Can states afford Trump’s infrastructure plan?

Can states afford Trump’s infrastructure plan?
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President TrumpDonald John TrumpReporters defend CNN's Acosta after White House says he 'disrespected' Trump with question Security costs of Trump visit to Scotland sparks outrage among Scottish citizens Ex-CIA officer: Prosecution of Russians indicted for DNC hack 'ain't ever going to happen' MORE’s $1.5 trillion infrastructure proposal has three base assumptions — that Congress will raise an additional $200 billion in revenues; that state governments have the available resources to fund 80 percent of federal projects; and that private enterprise will be attracted to invest in public infrastructure.

There are two reasons states likely will not be able to expand funding for federal projects.   Unfunded liabilities are creating structural deficits in budgets that need to be balanced, and 31 states have used up political capital since 2012 to address transportation infrastructure.

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Let’s look at Pennsylvania, which has the highest state gasoline tax in the nation at 58.2 cents per gallon, as an example that I am sure is not unique. In 2013, Pennsylvania lawmakers enacted Act 89, a comprehensive, long-term, multimodal plan for the state’s transportation infrastructure.  The increase in the per-gallon tax was the highest imposed by any state in the 21st century — approximately 28 cents.

 

The Transportation Funding Advisory Committee (TFAC) estimated in its 2011 report that Pennsylvania’s unmet needs stood at $3.5 billion per year and predicted those needs would grow to $7.2 billion annually within a decade. State officials needed to act or the system would begin to shut down.

The bill had a five-year rollout to generate $2.4 billion in additional funds per year available to the Pennsylvania Department of Transportation (PennDOT) to pay for roads, bridges, transit, freight rail, aviation and ports.  

When it passed, I said to industry executive Bob Latham, “This will be the last gas tax ever enacted in the state of Pennsylvania, because the industry has exhausted its political capital for decades.”  

Act 89 established a “fixed income” for PennDOT to manage rapidly expanding and evolving needs. The bill funded $2.4 billion of the $3.5 billion in 2010 needs, as defined by TFAC and fell $6 billion short of funding the “Twelve Year Plan,” so unmet needs slowed but continued to grow.

There is no doubt Act 89 is helping Pennsylvania in the short term. According to the Winter 2018 issue of the Pennsylvania construction industry periodical, Highway Builder, “Act 89 on Target: Promises Kept to the Motorists and Taxpayers of Pennsylvania,” the plan is delivering.

PennDOT Secretary Leslie Richards reported that since Act 89’s passage, the department has completed 2,325 projects and has an additional 707 projects, totaling $5.3 billion, under way.  The number of structurally deficient bridges stands at 3,114 — down markedly from the 6,024 reported in 2008. Lettings, the value of projects bid by private contractors, were estimated at $2.4 billion in 2017, up from $1.63 billion in 2013.

But you cannot view Act 89 in isolation. The trend over the past decade has seen more responsibility shifted to the states. Inaction at the federal level for the past 25 years to craft a long-term solution has resulted in funding from the Federal Highway Trust Fund to states dropping 10.9 percent from 2007 to 2013. Pennsylvania’s funding decreased by 13 percent during this period.  

This drop in federal support has forced states to act. According to Transportation for America, 31 states have addressed the transportation funding issue in some way since 2012, using combinations of gas tax, bonding, tolling, leasing, transfers from General Funds and fees. In Kentucky, where gas taxes were tied to the wholesale price, the legislature had to create a floor when prices fell dramatically to avoid losing $292 million in revenue.  

States have been so cash-starved that constitutional provisions to protect highway funds have not been followed to the letter. They have crafted deals for specific transportation modes and agencies that have grown out of control over time.

In Pennsylvania, the State Police funds 65 percent of its budget from the Motor License Fund.   The Pennsylvania Highway Information Association (PHIA) in 2017 estimated that $500 million from that fund have been lost since 2013 because contributions were not capped in the bill. The PHIA reported in June 2016 that the proposed 2016-2017 budget would take $815 million from the Motor License Fund, representing 13 cents in gas tax. Recently, fund transfers were capped, but massive transfers continue.

Unfunded liabilities in states are growing in large part because of public pension obligations. Pennsylvania’s unfunded liabilities were reported at $223 billion in 2017.  

The near-term fallout is yearly structural deficits in budgets that need to be balanced. In Pennsylvania, to balance the budget last year, the Republican legislature told Democratic Gov. Tom Wolf to find new revenue or cut $300 million. There are not many sources of cash available, but one prime source is the $184 million multimodal fund created by Act 89.   

Pennsylvania, with the highest gas tax in the nation, would not likely be able to assume 80 percent funding for federal projects. It is one of the 31 states that have expended political capital to find money for transportation infrastructure. The issues will not likely be addressed again in the foreseeable future.

The Trump initiative probably will create a new set of issues for states that are increasingly hard-pressed to fund transportation. In the end, safety, modernization and expansion projects will be put on hold for our interstate system. It is time to rethink how we fund transportation.

Dennis M. Powell is founder and president of Massey Powell, a public affairs consultancy headquartered in Plymouth Meeting, Pennsylvania. He has consulted nationally on transportation issues and presented on the need to think about transportation differently.