Connecticut’s tolls debate may be over for now, but that lull only means Gov. Ned Lamont and legislators now must resolve a daunting list of fiscal challenges left in its wake.
Absent toll receipts from large trucks, what other measures will be needed to keep the transportation program solvent for the rest of the decade?
Will Lamont, who eased his proposed debt diet to win support for tolls, again try to tighten the purse strings?
And will lawmakers respond by again attempting to seize control of Connecticut’s credit card?
“I’ve lost patience,” the governor said last week as he announced the tolls bill had fallen into political limbo. “We’re going to fix our transportation plan, and we’re ready to work with anybody who has a constructive alternative.”
Fixing the Special Transportation Fund
What does that mean?
For the short term, the governor said, it involves shifting priorities.
On paper, the budget’s Special Transportation Fund — which repays the borrowing that sustains highway, bridge and rail upgrades — is in fine shape, projected to run modest surpluses through 2024.
But appearances can be deceiving.
Those numbers only hold up if Connecticut keeps fixing infrastructure at its current pace that barely maintains a state of good repair — and leaves very little for strategic projects that enhance traffic flow.
The transportation fund currently supports roughly $800 million per year in state borrowing, which in turns leverages about $750 million in matching federal grants.
But DOT officials say as aging, overcrowded highways and bridges demand more costly repairs, $1.5 billion-to-$1.6 billion won’t get the job done, and something closer to $2 billion per year will be needed.
Based on that assumption, the transportation fund hits insolvency around 2025 or 2026.
As a stop-gap measure, Lamont said he favors taking about $200 million in borrowing supported by the budget’s General Fund — borrowing currently used to support school construction, conservation efforts, state building maintenance and economic development — and shifting that to transportation.
‘I hate to do it this way’
“I hate to do it this way,” Lamont said. “It’s bonding in place of other things that are priorities, but right now there’s no other option on the table.”
But another $200 million per year isn’t a long-term fix. It only postpones insolvency for a few more years, administration officials say.
Truck toll receipts would have added $150 million-to-$200 million per year.
Equally important, they would have helped Connecticut qualify for low-interest federal transportation loans.
This means Connecticut could have borrowed significantly more for infrastructure repairs.
If legislators won’t consider tolls, they could consider raising fuel taxes for the first time in seven years.
But Connecticut has two taxes that impact the price of gasoline — not to mention one of the highest fuel tax burdens in the nation.
When distributors bring fuel to local gas stations, the state applies an 8.1% wholesale tax. [A state-approved surcharge effectively raises the rate to 8.81%.]
This equates to nearly 15 cents per gallon, based on current wholesale prices, according to the according to the Connecticut Energy Marketers Association. But when oil prices skyrocketed in 2007 and 2008, the tax generated as much as 26 cents per gallon.
Regardless of the amount, gasoline station owners say they build the entire cost into the base price charged motorists, who also face a flat, 25-cents-per-gallon retail tax.
The wholesale tax last increased in 2013, following a schedule adopted in 2005. The retail tax last was changed in 2000, when legislators and then-Gov. John G. Rowland lowered it from 32 to 25 cents per gallon.
Neither Lamont nor any legislators have proposed any fuel tax hikes to date this year. The governor often has said tolls and other user fees were more reliable than increasing gasoline taxes, given the increasing fuel efficiency of vehicles.
The two fuel taxes together provide roughly half of the revenue for the $1.73 billion Special Transportation Fund.
Another option to mitigate the absence of toll receipts would be to increase sales tax revenues dedicated to transportation.
The sales tax currently provides about 30% of the STF’s revenues, and legislators passed a bipartisan plan in 2017 to increase that share steadily through the mid-2020s.
Lamont and his fellow Democrats in the legislature voted in June to scale back that increase, and Senate Minority Leader Len Fasano, R-North Haven, said officials should not deviate from that schedule any further.
More importantly, the tolls-centered transportation plan Lamont supports also was counting on sales tax transfers to the STF to ramp up again in 2022, jumping by more than $180 million that year.
In other words, maintaining that transfer plan wouldn’t push off the projected insolvency of the transportation fund. It just would stop it from happening even sooner.
‘Debt diet’ debate is far from over
And there’s also no guarantee legislators will accept the governor’s proposal to redirect $200 million in bonding away from non-transportation projects and into highways, bridges and rail lines.
Connecticut has one of the highest debt burdens, per capita, of any state, prompting Lamont 13 months ago to propose a “debt diet.”
The governor relented two weeks ago, proposing $1.77 billion in new general obligation bonding for this fiscal year — borrowing to bevrepaid out of the budget’s General Fund and not the STF.
That was more than $400 million beyond what the governor wanted, much of its focused on economic development priorities of Democratic legislators. And administration officials made it clear this was an olive branch to build support for tolls.
Now that tolls are on hold, sources say the “debt diet” is back in play.
Sen. John Fonfara, D-Hartford, co-chairman of the Finance, Revenue and Bonding Committee, said he hopes the administration’s bonding proposal from two weeks ago is still on the table.
“I take the administration at its word,” the Hartford lawmaker said. “I thought those decisions were based in good [borrowing] policy.”
Fonfara, who says bonding is a key tool for economic development and to help poor communities in lean fiscal times, introduced a bill last year that would have wrested control of the State Bond Commission from the Executive Branch and given it to the legislature.
It sailed through the finance committee, but legislative leaders then tabled it and instead tried to negotiate a middle ground with Lamont.
But if the bonding debate gets heated, the Democratic governor may have allies on the other side of the aisle.
Senate and House Republicans have argued for the past decade that state borrowing is too high, and Fasano warned last fall that if Democrats sent a bloated borrowing plan to Lamont — and if the governor vetoed it — Senate Republicans would not support an override.
“I would still hold to that position,” Fasano said. Democrats lack the two-thirds’ majority needed to override a veto by themselves.
“I think the Republicans recognize we have to prioritize and keep borrowing within our limits, keep it as lean as possible,” added Rep. Chris Davis of Ellington, ranking House Republican on the finance committee.
The battle over the state’s credit card also extends to borrowing for school construction. And sources said another dispute between Lamont and legislators — which was put on hold during the tolls debate — is now coming to the forefront.
Who controls borrowing for school construction?
Legislators from both parties balked last November when the administration unilaterally moved the Office of School Construction Grants and Review — which annually oversees hundreds of millions of dollars in construction grants to school districts — from the Department of Administrative Services and into the Office of Policy and Management. A high-profile agency that houses the governor’s budget staff, OPM is seen as closely involved with implementing the administration’s political agenda.
Critics said the move threatens a process that not only works well, but has traditionally been immune from politics.
“This reeks of politics,” Deputy House Minority Leader Vincent J. Candelora, R-North Branford, said at the time. “There is not a good reason to make this move.”
Administration officials said the move only was about increasing efficiency, but conceded it would require legislative approval, and submitted a bill this month to retroactively endorse the switch.
But the legislature’s Education Committee raised a bill this week to block it. Though full language hasn’t been drafted, the bill’s title starts with “An Act Prohibiting the Transfer of School Construction from DAS to OPM.”
This consternation surrounding the transfer comes at a time when the flow of money funding new school construction projects or major renovations has been significantly scaled back in recent years. The administration has insisted that this is the result of making sure that only projects that are close to being shovel-ready are brought before the legislature for approval, and eventually by the State Bond Commission.
But Kostantinos Diamantis — who heads the school construction unit — told the Education Committee that the downturn is going to continue because of a “self-imposed cap” of about $400 million in grants per year.
Education writer Jacqueline Rabe Thomas contributed to this report.
The companies and people who have left,and continue to leave, this state were prescient.They saw what many still do not recognize. This state is broken after many,many decades of corruption and mismanagement. Many far larger states with far few resources have flourished while this state seems to feed on itself. There is not much left on the plate and all Hartford can come up with is to tax the taxes and place fees on the fees. Nobody has the spine to do the heavy lifting required and the solutions,whatever they are, will not be felt for generations.
So sad.
It boggles the mind that we could not get truck tolls passed. Also, the idea that legislators would refrain from voting because they if they were to vote the measure would not pass seems like a dodge to me. The voters should know where their legislators stand on the issues by way of their votes. Then voters can decide how to use their ballots when the time comes.
“The voters should know where their legislators stand on the issues by way of their votes. Then voters can decide how to use their ballots when the time comes.”
I agree – they should know. BUT will they and will they vote?
It is fantastic tolls did not pass for now
Why no mention of reducing spending overall ?
Politicians in the State of Connecticut, must now recognize the difference between “emergency”, “critical”, “needed”, and “desired”. They and their supporters, have obfuscated the truth by misrepresenting opinion as facts, to drive their agenda. It must stop… NOW! The use of “misinformation”, “bias analysis”, “skewed statistics”, and “absence of transparency” can no longer be tolerated by citizens, and voters. Any politician that intentionally attempts to mislead the public through deception or plain ignorance, must be removed from office. It is the only way to turn this state around. The time is…NOW!
These truck tolls are the current “solve all” for the state. The tolls were anticipated to bring in $150-200 million. An article last week was entitled “Fiscal cure sought for UConn Health” The article revealed that Gov. Ned Lamont questions whether the state can afford to continue subsidizing the entity. The article said the State picked up $244 million in costs on top of revenue they billed last year. Hmm, here’s an idea for a simple solution. How bout we spin off UConn Health and the savings to the budget will be more than the truck tolls would’ve brought in. Surely the Legislature would spend the extra 44 million. Further, consider the reduction of future expense and liability to the defined benefit pensions enjoyed by UConn Health would be significant. No new employer would continue the benefit plan as it exists, and they’d make money on the operation rather than run it at a deficit. Does the Governor and Legislature have the guts?
And, sell or demolish the XL Center ($2 million/year) as it can’t compete with the CT casinos and MGM.
Same with Rentschler.
Take UConn football to DII and stop losing $13 million/year.
https://www.theuconnblog.com/2020/1/16/21068282/uconn-huskies-athletic-department-financial-budget-deficit-big-east-american-athletic-conference-sux
And, never, ever any talk of cutting expenses. Here’s how the private sector deals with fiscal imbalance:
HSBC lays off 35,000 employees.
https://news.bitcoin.com/hsbc-job-cuts/
you could look at the 300 Subway in Milford from 1000 employees..that would be like the state laying off 15000 employees.
Or perhaps something like two weeks ago – https://www.usatoday.com/story/money/2020/02/13/wayfair-layoffs-retailer-cutting-550-jobs-3-its-workforce/4749435002/
But the largest employer in the state will not take such measures, it will simply go out back to the taxpayer tree and pluck more cash off the branches. It hasn’t noticed the lack of re-growth and that there are more bare branches than those with cash.
Al, absolutely correct on tearing down the Rent. 57,800 UConn football fans used the Rent all last season. A 40K seat stadium. Cut the costs now, don’t waste more time and money. The XL Center is very difficult. You could not give it away. No major acts are playing Hartford and it’s getting harder to fill a 16K seat arena. Bands would rather play Mohegan and Bridgeport. Can anyone name the last rock concert at the XL?
If you want a good rock concert in Hartford. Summer at xfinity center. You are right. Only monster truck,wwe,uconn and wolfpack are xl center attractions. I personally enjoy these things but also can be easily moved out .
Will anyone pay attention to the degree to which the sales tax is not collected? I assume that is the case because sales tax revenue as a share of aggregate household consumption has declined in the last five years by about $220 million annually, relying on data from BEA. Several knowledgeable people have confirmed that DRS is poorly equipped to monitor properly sales tax payments, having lost significant staffing, especially auditors. Apparently there is a fair wide awareness that this is a serious problem, but there seems little willingness to address it. And if doesn’t get mentioned in an article like this, despite its relevance to the state’s fiscal challenges.
Thank you for pointing out one of the problems of understaffing: the lack of auditors to assure sales taxes are properly monitored. As the CT Mirror has reported, that’s not the only area in which the state has insufficient staff.
Given the potential for a substantial number of retirements in the near future, the state will either hire a substantial number of people or see a lot of lost revenues and court cases resulting from insufficient services. Underpaying the non-profits only worsens the problems.
Do you know if that sales tax revenue is adjusted for the decline in overall AGI or is it just the overall decline in sales tax. It would make sense to have less sales tax if the overall disposable income had dropped as less good ans services are been bought and sold.
Connecticut doesn’t have a revenue problem, it has a spending problem:
“Most of the toll fund will likely be squandered. In March, ConnDOT gave the Yankee Institute, a think tank in Hartford, price estimates for projects in an earlier version of Lamont’s plan. Almost without exception, ConnDOT’s costs are massively inflated, sometimes 10 times or more those of similar projects elsewhere.
The most expensive project in the plan is a renovation of the Mixmaster interchange between Interstate 84 and Route 8 in Waterbury. Urban freeway interchange upgrades typically cost a few hundred million dollars. An in-progress reconfiguration of a major interchange in Houston, for example, is estimated at $300 million; the far more complex Dallas Horseshoe Project cost only $798 million and included 73 new lane-miles of freeway and 37 bridges. But ConnDOT wants $7 billion for the Mixmaster, or almost nine Horseshoe Projects — even though the Mixmaster handles much less traffic and has far simpler traffic patterns.”
https://www.theintelligencer.com/opinion/article/Public-deserves-explanation-for-ConnDOT-s-13960538.php
It is pretty easy to understand why, check out Tables SF-2 and HM-81 at the Federal Highway Administration site, https://www.fhwa.dot.gov/policyinformation/statistics/2018/, and you will see what we spent (sf-2) and how many highway miles (hm-81) we were responsible for in 2018. (most recent data) Texas spends on average $78,217 per lane mile, and we spend $200,768 per lane mile. National average is $88,974 per lane mile. Most likely our Politicians are blissfully unaware of the discrepancy. And the exodus continues.
Hi StillInTheMiddle, the Yankee Institute published a piece last year detailing concerns with the FHA data and how the Connecticut Department of Transportation plans to more effectively categorize its spending going forward to avoid this issue in future years. The administrative cost per mile is dramatically lower than FHA’s data suggests it is:
https://yankeeinstitute.org/2019/09/04/connecticut-dot-reclassifies-spending-to-lower-reported-administrative-costs/
Hi StillInTheMiddle, the Yankee Institute published a piece last year detailing concerns with the FHA data and how the Connecticut Department of Transportation plans to more effectively categorize its spending going forward to avoid this issue in future years. The administrative cost per mile is dramatically lower than FHA’s data suggests it is:
https://yankeeinstitute.org/2019/09/04/connecticut-dot-reclassifies-spending-to-lower-reported-administrative-costs/
Thank you for the delayed reply. My analysis divides Total Disbursements by Total Lane Miles to determine per mile average costs. Administrative costs are a portion of Total Disbursements. The reported Administrative costs were reduced from 375,577,000 in 2016 to 84,961,000 in 2018 but the per mile average cost remains nearly 2.5 times the National average. The Yankee Institute report you reference confirms this. The question remains if our elected officials move beyond seeking additional revenue to actually reducing costs. While we wait to see if that will happen the exodus continues.
If Ned Lamont was running a private corporation and his largest cost center presented projects that ran 10-20 times higher than the industry, he would have a stroke. Yet somehow, when it comes to taxpayers’ money, the numbers look A-OK to him.
For every cook of the books, there is an equal and opposite reaction. Just because the state reduces administration costs by reclassifying its category, something else on the ledger must increase:
The overall effect wont’ change how much Connecticut spends but will reclassify spending to reflect “a truer administrative cost value for our highway program,” according to the report.
In total, the reclassification of fringe benefit costs and other agency expenses to a different category will decrease Connecticut’s reported administrative costs from $340 million per year to $43 million by 2018.
https://yankeeinstitute.org/2019/09/04/connecticut-dot-reclassifies-spending-to-lower-reported-administrative-costs/
The author of this article seems to insist that transportation borrowing from the federal government relies entirely on tolls. But, as I understand it, the federal requirement is for a dedicated funding source. Tolls are not specified.
A clarification would be useful.
Hi Philidor, apologies for the misunderstanding. You are correct. Tolls are not the only option. The article identifies other possibilities, including raising parts of the gas tax or sales tax and dedicating it to transportation to receive the federal loans.
Hi Philidor, apologies for the misunderstanding. You are correct. Tolls are not the only option. The article identifies other possibilities, including raising parts of the gas tax or sales tax and dedicating it to transportation to receive the federal loans.
It’s time to dissolve the Special Transportation Fund. It’s just a device that enables “shell game” shenanigans with taxpayer money. Fund transport the way we fund everything else, out of the general fund.