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Response to the Governor's Budget
On February 3rd Governor Walker introduced his 2015-17 executive budget to the legislature. The overall budget recommendation included a $35.9 billion operating budget for fiscal year 2016 and $32.2 billion for fiscal year 2017. The transportation proposal included $6.5 billion for the 2015-17 biennium.
Prior to the introduction of the governor’s budget, there had been a great deal of speculation surrounding the transportation portion of the budget. Ever since the passage of the previous biennial budget, there have been many comments from the governor and other elected officials about the need to place transportation funding on a more sustainable path.
In November, the Department of Transportation submitted a budget request to the governor which included a package of taxes and fees that would generate $751 million of new revenue along with a recommendation of $574 million in general purpose revenue to support the transportation budget.
The budget submitted by the governor did not include any of the revenue increases proposed by the Department of Transportation. Overall, the governor’s $6.5 billion transportation budget relies on $1.3 billion in bonding, up from $991 million in the last biennium.
The proposed budget keeps the Zoo Interchange on schedule for its 2018 completion date. The budget also keeps the Hoan Bridge on schedule but delays the I-94 North/South by one year from 2021 to 2022. Aid to local governments is held at the level set in the previous budget.
Since the budget was introduced three weeks ago, there has been significant reservations expressed by legislators across the state about the level of borrowing. In the days following the budget address, Robin Vos, the Speaker of the Assembly stated, "I think it's almost unanimous on the fact that no one I've spoken with likes the idea of using bonding as a short-term fix," Vos said. "I also do not support the idea of continuing bonding to get us through two years where literally...730 days from now we have the exact same conversation."
Editorial boards across the state have also consistently echoed similar concerns with the proposal. See Interesting News Coverage below.
The Joint Committee on Finance will begin its agency budget briefings the first week in March. On March 4th the Department of Transportation will be briefing the committee. Shortly thereafter the Joint Committee on Finance is expected to hold four public hearings in locations across the state. The exact dates and locations have not yet been set.
In Business Wisconsin Blog
We Have Transportation Funding Options; We Just Need to Level with Ourselves
The warning bells about growing debt levels in Wisconsin’s transportation fund have been sounded by commissions, legislators, the media, and stakeholder groups for several years now. That’s why it wasn’t terribly surprising that the Walker administration’s proposal to ramp up bonding in the transportation fund to $1.3 billion over the next two years went over like an osmium balloon. (Osmium is twice as dense as lead, by the way.)
But some have asked if this is an overreaction. Is it really so bad to borrow for big capital projects like rebuilding our freeways? Aren’t those just the types of projects that should be paid for over a period of time?
Debt is a completely legitimate financing mechanism for transportation projects. However, just like with our personal budgets, you need to have a plan and the discipline to stick to it. A monthly payment for a house mortgage or a car payment is fine if those payments are not consuming more and more of your disposable income every year. Debt is a financing tool, not a funding tool. There is a big difference.
In 2002, Wisconsin spent about 7% of its transportation budget on debt service. That number has ballooned to 17%. That’s a trend line that’s clearly unsustainable. If state legislators embrace the administration’s proposal, which they don’t seem ready to do, the amount of the budget eaten up by debt would leap to 25%. In fact, debt service would become the second-biggest program in the DOT budget — larger than general transportation aids to local governments or the southeast freeway megaprojects. Only the highway rehabilitation program would be larger.
The initial reaction from lawmakers in both parties has been encouraging. There have been bold statements about finding a more sustainable plan for transportation. Now for the hard part — settling on a solution. This has eluded Wisconsin for the past decade.
There is no one right answer. Options abound. The legislatively created Transportation Finance and Policy Commission outlined very specific options when it released its report back in January 2013. The Wisconsin Department of Transportation just put forth a proposal in November that offers real solutions. Business groups like Wisconsin Manufacturers & Commerce and some of its member chambers throughout the state have put revenue options on the table.
In order to finally have a breakthrough this time around, we are all going to have to be honest with ourselves, and our lawmakers will need to be honest with us. There are no magic beans.
We are Midwesterners, after all. We pride ourselves on our no-nonsense approach to the world. Let’s have an open dialogue about the most effective way to fund our immediate needs — one that won’t cost too much in the short run and won’t bury us in the long run, but that will ensure the safe and reliable movement of our Wisconsin goods, products, and people.
States Take Another Look at the Gas Tax
According to the Institute on Taxation and Economic Policy, six states enacted fuel tax increases or reforms in 2013 and two more in 2014. As many as 12 states are seriously considering a gas tax increase this year to help address transportation revenue shortfalls. Checkout what our neighbors are doing below:
Iowa: Governor Terry Branstad signed a gas tax increase into law today, approved by both the House and Senate yesterday.
The law can take effect the first of the following month -- meaning the 10 cent per gallon tax increase will start as early as this Sunday, March 1.
The bill passed by a margin of 28-21 in the Senate and by 53-46 in the House.
The gas tax increase will provide about $215 million annually for Iowa's network of bridges and roads, many of which are considered deteriorating.
The bill also imposes restrictions on future debt and bonding for local government road projects. That's important, Brandstad said, explaining he believes in a "pay-as-you-go" method of financing road construction with user fees that benefit people who pay the extra fuel tax.
The fuel tax increase has had broad support from groups like the Iowa Farm Bureau, chambers of commerce and other business groups, and Iowa's trucking industry.
Minnesota: In Minnesota, Governor Dayton and the Senate leaders have proposed adding a wholesale tax to fuel. The 6.5% wholesale tax would equate to a 16 cent increase in the per gallon gas tax and is anticipated to raise $4.4 billion over the next decade. The Governor and Senate leaders also propose increases in the tab fees and the Metro Area Sales Tax.
The House is eschewing revenue increases but is proposing to use $200 million in surplus revenue from the general fund. Although republican leaders in the House have called that position a “starting point.”
Michigan: As covered in last month’s newsletter, the Michigan Legislature passed a series of tax increases all contingent on the voters approving a one-percent sales tax increase on May 5th.
Other states taking a long look at a gas tax increase include: Georgia, Idaho, Missouri, New Jersey, South Carolina, South Dakota, Tennessee, Utah and Washington.
Oregon is Ready to OReGO
On July 1st, Oregon is kicking off its first-in-the-nation major trial of road user charges based on vehicle miles traveled.
The program, called OReGO, is looking for volunteers who agree to pay 1.5 cents per mile in exchange for a rebate of fuel taxes paid. Volunteers will have their choice of secure mileage reporting options offered by OReGO’s private-sector partners.
The first phase of OReGO is limited to 5,000 cars and light-duty commercial vehicles.
The state has launched myorego.org to provide background on the program and to solicit volunteers. There is even a calculator so people can determine if they would pay more under the per mileage fee and if so how much.
WisDOT Measuring Performance
The Wisconsin Department of Transportation has released its quarterly MAPSS Performance Scorecard. The report rates how well the department is doing in the five core goal areas of mobility, accountability, preservation, safety and service.
"The MAPSS Scorecard provides an objective way to assess where we’re meeting established goals and where we're falling short," said WisDOT Secretary Mark Gottlieb. "The metrics help us to take steps to address performance that’s trending in an unfavorable direction."
The MAPSS Scorecard includes a new measure that will be used to evaluate how often the right projects are being done at the right time and the right place.
In addition to the MAPSS Scorecard, the department released a new report – Better, Faster, Lower Cost: A Performance Report of the Wisconsin Department of Transportation. This report summarizes a number of ways in which the department is providing quality transportation programs and services utilizing new techniques in order to get the job done faster and at a lower cost.
Rep. Ribble Releases Bipartisan Letter Urging Action
Representative Ribble, recently released a letter signed by a bipartisan supermajority, almost 300 members, of the House of Representatives pushing for a responsible, long-term funding solution for the nation’s surface transportation network. Six members of the Wisconsin delegation signed the letter: Representatives Ribble, Duffy, Grothman, Kind, Pocan and Moore.
The letter urges House leadership to “move a responsible paid-for multi-year surface transportation bill that will support much needed economic growth throughout our nation.”
Obama's GROW AMERICA 2.0
As part of his budget, President Obama proposed a six-year, $478 billion surface transportation proposal. The proposal will be fully fleshed out in a bill called GROW AMERICA, which is expected to be submitted to Congress in the coming weeks.
The bill is very similar to the four-year, $302.3 billion GROW AMERICA bill proposed last year and bills proposed in several years prior. The primary difference is this year the president included a source of revenue.
The president’s proposal would impose a “one-time transition toll charge” of 14% on the estimated $1 to $2 trillion of untaxed foreign earnings of U.S. Companies left abroad. These receipts would be used as “pay-fors” to offset the cost of additional transfers from the general fund to the Highway Trust Fund (or the newly named Transportation Trust Fund under this proposal).
On the positive side, some, although not all, would say this brings in cash. However, this source is not on-going and it is not a user fee.
USDOT's Beyond Traffic 2045
USDOT recently unveiled Beyond Traffic 2045, which can best be described as an engagement tool.
The purpose of the report was to analyze the latest data and trends shaping transportation in order to objectively frame critical policy choices.
This report is structured in three parts. The first part discusses the major trends shaping our changing transportation system. The second part discusses the implications of these trends for each mode of transportation. And the third part presents a description of a baseline future scenario.
Because Beyond Traffic 2045 is designed as a tool to focus discussion on long-term solutions and results, the release has a number of media platforms and utilizes graphics to illustrate trends. Secretary Foxx discusses these trends in a chat at Google headquarters with Executive Chairman Eric Schmidt.
According to the draft document, “Beyond Traffic reveals that, if we don’t change, in 2045, the transportation system that powered our rise as a nation will instead slow us down. Transit systems will be so backed up that riders will wonder not just when they will get to work, but if they will get there at all. At the airports, and on the highway, every day will be like Thanksgiving is today.”
Interesting News Coverage
Editorials about the Budget
Wisconsin State Journal, February 8, 2015 – “Scott Walker’s budget needs big changes”
Eau Claire Leader Telegram, February 9, 2015 – “Walker budget sure to be debated vigorously”
Beloit Daily News, February 7, 2015 – “Walker budget: good, and bad”
Green Bay Press Gazette, February 7, 2015 – “Walker's budget raises questions”
Janesville Gazette, February 4, 2015 – “Borrowing plan for roadwork makes little sense”
Milwaukee Journal Sentinel, February 3, 2015 – “Wisconsin needs a permanent fix for transportation funding — not a credit card”
Fond Du Lac Reporter, February 21, 2015 – “Federal highway spending in Wisconsin dipped over 5 years”
Milwaukee Journal Sentinel, February 13, 2015 – “Bite from state road borrowing nearly triples since 1999”
Politico.com, February 13, 2015 – “Paul Ryan sees narrow window for tax code rewrite”
Governing.com, February 9, 2015 – “Raising gas taxes gets bipartisan boost from governors”
The Hill.com, January 30, 2015 – “Critics assail proposed tax holiday for roads”
Barb LaMue TDA's 38th President
Barb LaMue, sector development manager with the Wisconsin Economic Development Corporation, chaired the first TDA board meeting of the year earlier this month. She was elected the Transportation Development Association’s 38th president at the annual business meeting on Novemeber19th and will serve for one year.
Prior to joining the Wisconsin Economic Development Corporation, LaMue served as executive director of Centergy, Inc., a regional non-profit economic development corporation serving Marathon, Portage, Wood, Adams, and Lincoln Counties.
She serves on Governor Walker’s Transportation Projects Commission, the Rustic Roads Commission, the Mid-American Economic Development Council Board comprised of ten Midwest States and the UW-Stevens Point - Wisconsin Institute of Sustainable Technology Advisory Board. She was also one of ten commissioners on the Wisconsin Transportation Finance and Policy Commission.
LaMue is joined on the 2015 TDA Executive Committee by the following members:
- 1st Vice President: Jerry Derr, Town of Bristol
- 2nd Vice President: David Brose, EMCS
- Secretary: Bill Johnson, Johnson Timber Corporation
- Treasurer: Tim Peterson, James Peterson Sons, Inc.
- Immediate Past President: John Schmitt, Wisconsin Laborers’ District Council
TDA Welcomes a New Member
Calendar of Events
- TDA Drive-in: Wednesday, May 6th
- TDA Annual Meeting: Tuesday, September 15th
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