Transportation fund pays the price for failed concession deal

The state’s transportation system is the latest fiscal casualty as Gov. Dannel P. Malloy and the legislature scramble to replace savings that were supposed to come from employee givebacks.

Originally poised to receive more than $78 million in additional aid from the General Fund this fiscal year, the Special Transportation Fund lost that fiscal boost shortly before the new budget year began on July 1.

“Would we have liked to see that money stay there? Absolutely,” said Rep. Tony Guerrera, D-Rocky Hill, co-chairman of the legislature’s Transportation Committee. “Would it have kick-started a lot more transportation projects? Absolutely. Unfortunately these are the drawbacks we face when concessions don’t get ratified.”

Since the 2005 General Assembly and then-Gov. M. Jodi Rell dramatically increased the state’s wholesale fuel tax, transportation advocates have complained that less than 41 percent of the $1.84 billion revenues raised from that levy over the last six fiscal years have been dedicated to transportation programs.

Besides covering operating costs for the Transportation and Motor Vehicles departments, the fund also covers the annual debt service on most major transportation improvement projects.

During last fall’s gubernatorial campaign, Malloy also decried the low priority transportation has received, arguing that unless Connecticut addressed its clogged highway system, particularly in its southwestern corner, its prospects for new economic growth would be severely limited.

The governor and his fellow Democrats in the legislature’s majority appeared poised to reverse the situation in first budget they adopted for the 2011-12 fiscal year, a $19.8 billion package approved in early May.

That plan included a $1.3 billion transportation fund, up 11.5 percent from the prior year. More importantly, Malloy and lawmakers increased the fund’s share of revenues from the wholesale fuel tax – the only fuel levy that splits its resources between transportation and non-transportation programs – by nearly $62 million, up to $226.9 million.

And an annual transfer of revenues from the General Fund to the transportation system – established in 2009 to keep the latter out of deficit – was increased by another $16.5 million.

Then everything changed.

That original budget depended on state employees providing concessions worth $1 billion in 2011-12, but the tentative deal announced on May 13 fell short of that mark, offering $701 million, according to the administration.

The governor and lawmakers plugged that initial gap, in part by chopping $42.5 million away from this year’s transfer to transportation from the General Fund.

The biggest change, though, occurred in June when unionized state employees rejected the concession package.

After that, Malloy and the legislature cut the transfer by another $40.5 million and cutting transportation fund spending by $100 million as part of a much larger plan to replace the lost concessions.

When the fiscal smoke cleared, nearly $78 million in new revenues from the General Fund had been negated entirely and overall transportation spending had been increased by just 2.6 percent over the prior year.

There are new revenues to cover that additional spending, but much of that comes from a 6.6 cents-per-gallon hike in the diesel fuel tax and increases in permits, fees and fines.

“We began this year extremely concerned that the Special Transportation Fund was in jeopardy and we still need structural reforms in the transportation budget,” said Donald J. Shubert, spokesman for Keep CT Moving, a transportation advocacy coalition composed of construction labor and business groups.

Though new sources of revenue likely will be needed to pay for long-term transportation improvements, state officials also need to recognize that the last major tax hike ordered to do the same thing largely was diverted to pay for non-transportation programs, Shubert said.

Connecticut has long had two fuel taxes: a retail levy of 25 cents per gallon imposed exclusively on gasoline, and the petroleum products gross receipts tax, which is applied to a percentage of wholesale transactions of gasoline and certain other fuels.

It was the latter that lawmakers and Rell increased dramatically six years ago. Standing at 5 percent in May 2005 when the increases were adopted, the gross receipts tax rate rose to 5.8 percent in July 2005, 6.3 percent in July 2006 and 7 percent in July 2007. It was slated to rise to 7.5 percent in July 2008, but the legislature and Rell repealed that increase as public pressure rose amid spiking gasoline prices and reports that most revenue from the tax was being spent on non-transportation programs.

According to the Independent Connecticut Petroleum Association, the gross receipts tax added 23 cents per gallon to the price of gasoline based on wholesale prices in late June. Combined with the state’s retail tax and an 18.4 cents per gallon federal retail tax the total levy on Connecticut gasoline approached 67 cents per gallon.

And according to the American Petroleum Institute, the nation’s largest oil and natural gas trade organization, Connecticut’s fuel tax burden ranks highest among all states.

“We’re paying more in user fees and I feel like we’re being used,” Michael J. Riley, president of the Connecticut Motor Transport Association – the state’s largest trucking company coalition – said Tuesday, adding that the state’s fuel taxes continue to be used “as a piggy bank for every other kind of spending” besides transportation.

Malloy’s budget director, Office of Policy and Management Secretary Benjamin Barnes, could not be reached for comment Tuesday. But Barnes has said maintaining a healthy transportation fund remains a top priority for the administration going forward.

Sen. Toni Boucher of Greenwich, ranking GOP senator on the Transportation Committee, said Malloy and his fellow Democrats in the legislative majority didn’t have to undo the transportation fund reforms to compensate for the rejected concession deal.

“I was incredibly heartened when we started out,” said Boucher, who, like Malloy, comes from the state’s southwestern corner. “It was a very nonpartisan issue. We know we have (Interstate) 95 jammed morning, noon and night.”

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.

Though Malloy has proposed more than 6,600 employee layoffs and elimination of another 1,000 vacant jobs to help offset the rejected concessions, Boucher said Democrats have been reluctant to consider the programmatic cuts that could have left the transportation fund in much better shape.

“It’s unfortunate and I was disappointed,” she said. “The transportation infrastructure is absolutely critical for economic development.”