Will Lack of Consensus On How to Fix State’s Transportation Fund Impact Schools?

A Wisconsin State Journal article published last week highlights the lack of agreement between the governor and majority party lawmakers on how to shore up the state’s transportation fund, which is funded mainly from motor fuel (gas and diesel) taxes and motor vehicle registration fees.

This is of concern to public school leaders because the state’s transportation fund has increasingly been gobbling up dollars from the state’s general fund–the fund that pays out school aids, among other things. The more state general fund money siphoned away to fund roads and other transportation projects, the less state general fund money available, potentially, for aid to public schools.

State aid to public schools is paid out of the state’s general fund, money that comes mostly from state individual and corporate income tax revenues and state sales tax revenues. These dollars are known as “general purpose revenues” (or  GPR for short).

However, since 2011, there has been a $3.0 billion drop in state GPR due to reductions made by law rather than as a result of the economy.

Over roughly the same period, beginning in 2009-11, the state’s general fund has been bailing out the transportation fund through either: direct transfers of GPR dollars to the transportation fund ($446.1 million GPR since 2011); or the use of general-fund-supported bonding for transportation projects (at a cost of more than $695 million GPR since 2009-11, and over $490 million since 2011).

Meanwhile, there has only modest growth in the traditional sources of revenue for the transportation fund, the gas tax and vehicle registration fees. Gas consumption has been essentially flat since April 2006—the last time gas tax indexing (now repealed) was applied.

Had gas tax indexing been continued, state motor fuel taxes would be at 37.7 cents per gallon rather than 30.9 cents/gallon, where they currently stand.  On average, had gas tax indexing remained in place, it would have generated about $220 million annually or about $1.4 billion over the period since it was removed.  [Each additional penny per gallon raises about $33 million per year.]

DOT Secretary Mark Gottlieb, a former legislator, has decided not to seek additional transportation revenues–a move Gottlieb acknowledges would delay road expansion work and upkeep of all but the state’s most-traveled highways.  This at a time when recent federal reports rank Wisconsin roads among the poorest in the nation and getting worse.

In the previous two budget cycles, Gottlieb brought forward proposals to raise enough revenue to at least try to catch up and keep up with the state’s highway needs. Those previous proposals recommended modest adjustments that, taken together, would bring in significant revenues. Each time those proposals went nowhere. Instead, the state delayed some road projects and resorted to increasing the use of general fund-supported borrowing and making transfers from the state’s general fund to pay for others.

This time around, Gottlieb made it clear the DOT will submit a “no-revenue increase” budget proposal.  However, with recent federal reports ranking Wisconsin roads as among those in the poorest shape in the nation and getting worse, the pressure to find a solution appears to be building.

Some key legislative leaders have signaled a willingness to consider increasing gas taxes to provide a significant funding boost for roads. But the governor has held to the stance that he will not increase gas or other transportation taxes without tax cuts of equal or greater amounts elsewhere in the budget.

Possible solutions might include applying the state sales tax toward motor fuels and/or moving to a value-based system of registration fees (the more valuable the vehicle, the higher the registration fee); however, if the governor holds to his position, choosing either of these options would mean making  tax cuts elsewhere.

The bottom line is that if lawmakers and the governor don’t find a way to put the state on a path toward a more sustainable funding mix for transportation (and maybe even if they do), it may be harder for them to find money to increase state school funding.

Read more: WISN-TV “UpFront with Mike Gousha” segment; Wis. State Journal (Chris Rickert column)Beloit Daily News editorial