With budget holes to fill, will transportation fund be a target?

The new state budget adopted earlier this month shifts dramatically away from the recent trend of diverting fuel tax revenue for non-transportation uses.

But with a $300 million hole still to be patched in the first year of that new budget–and the potential for much larger gaps if a tentative union concession deal flops–Gov. Dannel P. Malloy and transportation advocates may be hard pressed to preserve the new funding carved out for Connecticut’s aging, congested infrastructure.

“We definitely want to maintain at least some of the progress we have made,” Malloy’s budget director, Office of Policy and Management Secretary Benjamin Barnes, said Monday, referring to the nearly $227 million in wholesale fuel tax revenues the Special Transportation Fund is scheduled to receive in the fiscal year that begins July 1. “We need that to maintain long-term viability of the fund and ultimately our ability to finance transportation projects.

By comparison, the General Fund, which comprises the bulk of the state budget and had received the majority of revenues from the Petroleum Products Gross Receipts Tax since three successive annual increases were imposed in July 2005-2007, receives just $93.1 million in 2011-12.

The gross receipts tax is levied on the first wholesale transaction of most fuels in the state. In the case of gasoline, that usually involves fuel sold from an importing site, such as New Haven harbor, to local filling stations.

“We know we have gaps in the budget and that money has to be replaced,” Sen. Andrew Maynard, D-Stonington, co-chairman of the Transportation Committee, said Monday. “But what we’ve been trying to explain to people who might look at the transportation fund to close those gaps is that we’ve got an enormous amount of infrastructure improvements to be made.”

The state’s Transportation Strategy Board reported last summer that Connecticut’s transportation network is plagued by aging infrastructure, heavy usage and harsh weather conditions — all compounded by shrinking government funding.

About 6 percent of the state’s highway bridges and 27 percent of its railway bridges–nearly 300 structures in total–were rated structurally deficient, with at least one major structural component – such as its deck or substructure – not capable of carrying all legal loads. A structurally deficient bridge can provide several years of service before receiving the necessary work to restore it to fair or better condition, the report adds.

According to Department of Transportation data, the number of structurally deficient bridges is at its highest level since 1993. And there are more potential problems in the near future: Much of the interstate highway system in this state was built in the 1950s and 1960s, and many of the bridges that serve it have a 40- to 60-year life span. The state maintains about 3,900 highway bridges and about 200 rail bridges; just over 2,850 were built prior to 1970.

Further complicating matters, the DOT projected last year a $926.4 million gap between the cost of highway, bridge and transit projects planned through 2014 , and the level of anticipated funding available.

“It’s certainly my hope we can preserve some of the progress we have made,” Maynard added. “There’s a lot of work that needs to get done.”

But both Barnes and Maynard conceded that some legislators might be tempted by past practice to look to the transportation fund to close holes in the General Fund.

The transportation fund was on pace to run a deficit in 2011-12 before Malloy and lawmakers agreed to dramatically increase the amount of gross receipts tax revenue dedicated to it, from $165.3 million this year to $226.9 million next year.

Still, the transportation fund has a reserve account of $104 million, while the General Fund’s emergency reserve, commonly known as the Rainy Day Fund, is empty. Legislators could transfer significant dollars away from transportation, and use the fund’s reserve account to plug the gap for a year or two.

Malloy campaigned against those types of short-term solutions, arguing they helped to create the $3.67 billion projected budget deficit for 2011-12 he inherited when he took office in January.

“We are very confident that the governor understands the connection between investing in infrastructure and creating jobs and growing the economy,” said Donald J. Shubert, spokesman for Keep CT Moving, a transportation advocacy coalition composed of construction labor and business groups. “We think he has made a very clear case for this. It would be a big disappointment if the legislature went in another direction.”

But both lawmakers and Malloy have to make adjustments to the 2011-12 budget. That plan relied on $1 billion in savings from state employee concessions. But the $1.6 billion, two-year tentative concession package the governor and union leaders announced earlier this month is projected to save $700 million next fiscal year and $900 million in 2012-13.

The $19.83 billion budget adopted for next year is designed to produce a $369 million surplus, due largely to a last-minute surge in projected state income tax revenues.

Malloy has said he doesn’t want to close the $300 million gap solely with that revenue, noting that state government will need to those funds to tackle several other long-term fiscal challenges, including more than $19 billion in bonded debt and large funded liabilities in state employee pension and retirement health care programs.

“Surpluses don’t exist when you have the type of long-term unfunded obligations that we have,” Malloy said Monday.