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One More Republican Governor Signs a Gas Tax Increase, Another Poised to Act
Less than a month after Governor Branstad signed a 10 cent gas tax increase into law for Iowa, the governors in South Dakota and Utah are following suit.
In South Dakota the package increases the gas tax by 6 cents as well as the state’s motor vehicle excise tax from 3 percent to 4 percent and license plate fees by 20 percent. Before reaching Governor Daugaard’s desk the measure had to pass by a supermajority in both houses. After receiving the necessary votes, Daugaard told the Associated Press. “I am grateful for the courage of the legislators who, while reluctant to raise taxes, realized that in some situations we need to do what we need to do to protect our infrastructure.”
In Utah, the House and Senate reached a last minute compromise to include a 12 percent wholesale tax on gas starting July 1 that will increase the current 24.5 cents-per-gallon tax by 5 cents. The tax is capped at 40 cents a gallon with a floor of 29 cents. The bill also allows local governments to go to voters for a 0.25-cent sales tax increase for transportation projects. Governor Herbert has not yet signed the bill but has indicated he will. The governor set the stage back in December, as the budget was making its way through the process by saying, "Whatever gets us to the finish line is what we need to come together on. We need to build some consensus. Whether it's 10 cents or a nickel, a sales tax, indexing for inflation, a hybrid approach, phasing it over the next five years."
Iowa, South Dakota and Utah are the first three states that have acted to shore up their transportation funds in 2015. They join eight other states that have taken such action since 2013. There are about ten more states that are in the midst of seriously debating transportation revenue packages.
Madison and DC Not So Far Apart, Unfortunately
The U.S. Capitol building and the Wisconsin State Capitol building look very similar. The State Capitol is 284 feet 5 inches tall from the ground floor to the top of the statue on the dome, making the building 3 feet shorter than the nation's capitol in Washington, D.C.
Unfortunately, the transportation policies emanating from these magnificent buildings are becoming eerily similar as well – varying more in size than substance.
Politicians at both levels have grown fond of paying for the upkeep of our aging transportation systems with something other than traditional user fees. At the federal level this has taken the form of deficit spending. In Wisconsin, it has taken the form of bonding.
The state and federal gas tax are flat fees per gallon. If these traditional user fees are not adjusted, they don’t move with the growth in wages and cost of living like income, sales or property taxes do. The feds haven’t adjusted the federal user fee in almost 25 years, and in Wisconsin, it has been a decade.
During that time, we have still funded the upkeep of our current system as well as the reconstruction of major arteries. In Wisconsin, we rebuilt the Marquette Interchange and are in the midst of other generational projects like the Zoo Interchange. Granted funding to locals has eroded and projects have been delayed, but there has still been more done than the incoming revenue would have supported.
This has had the effect of making taxpayers skeptical there is any real need to adjust the user fee.
At the federal level, we have authorized transportation budgets that are propped up with transfers from the general fund (aka deficit spending) to the tune of more than 30% of the overall transportation budget. In Wisconsin, we have fallen back on borrowing without adjusting the revenue source to pay the debt service. As a result, debt service is becoming the Pac-Man of the state transportation budget.
This problem is not lost on all of our state and federal officials. As conservative state senator Howard Marklein (R, Spring Green) pointed out at a recent Joint Finance Committee briefing, the worst part about this practice is it “masks the underlying problem.” U.S. Congressman Reid Ribble (R, Appleton) who sits on the House Transportation and Infrastructure Committee, has pointed out that continuing to kick the can down the road is a tax increase. It’s just a tax increase on the people too young to vote.
Wisconsin is, of course, beginning its budget debate for the next biennium. Governor Walker proposed increasing bonding for transportation another 30% above Wisconsin’s already high level of transportation bonding. Legislators have expressed concern over this approach, but no alternatives have been proposed as of yet.
The federal government is facing an ominous deadline for the surface transportation program. The current authorization period will run out at the end of May. Congress is, once again, going to have to decide whether to come up with a long-term plan to finance the nation’s road and transit systems or plug in more deficit spending. The third option would be to simply reduce funding for roads by about 30% and transit by about 60%.
Across the country, the average breakdown for paying for transportation comes out to about 35% local funding, 40% state funding and 25% federal funding. Wisconsin is not far from that average.
This country built a transportation network that has provided businesses with a huge competitive advantage by relying on that federal-state-local partnership. But that partnership and that network are only as strong as the weakest link.
Let me give you just one idea of what those words “competitive advantage” mean in today’s world. Brazil has exploded on the scene in recent years in terms of agricultural production, becoming a primary rival to the U.S. – specifically in soybean production. According to Institutional Investor, however, the transportation costs from Mato Grosso, the soy bean producing region in central Brazil, to China is about $190 per ton. Argentina’s transportation costs to export to China are about $102 per ton. The United States – $64 per ton.
We have our parents and grandparents to thank for that competitive advantage. They had the vision to construct and the fortitude to pay for this tremendous transportation network.
There is cause to believe we may be waking from our slumber. Eight states adjusted their transportation user fees in the last two years. Iowa, South Dakota and Utah just passed transportation revenue packages in the last several weeks. About a dozen more states are in the midst of debating significant transportation packages.
We will have to wait and see if Wisconsin and Washington, DC will follow suit.
TDA Members Head to DC
TDA members head to Washington, DC for the 2015 Fly-in before Congress goes home for Easter break.
The two-day Fly-in will begin on March 25th at the Grand Hyatt where members will hear from speakers including: Greg Principato, President and CEO National Association of State Aviation Officials; Dr. Pete Ruane, President and CEO, American Road & Transportation Builders Association; Carolyn Coleman, Director of Federal Advocacy for the National League of Cities; executive staff from the U.S. House and Senate transportation committees and WisDOT Secretary Mark Gottlieb.
The following day, members will take to the Hill to meet with the Wisconsin congressional delegation in order to make the case for a long-term plan for surface, air and waterborne transportation.
Members attending range from local government officials to private business representatives to professionals involved in the road, transit, freight rail and airport industries.
Thanks TDA Fly-in Sponsors
American Council of Engineering Companies of Wisconsin
FABCO Equipment, Inc.
International Union of Operating Engineers, Local 139
Johnson Timber Corporation
Mead & Hunt, Inc.
Miller-Bradford & Risberg, Inc.
Short Elliott Hendrickson, Inc.
Wisconsin Asphalt Pavement Association
Wisconsin Concrete Pavement Association
Wisconsin County Highway Association
Wisconsin Laborers’ District Council
Wisconsin State Council of Carpenters
Wisconsin Transportation Builders Association
TDA Launches New Publication
Last week, TDA began a new emarketing campaign for the legislature. The publication, as the name On the Go implies, is meant to be read quickly and perhaps on a cell phone on the way to the next meeting.
This weekly publication will deal with only one topic a week – both timely and evergreen topics – and provide a listing of relevant transportation news stories from around the nation.
The purpose of On the Go is simply to highlight key facts about Wisconsin’s transportation system and to provide a wider perspective about how other states are dealing with transportation issues.
VMT on the Rise
Drivers on U.S. roadways traversed 18.9 billion miles more during 2013 than 2012 according to the Federal Highway Administration (FHWA).
That marks the second consecutive year of mileage increases. Vehicle Miles Traveled (VMT) began declining in 2008 when the Great Recession began and continued to weaken during subsequent years of high gas prices and weak economic growth.The FH
WA figures show 2013 had the largest VMT total since Great Recession and the fourth-highest on record. The new information suggests that demand on the roadway system is returning to historical trends of increased freight traffic and increased use of passenger vehicles as the economy improves.
The significant drop in gas prices had no bearing on these numbers as the average price of gasoline was still well above $3.00 per gallon in 2013.
Preliminary figures for 2014 indicate traffic grew 1.7 percent from 2013.
Transportation in the News
Plan to Fund Federal Highway Trust Fund – The American Road and Transportation Builders have put forth a plan, “Getting Beyond Gridlock”, to fund the nation’s highways and transit. The plan calls for a 15 cent gas tax increase to be completely offset by 100% federal tax rebate for middle and lower income Americans for six years.
“If our national leaders think they need to use budget gimmicks or ‘one-offs’ again to pass the surface transportation investment program the states need and the business community has been pleading for, then use those devices to provide a $90 tax rebate to middle and lower income tax filers to offset the cost to them of a 15 cent per gallon increase in the federal gas tax,” ARTBA President & CEO Pete Ruane said in announcing the plan. “Don’t use them to just prop up the program for a few years. That won’t resolve the structural damage that’s been done to the Highway Trust Fund, nor will it allow states to do the long-range capital planning that the nation needs.”
Ports – The Wisconsin Commercial Ports Association is in the press expressing disappointment with the governor’s budget. While the $1.3 billion of debt included in the governor’s budget has been well covered in the press, the fact the governor zeroed out all bonding for the Harbor Assistance Program (HAP) had received little coverage.
HAP helps pay for harbor projects like dock repairs and dredging. The program has historically been funded with $1.3 million of SEG funding over a biennium and bonding. Over the last five biennia, the bonding amount has ranged from $10.7 million to $15.9 million.
“Most harbor improvement projects have a long lifespan when completed, which makes them suitable for bonding. It’s a good way to invest,” said Dean Haen, director of Brown County Port & Resource Recovery and president of the Wisconsin Commercial Ports Association. “But if the proposed budget holds, it will eliminate all bonding from the HAP, essentially putting Wisconsin’s 15 ports in a holding pattern outside of making minor repairs.”
Each year, more than 30 million tons of cargo worth more than $2.4 billion are imported and exported from Wisconsin ports.
Press coverage includes stories in Green Bay, Superior and Milwaukee.
Interesting News Coverage
MCClatchyDC.com, March 19, 2015– “Gas tax hike best highway funding fix, key financial group says”
Kenosha News, March 13, 2015 – “CRAIG THOMPSON: State highway funding issues must be faced”
U.S. News, March 9, 2015 – “Going beyond the gas tax: How to pay for the Highway Trust Fund?”
Janesville Gazette, March 7, 2015 –“Our Views: It's time Republicans show leadership, raise revenues for roads”
Beloit Daily News, March 7, 2015 – “Transportation must be funded: Even limited government advocates should support good infrastructure policy.”
QC Online, March 5, 2015 – “Illinois group pushes for gas tax increase, lawmakers open to idea”
The State, March 4, 2015 – “Winthrop Poll: Raise gas tax, most in S.C. say”
Transportation Topics, March 2, 2015 – “Editorial: D.C. talks while Iowa acts”
TDA Welcomes Returning Member
Racine Area Manufacturers and Commerce
Mark Your Calendar
- TDA Drive-in: Wednesday, May 6th. Details coming soon.
- TDA Annual Meeting: Tuesday, September 15th.
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