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A Transportation System Beyond the Worst-Case Scenario

October 09, 2007 By Conrad deFiebre, Transportation Fellow
 
In June 2005, the official state economist, Thomas Stinson, and a University of Minnesota colleague published a deeply researched scholarly report that sought to predict state revenues for roads and bridges through the year 2030.

They considered three economic growth scenarios that would affect collections from the three major highway funding sources: gasoline taxes, motor vehicle sales taxes and vehicle registration fees.

It took just 12 months for all three of those revenue drivers to dip far below the Stinson projections for even a worst-case economic scenario. In fiscal 2006, which ended in June of last year, the combined shortfall was $171 million under the most pessimistic prediction of $1.5 billion, even though the Minnesota economy as a whole performed no worse than the mid-range estimate.

Even worse, the estimated take for fiscal '07, which ended June 30 and is still being tallied, is $15 million less than the previous year's and $229 million below Stinson's worst-case projection.

What happened? Stinson blamed a slump in new car sales, which cut into both sales taxes and tab fees, plus increased fuel economy and much higher pump prices, which drove down gas taxes.

This is not to fault Stinson, a respected economist, for not foreseeing developments in the marketplace of mobility that practically no one else saw coming, either. What's harder to forgive is the refusal of state policymakers, especially Gov. Tim Pawlenty, to do much of anything about the problem once it became apparent.

Stinson's paper clearly defined the problem: Even with a revenue stream yielding $171 million more in road and bridge money than actually materialized in fiscal '06, he wrote, policymakers would "face the choice of raising road taxes, shifting funds from other programs or reducing the level of road service."

Pawlenty has supported funding shifts, and voters backed him up last year by approving full dedication of vehicle sales taxes to transportation spending. But as that change is phased in beginning this fiscal year, the boost for roads and bridges is only about $35 million - or less than one-tenth the cost of replacing the collapsed Interstate 35W bridge alone.

The governor and his transportation commissioner, Lt. Gov. Carol Molnau, have been more adept at Stinson's third option, reducing road service. They have cut 700 workers from the state Department of Transportation, mostly in maintenance and inspections, in order to finance long-term borrowing for new roads and bridges.

For anti-tax ideologues, of course, this is a near-perfect set of circumstances: state-level taxes going down all by themselves -- on autopilot, they might say -- without even the bother of debating the issue. The rest of us have been left to curse our traffic-clogged, deteriorating state roads and bridges and to pay soaring property taxes to maintain and improve local routes.

Legislators have tried their best to raise money for the safe, reliable and efficient transportation system Minnesota needs to prosper economically. But Pawlenty twice has vetoed long-overdue and reasonable increases in the gas tax and tab fees.

Now the two sides are tussling over how to pay for the $393 million 35W bridge project, staring at estimates of imminent deficits in the trunk highway fund reaching into the hundreds of millions of dollars. Whether or not promised federal help arrives promptly, it appears likely that other road work around the state will be deferred in the wake of the bridge disaster.

But that's nothing new. We've been underfunding transportation for years by between $1 billion and $2.4 billion annually, according to MnDOT's own estimates.

Stinson, a Pawlenty administration employee who chooses his words carefully, said one way to help plug the gap would be to index the gas tax for inflation. It's the only major state tax that doesn't increase automatically as prices rise, and it's been stuck at 20 cents a gallon since 1988, losing at least half its buying power to finance roads and bridges.

Stinson's suggestion alone wouldn't be enough to keep traffic congestion from getting worse and to ensure that no more bridges fall down. But it would be a start.


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