Transportation Funding

Presented by:Erich W. Zimmermann, Director

Transportation Programs

National Association of Regional Councils

Overview• About NARC• Federal Spending – The Big Picture• Federal Transportation Funding• Non-federal Approaches• Q&A

About NARC• National non-profit trade organization• Represents multi-jurisdictional regional planning

organizations – large and small, urban and rural• Thank you for extremely strong AZ membership

• Formed by NACo and NLC• Governed by local elected officials

• President Hon. Penny Gross, Supervisor, Fairfax County, VA

• Advised by Executive Directors• Four core areas of concentration

– Transportation– Economic & Community Development– Homeland Security/Public Safety– Environment

• Membership covers 97% of counties; 99% of population

FY14 & 15 FundingDebt Ceiling

SequestrationBig Issues

Reauthorizations

Tax Reform

InfrastructureDisaster/Recovery

ECONOMY

Agency Consolidation/Reductions

Federal Spending1994 was last time appropriations process was completed properly

• FY11 – nearly $40B in cuts• FY12 – many additional reductions/cuts (HUD, HSR, CDBG)• FY13 – more reductions Sequestration

• CR with flat funding at FY12 levels• $984B total; includes $85B sequester cuts• Approx. -5% from domestic discretionary programs

• FY14 – Finally some progress (after the pain)• Joint budget resolutions passed but only after a shutdown• Approps bills complete; roll back of sequestration• $1.1 trillion omnibus• Relatively good news for transportation: TIGER, Amtrak,

New Starts• FY15 – Baby steps

• Sequestration rolled back (temporarily)• Top-line number set

Sequestration 101WHAT?Automatic, across‐the‐board cuts on federal domestic and defense discretionary and mandatory funds starting in FY13

HOW?Created under the Budget Control Act (BCA), the debt limit deal passed by Congress in August 2011

TOTAL?$1.2 trillion to be cut evenly over 2013-2021 ($109B/year)

EXEMPTIONS?Transportation Trust Funds Social Security CHIP

Medicaid/Medicare (2% cap) Veterans Programs Food Stamps (SNAP)

Federal Retirement Benefits Child Nutrition Some tax credits

Military Pay Pell Grants

Federal Transportation Funding• Highway Trust Fund in trouble

• Maybe sooner than we think?• Tax reform bill unlikely to save day

• Extensions going to be difficult• General Fund Transfer again?

• $41 billion to date, plus $12.6b for ‘14• Another $15b would be need for ‘15 (CBO)

• Other offsets?• (Implementable) ideas limited

• Gas tax increase (index?)/tax reform• Rep. Blumenauer/Sen. Boxer• VMT• Increased tolling authority• Financing ≠ Funding

Federal Transportation Funding

• CBO (July 2013):“Bringing the trust fund into balance in 2015 would require entirely eliminating the authority in that year to obligate funds (projected to be about $51 billion), raising the taxes on motor fuels by about 10 cents per gallon, or undertaking some combination of those approaches.” (emphasis added)

Source: CBO

Source: FHWA

Federal Transportation Funding

CBO (TRB, January 2014):

• “We were wrong, in a bad direction”• Highway Account may not last until the end of

MAP-21

• Which begs the question: what then?

Things May Be Even Worse

• Flurry of activity in 2013• Likely to continue into 2014

Better News At State Level?

General themes:

• Gas tax increases

• Eliminating/reducing per gallon gas tax

• Wholesale taxes

• Indexing for inflation

Better News At State Level?

The big ones:

• Pennsylvania

• Virginia

• Maryland

• Massachusetts

Better News At State Level?

• Debate went down to the wire; took special session

• PA has enormous bridge needs

• $2.3 billion– $1.65 billion for roads and bridges; $475 million for transit).

• Eliminates per gallon tax

• Uncaps & increases wholesale gas tax (oil franchise fee); indexes

• 5-year phase-in (increases in ’14, ’15, ‘17)

• Raises fees

• Separately: natural gas impact fees for bridge repair ($18 million/year to counties)

Pennsylvania

• Complex & innovative; nearly ¼ century since last increase

• Multi-modal approach

• $3.5 billion over five years

• Eliminated its per gallon tax (17.5 cents)

• Adds wholesale tax on gasoline (3.5%) and diesel (6%)

• State sales tax increase; portion committed to transportation

• Local taxes: adds taxes in NoVa and Hampton Roads

• Vehicle fees: $64 fee on hybrids

• Internet sales tax revenue

Virginia

• Intercounty Connector made a package necessary

• $4.4 billion over six years, including borrowing ability– $800 million annually at full implementation.

• Maintained 23.5-cent state gas tax and indexes it to CPI– Also indexes transit fares

• Added 3% wholesale tax on gasoline– To 4% if Congress lifts internet tax ban; 5% otherwise

• Modes aren’t defined, but funds unified state trust fund

• Lockbox

Maryland

• Big Dig Legacy

• $3B over five years ($500M/year; to $800M by 2018)

• Gas tax increase (3 cents, to 24 cents) and indexes to inflation for the future (starting in January 2015)– Indexing will appear on a future ballot, however

• Cigarette tax increase ($1 per pack); new business taxes

Massachusetts

• Vermont: sales tax on gasoline

• Wyoming: gas tax increase

• Ohio: Increased borrowing authority

• Arkansas: new bonding authority, temporary sales tax increase

• Washington: electric car fee, VMT fee study

• Oregon: VMT pilot program. Drivers pay 1.6 cents/mile and refunded state taxes they pay on fuel.

• California: Gas tax increase (with a caveat)

Other States

• Washington, DC: Replaced 23.5 cpg gas tax with 8.3% whole gas and diesel tax

• Nevada: Allows Clark County (Las Vegas) to index gas tax for inflation

• Raleigh, NC: $75 million bond issue, funded by property tax increase

Non-States

• The 17 states with gas tax rates tied to inflation, the price of gasoline, or both include:– California– Connecticut– Florida– Georgia– Hawaii– Illinois– Indiana– Kentucky– Maryland– Massachusetts– Michigan– Nebraska– New York– North Carolina– Vermont– Virginia– West Virginia.

Source: ITEP, 2013

States that Index

• Indiana: to allow central Indiana (including Indianapolis) to raise regional taxes to pay for transit; study commission approved the idea if voter referendum occurs

• Texas: $1.2 billion per year by diverting oil and gas revenues from the state’s Rainy Day Fund. Requires voter approval.

• Washington: debated a gas tax increase through December; will come up again in 2014

• Missouri: plan to raise $7.9B over 10 years through one-cent sales tax increase passed both chambers, but final package was filibustered

Looking Ahead

US Avg.

Arizona?

According to AASHTO: Arizona has a $63 billion gap in funding over 25 years ($2.52B annually)

Source: ITEP 2011

2013

• ITEP estimates states are losing $10 billion each year just as a result of inflation erosion

• Pressure on state general funds• Increasing costs over time as

infrastructure is not adequately maintained

• Loss of competitiveness

What Does It Mean?

• This year was huge, but came after several years of no increases

• States can’t be expected to make up the gap by themselves– The low-hanging fruit may have already

acted• Still require a strong federal partner

Conclusions

• Institute on Taxation and Economic Policy (ITEP). Building a Better Gas Tax: How to Fix One of State Government’s Least Sustainable Revenue Sources. December 2011.

• ITEP. A Federal Gas Tax for the Future. September 23, 2013.

• Congressional Budget Office. Testimony: Status of the Highway Trust Fund. Kim P. Cawley (Chief, Natural and Physical Resources Cost Estimates Unit). Before the Subcommittee on Highways and Transit Committee on Transportation and Infrastructure. July 23, 2013.

• Bipartisan Policy Center/Eno Foundation. The Consequences of Reduced Federal Transportation Investment. September 2012.

Cited Resources

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NARC contact info:

Thank you!

www.narc.org202.986.1032

My contact info:erich@narc.org

202-986-1032 x212