Donald Fry: Transportation funding: Maryland takes one step forward, one step back

By Donald C. Fry

Last Monday, more than two dozen members of a statewide coalition of transportation advocates met at the Greater Baltimore Committee to discern the answer to a basic question: after a flurry of General Assembly activity during the 2011 regular session, what’s the current status of funding for Maryland’s transportation infrastructure?

The short answer: Still in serious crisis.

What’s more, the consensus among members of the Statewide Alliance to Restore the Trust (START), isn’t just that Maryland’s Transportation Trust Fund continues to face a $40-$60 billion shortfall of funding for highway, transit, port and airport projects that are planned but lack funding for construction.

It’s that, despite this massive shortfall, transportation advocates still face considerable challenges in achieving a consensus among political leaders on how to address this funding crisis.

The START coalition, which includes more than 60 organizations and businesses from across Maryland, is seeking three basic things from lawmakers – increase revenue for transportation infrastructure by at least $500 million per year, enact a firewall protecting the transportation fund from executive and legislative raids for non-transportation uses, and restore funding to local governments for local transportation needs.

The outcome of the recent General Assembly session graphically illustrates the magnitude of the challenge in gaining a consensus among state lawmakers on these issues. For instance, many Democrats acknowledge the need to increase the state’s investment in the transportation infrastructure, but do not support the creation of a firewall. Most Republicans oppose increasing transportation revenue, but do support a firewall.

If anything, lawmakers took one step forward and one step back during the 2011 session. Here’s what lawmakers did this legislative session regarding transportation fund revenue:

• They doubled fees for vehicle titles and vanity tags, and increased dealer processing charges. This did, to some degree, increase funding in the transportation trust fund.

• They transferred $100 million out of the transportation fund – $60 million to the general fund, and $40 million to the state’s Rainy Day Fund. The $60 million is to be repaid to the transportation fund by 2016. The new revenue from the certificates of title fee is considered the repayment of the $40 million transferred to the Rainy Day Fund.

• They permanently moved the transportation trust fund’s share of sales tax revenue to the general fund. This portion was just enacted in the special session of 2007.

• They also reduced the transportation trust fund’s share of corporate income taxes and allocated the reduced portion to the general fund.

• They increased the allocation of Highway User Revenue to the Transportation Trust Fund. As a result the Transportation Trust Fund share of the Highway User Revenue will increase from the traditional 70 percent up to 90.4 percent.

• Correspondingly, lawmakers lowered the FY 2012 highway user revenue distribution to the general fund and eliminated all such distributions to the general fund after FY 2012.

The bottom-line result of this pea shuffling under the shells? For the next two years, the transportation fund’s revenue will increase slightly, according to Maryland Department of Transportation estimates. But for two years it will not even receive the full benefit of the vehicle fee increases imposed this year on Maryland drivers.

The vehicle fee increases will generate a combined $123 million during the next two years, but net transportation fund revenues will increase by only $105 million during that time, according to MDOT estimates. MDOT projects that the actions of lawmakers in the 2011 session will eventually yield net annual revenue increases to the Transportation Trust Fund of $96 million by FY 2016. Generally speaking, lawmakers are taking away roughly $300 million in annual sales tax and corporate income tax revenue and replacing it with roughly $300 million in highway user revenue plus increased vehicle fees.

Meanwhile, state transportation funding to local governments will remain drastically reduced.

You can easily see what I mean by one step forward and one step back. This is not how Maryland will be able to solve its annual shortfall in funding for transportation infrastructure.

The state’s Transportation Trust Fund remains chronically stagnant, primarily due to the fact the per-gallon gas tax – which is not sensitive to inflation and is the largest single source of revenue to the fund – hasn’t been increased by lawmakers in 19 years.

But most lawmakers, while agreeing that transportation revenue needs to be increased, voice little sentiment for increasing the gas tax. While this seems somewhat logical in light of the current gas prices, the reality is that you can’t time gas tax increases just like you can’t time the best moment to invest in the stock market.

There is no question that we need investment in transportation infrastructure. So if “timing” is the issue, we must ask: Why haven’t governors and legislators found the “right time” over the past 19 years? I suggest that in today’s political environment there is no “good time” to increase revenues. What is needed is leadership and political will. That’s what has been lacking for 19 years.

Governor Martin O’Malley appears to be seeking to make transportation funding an issue during the special session this fall, which is scheduled to primarily deal with Congressional redistricting.

Nevertheless, if anything substantial is to be accomplished to ease the transportation funding crisis, our elected leaders must address the unanswered revenue question that has been looming for more than a decade as Maryland’s capacity to fund transportation infrastructure has dwindled: “If not the gas tax, then what?”

 

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