President Joe Biden and Congress have dangled $1.2 trillion in matching funds before states for the past two years, challenging them to invest in their aging highways, bridges and other infrastructure.
But Connecticut has resisted that lure somewhat, leaving hundreds of millions of dollars unspent in its transportation fund since 2021 — and projecting another huge surplus in the program this fiscal year.
And while the State Bond Commission continues to approve financing for transportation work, that doesn’t always mean Connecticut will actually borrow and spend the funds in a timely fashion.
According to the treasurer’s office, nearly $5.4 billion in commission-approved bonding still hasn’t been issued, a backlog more than six times the size of Connecticut’s projected transportation borrowing this year.
Meanwhile, the state’s approach has left construction industries and workers frustrated, and Connecticut’s gasoline station owners are calling for an immediate reduction in state fuel taxes.
Advocacy groups want fuel taxes cut
The message is simple: Use it or lose it.
“Why shouldn’t the state deliver relief to its taxpayers?” said Michael Fox, executive director of the Connecticut-based Gasoline & Automotive Service Dealers of America, commonly known as GASDA. “They need energy price relief, and they need inflation relief.”
Fox, whose organization represents about 500 stations, said the state budget’s Special Transportation Fund certainly can spare the revenue.
More than 40% of the $2.15 billion fund covers the debt service on the bonds Connecticut issues to finance upgrades to its aging infrastructure, while another 40% pays for Department of Transportation operations and public transit programs. The rest covers the Department of Motor Vehicles and fringe benefits costs.
The STF is on pace to close $204 million or almost 10% in the black when the fiscal year ends June 30, according to Gov. Ned Lamont’s budget agency, the Office of Policy and Management.
The fund closed the 2022-23 fiscal year with a 15% surplus, equal to $277 million, according to final numbers from the state comptroller’s office. And that was despite a 13-month gasoline tax holiday that returned about $330 million to motorists. Most of that loss, $240 million, occurred during the 2022-23 fiscal year.
The rest of the expense tied to that holiday, about $90 million came at the end of the 2021-22 fiscal year, when finances still finished with a 4% surplus, leaving about $79 million unspent.
The Special Transportation Fund gets most of its revenues from retail and wholesale taxes on fuel, plus a share of sales tax receipts.
Fox wants the legislature to eliminate the wholesale levy, which adds 8.81% to the price of gasoline when its delivered to local stations. That full cost is then built into the price charged to motorists.
Based on the $2.54 per gallon average wholesale price in the middle of this past week at New Haven harbor — the single-largest fuel importing site in the state — the tax currently adds about 22 cents per gallon to the price.
The state also tacks on a flat, 25-cents-per-gallon retail tax.
Lamont’s budget staff estimates the wholesale tax would generate $387 million this fiscal year, or almost twice the $204 million projected transportation fund surplus.
Given last year’s windfall as well, Fox says he believes the state still could afford that tax cut. But if officials are wary, he added, they always could phase the relief in over a few years.
Gas station owners aren’t the only ones interested in relief.
Fuel distributors also say that if Connecticut isn’t going to spend more fixing its highways, bridges and rail lines, then consumers should benefit.
Chris Herb, president and CEO of the Connecticut Energy Marketers Association, noted that the wholesale tax originally was created more than four decades ago to help fund clean-up of underground fuel tank leaks — a program legislators voted to phase out back in 2012.
The wholesale tax at least should be reduced to reflect the fact that it no longer funds that assistance, Herb said.
And Patrick Sasser of Stamford, founder of the No Tolls CT grassroots organization that battled Lamont’s efforts to establish tolls in 2019 and 2020, said governors and many legislators have been insisting for nearly two decades that the STF will need more revenue since capital road work will begin to increase very soon.
“It becomes a bit of fear mongering, because they tell us they need the money to make these repairs,” he said. “They scare us and tell us the bridges are going to collapse, yet they don’t use the money.”
There are numbers to back Sasser’s argument.
CT spending on infrastructure upgrades has grown modestly under Lamont
Connecticut was borrowing about $600 million to $700 million per year for transportation projects in the mid-2010s and pairing it with about $700 million in federal construction grants. But DOT officials said then that capital budget of about $1.4 billion needed to be closer to $2 billion to cover both safety upgrades and projects to reduce congestion.
Connecticut issued an annual average of $725 million in transportation bonds between 2015 and 2018 under Gov. Dannel P. Malloy, according to debt reports from the state treasurer’s office. During Lamont’s first term, the annual average ticked upward just 2.6%, reaching $744 million — even though STF revenues grew 22% over those four years.
Borrowing covered by the Special Transportation Fund did rise 11.5% last fiscal year, reaching $830 million. And the Lamont administration had construction industry and trade officials excited last November when it projected the investment would grow to $1 billion in 2023-24. Federal grants under the new Biden initiative are covering 80% to 90% of the cost of many transportation projects, meaning the more states commit, the more overall funding they can leverage.
But in the latest monthly debt report issued by state Treasurer Erick Russell’s office, it indicated Connecticut plans to issue $875 million this fiscal year, just a 5.4% increase.
The treasurer’s projections usually are based on whatever the administration — and specifically the Department of Transportation — is prepared to spend.
Both construction management and labor reacted this week with disappointment.
“We should be bonding at $1.25 billion to $1.5 billion a year right now,” said Don Shubert, president of the Connecticut Construction Industry Association, who added the extra borrowing would amount to a massive infusion in the state’s economy given the huge potential aid from Washington. “It yields one of the highest returns on investments for government spending.”
“We are sitting on a lot of money,” said Nate Brown, political director and business agent for the International Union of Operating Engineers, Local 478. “We don’t want to miss this opportunity. At some point that [federal] money … will dry up.”
Lamont administration: ‘We expect to use all the revenue’
The state Department of Transportation wrote in a statement that Connecticut has leveraged more than $280 million in federal discretionary grants to date. The department “is also accelerating existing projects so they can be completed sooner, freeing up resources for other much-needed work,” it continued. “CTDOT is leveraging billions of state and federal dollars which are going towards improving the state’s infrastructure, helping grow the economy, generating jobs, connecting communities, and creating safe and accessible passageways for more people”
The Lamont administration is expected Friday to release a new bond commission agenda that endorses about $400 million in transportation borrowing that would leverage another $2 billion in federal funds.
But despite bond commission approval, the state traditionally doesn’t borrow funds until the DOT is ready to spend the dollars.
The backlog of approved transportation bonding that hasn’t been issued or spent more than doubled under Malloy and has swelled by almost 40%, from $3.9 billion to $5.4 billion, since Lamont took office in January 2019, according to the treasurer’s records.
State employee labor unions argue the department has been plagued for more than a decade by a shortage of engineers, planners and architects that make it difficult to launch projects quickly.
Shubert and Brown both said they oppose cutting fuel taxes or taking any resources away from the Special Transportation Fund. And both also said they believe DOT Commissioner Garrett Eucalitto, who inherited many challenges when Lamont tapped him nine months ago to run the department, will find a way to get more projects moving.
Lamont’s budget office had been projecting as late as February that the Special Transportation Fund would remain in surplus through mid-2026. His budget spokesman, Chris Collibee, said the office now projects an operating deficit two-and-a-half years from now, though he didn’t release specific numbers.
But even if the fund slips into the red by 2026, the administration also projected the transportation fund reserve — which holds its cumulative surpluses — will hold almost $1.2 billion by then. That’s more than half of this year’s entire Special Transportation Fund.
Collibee added that “we expect to use all the revenue going into the fund for the purposes to which they are dedicated. The nature of transportation investments are such that the drawdown of funds can sometimes take a number of years.”