not be in a significantly better condition.  The real issue for those concerned about transportation projects, including state aid to local governments, is revenue.  Below are some highlights, or lowlights, of problems facing Wisconsin’s transportation fund.

REVENUE CUTS AND OTHER PRESSURES ON THE TRANSPORTATION FUND:

GAS TAX INDEXING

The repeal of gas tax indexing in 2005 has created a compounding problem for the transportation fund.  When the automatic inflationary increases in the gas tax were repealed, it was estimated that the transportation fund would lose approximately $30 million in new revenue annually.  This means, in the first year of the biennia, the gas tax would generate $30 million less than it would have if the indexing were still in place.  In the second year it would generate $60 million less (the lost $30 million from the first year, plus an additional $30 million in the second).  This lost revenue continues to compound each year, with the transportation fund expected to generate $210 million less in gas tax revenue in the upcoming biennium than it would have had indexing not been repealed.

FEDERAL AID

The Federal Highway Trust Fund currently faces a shortfall of over $14 billion.  Efforts to partially fill that shortfall were defeated by a republican led filibuster in the US Senate in June.  If congress doesn’t address the problem by September 2009, cuts will have to be made.  Wisconsin stands to lose $197 million in federal transportation revenue under this scenario.

CONSTRUCTION INFLATION

Even had indexing remained in place, the transportation fund would have seen the buying power of the gas tax diminish.  Indexing was tied to changes in CPI.  However, construction inflation has risen significantly faster than CPI in recent years, with some estimates coming in as high as 11% increases in the last year.

RISING GAS PRICES

Many are predicting that gas tax revenues will decrease as people drive fewer miles to deal with the rising price of gas.  As of April, however, the Legislative Fiscal Bureau had not seen significant indication of this trend reflected in the gas tax revenue estimates they had received.  However, given the large amount of anecdotal evidence being reported in the media, a close eye will be kept on this issue in the coming months.

AIDS TO LOCAL GOVERNMENTS

While AFSCME has made some modest gains to increase the base in aids to local governments in recent budgets, those gains haven’t kept pace with inflation, much less construction inflation.  In some cases, those gains were offset by one-time money from one budget not being built into the base, so the increase that was received in the next budget was not nearly as great as first anticipated.

For example, 2007 Act 20 increased funding for the State Highway Maintenance program by $44 million.  It was only several months after the budget had passed that counties learned that the net effect of that increase was closer to $8 million.  The cause was one-time money from the 2005-07 biennia allocated by the department to the program that was not maintained in the next budget.  While the budget adjustment bill placed an extra $25 million into the program, that increase offset the costs associated with this past winter’s record snowfall, and still left local governments behind for base operations.

GOING FORWARD

AFSCME has lobbied for increasing revenue to the transportation fund in each of the past three budgets.  Among the items AFSCME has supported are reinstating gas tax indexing, adopting a 2.5% assessment on oil company profits, and increasing vehicle registration and title and driver license fees.  Of these, only the fee increases have been adopted by the legislature, with the increase in the driver license fee tied to the implementation of the Federal Real ID program.

While the fee increases from this past legislative session were helpful, they were only a stop gap provision.  AFSCME must lead the way in support for sustainable revenue streams to ensure the transportation fund can support Wisconsin’s infrastructure.