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More highway funding needed, PAR says

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Significant new revenue will be required to prevent the long-term deterioration of the highway system, the Public Affairs Research Council (PAR) says in a report released today entitled “Moving Highway Funding to Stable Ground.” The second in a two-part series on highway funding, this report examines a variety of options for funding the highway program and considers innovative approaches to funding mega-projects.

The first of PAR’s two-part series on highway funding came to several basic conclusions. Louisiana’s roads and bridges fare poorly in comparison with national norms. Current levels of state and federal funds are insufficient to tackle the $14 billion backlog in unmet needs on existing highways. The Transportation Infrastructure Model for Economic Development (TIMED) program is insolvent. And, a number of very large “mega-projects,” proposed to help promote economic development, remain little more than a wish list at this point.

“Louisiana’s citizens and economy would benefit from a significant increase in highway and bridge funding in terms of less congestion, shorter commute times, lower vehicle maintenance bills, fewer traffic casualties, new and expanded business, and improved tourism,” said PAR President Jim Brandt.

The state can do little about the federal highway funding crisis, but it could provide special funding to prevent completion of the TIMED program from eating into the regular highway program. The long-term crisis in the state’s Transportation Trust Fund (TTF) requires serious deliberation over the next two years. Decisions must be made as to whether the state is going to commit to an aggressive and consistent highway improvement program and how the appropriate level of funding is to be provided. An expanded construction program cannot be built easily on revenue shifted from other purposes.

A reasonable objective is for the state to provide an additional $650 million a year in highway funding. This amount could be put to work effectively and would ideally be achieved using annually determined general fund appropriations that maintain optimum budget flexibility for the overall state budget. In addition, there are some revenue dedications that would be acceptable sources of new funding.

Unfortunately, raising new revenue is the only option for reducing the backlog of much-needed road construction and maintenance projects,” Brandt said. “Because good roads are so important to the state’s economy, we find that certain dedications would be acceptable as long as they would not impact the level of funding currently going to health care and education. Any acceptable dedication would have to be from new revenue directly related to highway use.”

This report estimates additional recurring revenue from increased rates for various user-related revenues. These options include the gasoline tax, auto license tax, truck license tax, driver’s license fees, fines and tolls. The gasoline tax increase would be the obvious choice for raising a large share of any desired additional revenue. However, meeting the $650 million objective with the gas tax alone would require adding 21.7 cents to the current 20-cents-per-gallon tax.

The report also provides an analysis of the state’s highway budget request process and the potential for innovative financing strategies to help tackle the long list of mega-projects that have dim prospects for being funded. The analysis yielded the following recommendations:

Recommendation #1: The TIMED program should be placed on a sound fiscal footing by levying an additional gasoline and motor fuels tax of up to 2 cents per gallon to fully fund the completion of all projects currently under contract. Contracts for the final two projects should not be let until a subsequent tax increase is levied sufficient to fund them as well. An alternative would be to eliminate, indefinitely postpone or downsize the final two projects.

Recommendation #2: The gasoline and motor fuels tax should be indexed to the rate of inflation and automatically adjusted annually without requiring further action by the Legislature.

Recommendation #3: The state’s initial highway funding objective should be to provide the $650 million in annual new revenue needed to fund the aggressive highway construction program outlined in the Statewide Transportation Plan. A major share of this new funding must necessarily come from increases in some or all of the major highway user fees and taxes, particularly the gasoline and motor fuels tax, auto licenses and truck registration fees.

Recommendation #4
: The vehicle sales tax dedication should be repealed. As an alternative, a general fund appropriation to the highway priority program should be considered annually.

Recommendation #5: DOTD should submit an annual budget request indicating the general revenue support needed to meet the “minimum” highway funding needs (without increasing the project backlog), an intermediate or “adequate” funding level that would eliminate the backlog over time and an “optimum”; level designed to aggressively attack the project backlog and help fund mega-projects as well.

Recommendation #6
: Windfall revenues appropriated for highway construction should be limited to the top-priority mega-projects as determined by the DOTD planning process.

Recommendation #7: State and local toll authorities should pursue toll-based funding for new facilities. They should also continue to examine public-private partnership opportunities, but with extreme caution, using maximum transparency and recognizing the limited applicability of this approach.

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