Donald Fry: How Maryland lost its transportation funding discipline

By Donald C. Fry 

Business and transportation advocates, including the Greater Baltimore Committee, the Maryland Chamber of Commerce, the Greater Washington Board of Trade, AAA Mid-Atlantic, and 50 other organizations and businesses are pushing Maryland lawmakers hard this year to enact a firewall for the state’s Transportation Trust Fund.

Lawmakers’ habitual raiding of the fund has received primary attention from transportation advocates even though it is only part of the reason that Maryland finds itself facing a crisis in funding its transportation infrastructure. It’s just a part of the problem, but it’s key to the solution.

As the Daily Record‘s recent editorial points out, a firewall to keep the transportation fund from being raided for other uses is an essential prerequisite to gaining taxpayer acceptance of the substantial heavy fiscal lifting required to address the full-blown transportation funding crisis the state now faces.

Our coalition of transportation advocates – the State Transportation Alliance to Restore the Trust (START) – is also urging lawmakers to increase revenue to Maryland’s transportation fund by at least $500 million annually. That’s what it will take to begin closing the almost unfathomable $40 billion backlog in state highway, transit, port, and airport projects that are fully planned, but do not have a dollar of construction money budgeted for them.

Granted, this is not an ideal time to be supporting an increase in the gas tax rate and other methods to generate sorely-needed transportation funding. And $500 million in new revenue is a lot of money. But you can’t time the fluctuation of gas prices, and this kind of dramatic increase is required to make up for years of transportation funding neglect that detracts from Maryland’s ability to compete successfully for business and jobs.

Funding transportation infrastructure now looms as Maryland’s top economic development challenge.

How did Maryland allow itself to end up with this transportation funding crisis?

Unlike the current operating budget crisis that escalated rapidly when the recession hit in 2008, the transportation funding crisis evolved through decades of inattention to a growing revenue deficiency. Virtually everyone in Annapolis saw it coming, but did not adequately address it.

The history of Maryland’s Transportation Trust Fund is a story of how a government widely considered to be financially well-managed lost its fiscal discipline in maintaining a public resource – transportation infrastructure – that is critical to our state’s business climate and quality of life.

The fund’s erosion is largely the result of two debilitating legislative tendencies – cultivating the habit of raiding the fund over the last 27 years and abandoning, for the last 19 years, the previously-routine practice of reviewing and making incremental upward adjustments to the per-gallon gas tax, the transportation fund’s largest source of revenue.

Maryland’s Transportation Trust Fund was created in 1971 to establish an integrated, dedicated, and flexible fund to support the newly-created Maryland Department of Transportation (MDOT).

In 1984 the General Assembly began regularly borrowing or outright diverting money from this intended dedicated source primarily to the state’s general fund for non-transportation uses.

Current legislative leaders counter that almost all of the $571.1 million borrowed from the transportation fund since 1984 has eventually been paid back to the fund. That’s accurate. Over the years, all but $117.9 million has been paid back. Another $68 million repayment is scheduled in 2012. This leaves $49.9 million in borrowed transportation funding remaining to be paid back, according to MDOT data.

But that doesn’t account for another $250 million in sales tax revenue dedicated to the transportation fund that lawmakers in 2008 diverted to the general fund over a five-year period, with no intended repayment, to make up for anticipated operating revenue lost due to the repeal of the computer services tax.

Nor does it account for the hundreds of millions in transportation fund revenue previously earmarked for local governments that has been diverted in recent years to the general fund.

The transportation fund has become a legislative fiscal contingency of choice.

The issue of raids aside, the stage was set for more serious transportation funding stagnation after 1992 when lawmakers stopped enacting increases to the per-gallon gas tax, which is not inflation sensitive. Before that, lawmakers had increased the gas tax rate four times in the previous 20 years.

The outcome was predictable. Transportation fund revenue began to lag. Before the recession, between 2000 and 2008, transportation revenue growth was less than half the rate of growth for the state’s general fund, despite some legislated increases in vehicle and registration fees.

Since 1992, there have been several state commissions created to evaluate stagnating transportation funding and propose ways to address the developing crisis. The firewall and revenue increases that transportation advocates are presently urging lawmakers to enact mirror the recommendations of the current Blue Ribbon Commission.

Raising revenues are never popular decisions. In the case of transportation funding, when spent appropriately and for the purpose for it was intended, the increased funding will create jobs, enhance mobility that’s essential for economic growth, increase productivity, improve quality of life, and address environmental concerns by reducing congestion.

All of these outcomes will help make Maryland more competitive, promote economic activity, and grow the state’s tax base, which will ultimately translate into a healthier general fund.

There is little question that our state has compelling transportation needs. The question is whether the political will exists to address them and end decades of kicking the can down the road.

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