Legislative session came — and went — with no highway fix

If Missouri doesn’t put more cash into its transportation budget it will run afoul of federal rules and lose hundreds of millions of dollars in federal highway dollars starting in fiscal 2017.

In August, voters downed a proposed statewide 3/4-cent sales tax that would have raised $540 million in annual revenues for the state road construction projects, which would have secured the state’s federal funding.

That left state lawmakers to find another fix during the recent legislative session.

They didn’t.

“There wasn’t too much discussion on transportation, which was kind of a surprise to me,” said Rep. Jeff Messenger, R-Republic. “Right-to-work kind of took its place even though it doesn’t have the support to get past (Gov. Jay Nixon’s) veto.”

In interviews with the News-Leader, several local state lawmakers said transportation funding is an important issue, but they didn’t see eye-to-eye on how to patch MoDOT’s budget and avoid a loss of federal funding.

For example, Sen. Jay Wasson, R-Nixa, said he supported a proposed small gas tax increase to raise new revenue for road construction projects.

Conversely, Rep. Eric Burlison, R-Springfield, said a tax increase is the wrong tack. He suggested the state rethink the way it funds MoDOT in order to create more revenue specifically for road projects.

Like all states, Missouri must come up with a 20 percent local match to tap its full share of federal transportation money, which comes from the national gas tax.

States that don’t meet the match lose out on a portion of their federal highway dollars — which is where Missouri is headed.

Missouri uses money from its state gas tax, vehicle license taxes and vehicle sales taxes to fund transportation. Gas tax revenues have declined in recent years, in part, because vehicles have become more fuel efficient.

Without a bump in its transportation revenue, the Show Me state is projected to lose $167 million in federal funding in fiscal 2017, and $400 million in the years thereafter, according to Stephen Miller, chairman of the Missouri Highways and Transportation Commission.

“That’s a huge monster,” Wasson said.

Bill had some momentum

A bill that would have raised transportation revenues by increasing Missouri’s gas tax, which would have staved off the loss of federal funding, gained some momentum during the recent session, but ultimately failed.

The bill, SB 540, would have raised Missouri’s tax on gas by 1.5 cents — up to 18.5 cents —and the tax on diesel fuel by 3.5 cents — up to 20.5 cents.

The original version of the bill, sponsored by Sen. Doug Libla, R-Poplar Bluff, would have increased the gas tax by 6 cents over three years, increasing it by 2 cents each year.

That version would have raised about $160 million in state revenue, which is about how much it would take to maintain Missouri’s roads at their current level, beginning in fiscal 2017 (which starts July 1, 2016), Miller said.

The amended version of the bill would have raised $55 million for MoDOT. That amount of new revenue would have prevented a loss in federal funds for fiscal 2017, but not in the following years.

“We were going to come up with just enough to leverage the federal money,” said Wasson, who supported the bill. “It was just a Band-Aid. It would not be enough to allow us to fix all the roads.”

But for opponents of the bill, the tax increase was a nonstarter.

“It seems kind of silly to make a tax cut one year and then a tax hike the next,” said Messenger, noting lawmakers passed an income tax cut last year.

Likewise, Burlison said it seemed “schizophrenic” to cut one tax one year and increase another the next.

“I don’t think that the legislature has an appetite to vote for a tax increase at this time after the voters voted one down” in August, Burlison said.

Wasson said he understood that line of thinking, but noted the proposed gas tax was a much smaller tax hike than the statewide sales tax proposal.

“But that’s why we came back with a very small tax increase – 2 cents,” he said.

A fix without a tax hike?

Some area Republicans argue the transportation budget can be patched without raising taxes.

“Question is do we have to raise taxes to do that?” asked Burlison.

His answer is no.

This past session, Burlison introduced legislation that would have used an accounting switch to free up more dollars for road projects.

The legislation, HB1198, would have moved MoDOT employees’ salaries, benefits and pension costs into the state’s general fund.

Currently, only 1 percent of the department’s revenue comes from the general fund. Most of its revenue comes from fuel taxes, vehicle and driver licensing fees, vehicle sales taxes and federal dollars, according to the MoDOT’s October 2014 Financial Snapshot.

Moving the department’s personnel costs over to the general fund would free up a considerable amount of revenue to be used on road improvement projects, Burlison said.

Of course, this tack would also require making spending cuts elsewhere in state government in order to free up dollars for MoDOT employees’ salaries, benefits and pension costs within the general fund.

Burlison said he plans to introduce the bill again next year and believes it will gain more traction. He noted bills often must be introduced several times before they are passed.

It would have at least one opponent. Messenger thinks Burlison is taking the wrong tack, he said.

Messenger said there is already too much pressure on the general fund and he prefers departments to have their own dedicated sources of revenue.

Yet, like Burlison, Messenger believes there is a way to plug the hole in the state’s transportation budget without a tax increase, although it is unlikely to make state agencies happy, he said.

Messenger would like to take money set aside for agencies’ potential budget overruns, and dedicate it to the transportation budget, he said.

This would mean that state agencies could not go over on their budgets and would force them to be very financially disciplined, Messenger said.

Messenger is not sure whether this proposal would gain enough traction next session to get passed, but he is trying to garner support for the measure in the interim and will decide later if he wants to introduce it as a bill, he said.

The Springfield area’s lone Democratic lawmaker, Rep. Charlie Norr, said it was disappointing the Republican-controlled legislature couldn’t find the political will to raise taxes for the transportation budget.

“We haven’t raised the gas taxes since the ’90s,” Norr said. “I think the legislature needs to show some fortitude and raise some taxes and use it for highways.”

Miller, the state highway commission chair, summed up the legislature’s inaction saying, “It’s frustrating.”

Local impact

The Missouri Department of Transportation has come up with a plan in case there is not a revenue bump and it does lose federal funding.

In January, the department announced its “325 Plan” that outlines how the department would go about spending its projected 2017 construction budget, which includes about $325 million for projects.

This budget is significantly smaller than its 2014 construction budget, which included $700 million for projects, said Robert Brendel, MoDOT special assignment coordinator.

Under this plan, road improvement projects will be concentrated on 8,000 miles of highway starting in 2017, Brendel said.

Brendel said the other 26,000 miles of state-maintained road will only receive limited maintenance as department revenue allows.

Among those roads will be some of Springfield’s main thoroughfares — such as Kansas Expressway, Chestnut Expressway and Glenstone Avenue, said Laurel McKean, MoDOT assistant district engineer, who works out of the Springfield office.

McKean said people will continue to see MoDOT projects in the coming year — like adding lanes to U.S. 65 — but they will dry up in 2017.

“The biggest impact to Springfield is all the major arterials in town are now on the supplementary list,” McKean said. “We won’t be able to make the impact on congestion and safety that we did in the past.”

Sara Fields, executive director of the Ozarks Transportation Organization, said federal dollars that go directly to local departments would not be affected if the state failed to meet its match requirements.

But it has already affected cost-share programs that allow local agencies to team up with the state to improve roads.

In the past, local agencies would partner with the state to complete big projects on important roads through cost-share programs, Fields said. But now MoDOT has cut the programs that allowed them to do that because of its declining revenue, Fields said.

The bigger issue, however, is the potential loss of federal funds, Fields said.

“We pay for that and it would be a shame to lose it,” she said.

Next year, we’ll see

Messenger said he expects transportation will be a much bigger issue in the next legislative session, and that lawmakers will prevent the loss of federal funding.

If lawmakers come up with no other solution between now and the end of the next session, Messenger believes they will back-fill the transportation budget with dollars from the state’s general fund to ensure Missouri doesn’t lose out on its federal highway funding, he said.

For his part Wasson said he’s not sure how lawmakers will fix the transportation budget. But it might not happen until people see the roads deteriorate, he said.

“The public is only going to realize this when the roads are failing,” Wasson said. “I think we’ll figure out a way to do this, it just might get painful to do.”