You’re doin’ fine, transportation

The past several years have put severe constraints on the state budget. State appropriations remain below their levels of four years ago.  Many state agencies have absorbed funding cuts of over 20 percent, and most have been forced to cut staff while eliminating programs and services.

There are two notable exceptions to the hard times that have befallen most state agencies. The one frequently discussed exception is the state Medicaid program, which has required additional funding each year to cover  rising health care costs and increased enrollment of low-income children. Less often noted is the Oklahoma Department of Transportation (ODOT). The Legislature has embarked on an ambitious and vital effort to repair and maintain the state’s crumbling highways and bridges. Transportation is now consuming a significantly greater share of the total budgetary pie as tax dollars that formerly went to general revenue are earmarked for roads and bridges. Meanwhile, the real value of state gas taxes are at their lowest level in decades and tax cuts continue to erode the state’s revenue base.

Following a long stretch where state investment in roads and bridges remained virtually flat, the Legislature in 2005 created the ROADS (Rebuilding Oklahoma Access and Driver Safety) Fund. Bypassing the legislative appropriations process, revenues to the ROADS fund are apportioned directly from personal income tax collections. Beginning with $15 million in FY 2006, the apportionment to the ROADS Fund was initially set to increase  by $17.5 million or $35 million annually, depending on a revenue growth trigger, until it reached  a cap of $170 million. Small annual amounts were also set aside for passenger rail service ($2 million) and public transit ($3 million).

Subsequent legislatures have increased ROADS funding far beyond what was initially anticipated. This year (FY 2013), the fund will receive $292.4 million. As a result of HB 2248 passed last session, the fund will continue to grow in annual increments of $59.7 million until it reaches a cap of $575 million in FY 2018.

In addition to the ROADS Fund, roads and bridges have received various other funding increases since 2005 (click here for a detailed annual breakdown by funding source). These include:

• Dedicated revenue streams. A portion of three state taxes – the motor vehicle tax, motor fuel tax, and gross production tax on oil – that previously were apportioned to the General Revenue fund are now directed to two county roads and bridges funds and to the High Priority State Bridge Fund. These three funds are expected to collect $117.7 million in FY 2013 and to grow by at least $31.1 million more by FY 2015 due to legislation passed in 2012 (HB 2249);
• Bond payments. The Legislature authorized a pair of $150 million bond issues in 2009 and 2010 through the Oklahoma Capitol Improvement Authority;
• One-time allocations. ODOT received additional appropriations in 2006 and 2076 for debt service obligations ($138.1 million) and for roads and bridges ($125 million).

Transportation did absorb cuts in its legislative appropriation from FY 2010 – FY 2012 when the state was grappling with large budget shortfalls, but these were offset by issuing additional bonds and increases in ROADS funding.

The chart shows that state transportation funding has more than tripled since FY 2005. While the annual fluctuations reflect, in part,  bond issues and other one-time funding streams, this year’s funding of $571 million is all ongoing revenue.

This additional funding for roads and bridges has yielded clear improvements to the state’s infrastructure. Oklahoma has long ranked among the states with the highest number and percentage of bridges that are structurally deficient. According to its 2011 progress report, the Department of Transportation reduced the number of structurally deficient highway bridges from  1,168 in 2004 to 706 in 2010. With this year’s additional commitment of resources, the Department is now on track to repair all deficient state bridges by 2019. The Department also reports that since 2003, the state has undertaken significant rehabilitation of over 239 miles of interstate pavement and is now investing $65 million annually in surface rehabilitation.

Yet if strengthening our infrastructure is a valid and critical purpose of state government, we must also be prepared to ask at what point our commitment to road and bridge repair may be working at the expense of other critical state goals. Since we have not raised any new revenues, increased investments in transportation means less money for other components of the budget. The revenues from the income tax, motor vehicle tax, motor fuels tax and gross production tax that are apportioned directly to the Department of Transportation are not being apportioned to the General Revenue fund and the 1017 Fund to support education, public safety, human services and other core government functions. For example, since 2005, state funding for transportation has increased three-fold, while support for public education has increased only 13 percent. This year, while transportation enjoyed an $80 million increase, common education received no additional state dollars.

At the same time as transportation is taking a larger bite out of general revenues, drivers are paying much less to cover the costs of road construction and maintenance. Oklahoma has not adjusted the gas tax for inflation in 24 years, longer than all states except Alaska, and the tax has lost 45 percent of its value since the last increase. In 2005, Oklahoma voters overwhelmingly rejected a proposed increase in the gas tax.

Without any further legislative changes, state transportation funding will continue to grow, reaching upwards of $925 million by FY 2018. At the very least, our elected leaders must be open to a genuine discussion about how long transportation should maintain its place at the head of the queue for additional state revenues, and whether it is time to again ask drivers to cover more of their fair share of the cost through a modernized gas tax.