Transportation funding debate still centered on ‘lockbox’
For more than a year now, Gov. Dannel P. Malloy has told the legislature that the ball is in its court when it comes to transportation.
Though a gubernatorial panel laid out $42 billion in options — including tolls and gasoline tax increases — to fund long-term transportation initiatives, Malloy would not press for them until lawmakers backed a constitutional “lockbox” amendment to safeguard those revenues.
While the governor has released no transportation-related details from his next two-year budget plan, the administration has shown no signs of backing away from its lockbox demand.
Meanwhile, transportation advocates are increasingly fearful that Malloy’s vision for a major, 30-year transportation rebuilding program is vanishing.
“Governor Malloy is committed to transforming our transportation system so that our infrastructure can help foster economic growth and attract businesses to the state,” Malloy spokesman Chris McClure said. “…I remain confident that the legislature, and ultimately Connecticut voters, will pass a constitutional lockbox.”
Malloy came forward two years ago with a plan to spend $100 billion over 30 years to transform Connecticut’s aging, clogged highway and rail networks into a modern, efficient system.
That $100 billion involved a combination of state borrowing and matching federal grants, and includes both existing funding levels and proposed new investments over three decades.
The key to making all of that happen is to appropriate sufficient resources within the budget’s Special Transportation Fund (STF), and particularly its debt service line item that covers the principal and interest on transportation-related borrowing.
To cover the first five years of that program — 2016 through 2020 — Malloy proposed replacing an older system of sharing General Fund resources with the STF with a more generous plan to shift sales tax receipts into transportation.
And while McClure said that five-year ramp-up is making “substantial progress in replacing or rehabilitating outdated and over-used roads, bridges, and tunnels,” there is mounting evidence it isn’t sufficient to do the job through 2020.
Nonpartisan analysts warned last year that the STF was projected to run $46 million in deficit beginning with the 2018-19 fiscal year — Year 4 of the 30-year program.
Now it looks like it won’t even make it through its second year in balance.
Legislators decided last May to cut this fiscal year’s sales tax transfer by $50 million to help close a major deficit in the General Fund.
The governor’s budget staff estimated last month that the STF would finish this fiscal year $17.1 million in deficit.
And while the fund has a $142 million reserve, which could cover deficits for a few years, transportation advocates insist the program needs more resources now.
They don’t all agree on how to solve that problem.
“The Special Transportation Fund is headed toward insolvency at some point,” said transportation consultant Emil Frankel, who served as state transportation commissioner from 1991 through 1994 under Gov. Lowell P. Weicker Jr. “It is necessary that additional revenue sources be identified to prevent that from happening.”
Frankel served throughout 2015 on the Transportation Finance Panel, a group commissioned by Malloy to identify long-term funding options for his 30-year initiative.
Among the options the panel offered were:
- Increasing the retail gasoline tax by two cents per year for seven years. This would raise the levy from 25 to 39 cents per gallon.
- Increasing the state’s wholesale fuel tax from 8.1 to 9.1 percent
- Boosting rail and bus fares by 2.5 percent annually to keep pace with inflation.
- Implementing all-electronic tolling on highways and using congestion pricing to ensure motorists who travel the most help to pay for transportation upgrades.
Tolling could take up to seven years to implement and raise as much as $18.3 billion over a 20-year period.
The panel also recommended a constitutional lockbox amendment.
Don Shubert, president of the Connecticut Construction Industry Association, who also favors such an amendment, said the state’s transportation needs are so pressing that there’s no reason why revenue options can’t be discussed at the same time a lockbox is debated.
The Department of Transportation “needs a new revenue stream, and they need it quickly,” Shubert said.
A healthy state budget that can cover the debt service on transportation construction projects — and attract big federal grants to be spent within Connecticut — “is the basis for any sustainable transportation program” and vital for long-term economic growth, he said.
Toward that end, Connecticut officials at least should be exploring tolls seriously now, Shubert said, adding it would take several years to get them up and running, if approved.
Shubert also noted that much of the growth in Connecticut’s transportation budget is being driven by transit programs. And while transit is important, it would be a mistake to scale back debt service growth — and correspondingly, borrowing for transportation projects — to offset rising transit costs, he said.
Public transportation operating costs have risen almost 72 percent over the past decade.
Further complicating matters, two new factors threaten to drive transit costs even higher in the next two-year state budget.
About $18 million in federal funds available to help cover operating costs for the New Britain-to-Hartford busway no longer can be used for that purpose. And annual operating costs for the new Springfield-to-New Haven rail service have been estimated at about $40 million.
“ConnDOT is going to be forced to choose between operating costs and capital investments,” Shubert said.
Mike Riley, a longtime transportation advocate and former president of the Connecticut Motor Transportation Association — the state’s largest trucking business coalition — said state officials need a leaner transit budget.
Those programs that require hefty state subsidies while returning limited economic value should be reduced, Riley said.
“The state is subsidizing, to a horrendous amount, some transit projects that are not producing,” he said, suggesting state officials review the Waterbury-area rail line as well as the Shoreline East system, which connects New Haven to the Rhode Island border.
But while Riley supports the lockbox, he does not favor a discussion of tolls, gasoline tax increases, or any other new fees or levies for transportation at this time.
“Having a lockbox first is an absolute imperative before giving the government any more money,” he said.
But Malloy’s fellow Democrats in the legislature have been wary of endorsing a constitutional amendment to insulate transportation revenues from future budget cuts.
Surging retirement benefit costs have contributed to projected state budget deficits totaling $3 billion in the two fiscal years combined, and are expected to remain a big cost driver in state finances for the next 15 years or longer.
Several Democratic legislative leaders have said that as long as other priorities such as education, health care, social services and municipal grants are at risk of being cut to balance state finances, then transportation must be on the table as well.
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