Doing less For Now
With $230 million less in capital investments budgeted for the biennium, policymakers look ahead to what more can be done for transportation in the next session
The first session of the 125th Maine Legislature closed with a hard-won two-thirds majority on the General Fund and Highway Fund budgets. News accounts hailed the votes as benchmarks of bipartisanship. Many went into the session believing it would be nearly impossible to craft a General Fund budget that would win two-thirds support from the legislature. Appropriations Committee co-chairs, Senator Richard Rosen (R-Hancock) and Representative Patrick Flood (R-Winthrop) successfully shepherded negotiations leading to a unanimous committee vote in Appropriations, prior to the successful votes in both chambers.
While the Highway Fund budget received similar support, those closely familiar with cuts to capital transportation spending – a reduction of $230 million in long-term capital investments over the next two years – were less sanguine. Senator Ronald F. Collins (R-York County), co-chair of the legislature’s Joint Standing Committee on Transportation, voiced his disappointment that several measures to boost transportation funding, including a $20 million infusion from the General Fund slated in Governor Paul LePage’s original budget and a measure to reduce Highway Fund payments for Maine State Police operations to a constitutionally appropriate level, did not come to pass.
“Quite honestly, it comes down to priorities,” said Senator Collins. “We tried to stress the importance of maintaining our roads and bridge infrastructure, but creating that sense of urgency was difficult.”
Still, even among policymakers who support transportation investments, priorities and funding strategies vary widely, making the outlook for any gains unclear. The governor and some legislators, including Senator Collins and Senate President Kevin Raye (R-Washington County), would like to see an increase in General Fund support through measures such as a re-allocation of State Police funding. Some legislators, including Senator Raye and House Minority Leader Emily Cain (D-Orono), plan to push for an infrastructure bond in the coming session – a measure that may be unpopular with some in the House and Senate.
Representative Edward J. Mazurek (D-Rockland), the ranking Democrat on the Transportation Committee and a four-term veteran of the state legislature, expressed dismay at the funding impasse which occurred during the legislative session.
“I don’t understand what we’re waiting for,” said Representative Mazurek. “If we want good roads, not to mention the economic benefits that come with investment in infrastructure, it’s foolish not to act, not to mention short-sighted.”
The Maine Better Transportation Association (MBTA) issued an analysis of the outcome of the first session titled The Good, Bad and Ugly of the 2011 Maine Legislative Session. The piece details what MBTA noted “could very well go down in history as having the worst capital investment forecast in the history of the Highway Fund.” The report takes its title from a tough-talking Clint Eastwood movie and details legislative actions that helped contribute to the $230 million decrease.
The $230 million figure is based on data from the Maine Legislature’s non-partisan Office of Fiscal and Program Review. MBTA Executive Director Maria Fuentes said the decrease was created by a perfect storm of negative pressures on the Highway Fund. Highway Fund revenues from gas taxes are expected to be stagnant or decrease as Mainers turn to more fuel-efficient vehicles and continue to curtail driving during the slow economic recovery. The legislature could not agree on an infrastructure bond package to send to voters. To compound matters, the legislature voted to repeal gas tax indexing.
“Indexing has generated $341 million in new Highway Fund revenues over the past nine years and has been the hedge against inflation. Now, that’s gone. It is hard to imagine that our roads won’t get worse if we continue to let transportation funding slide south,” said Fuentes.
MaineDOT Commissioner David Bernhardt acknowledges that the drop in biennial funding is significant, and said that it is important to focus on the number of miles being improved.
“Our job is to stretch the dollar and get the most done we can with the funding provided,” said Bernhardt. “By tailoring the level of improvement to the priority of the road and by partnering with municipalities, I think you can see that we have done that. For example, the number of miles being reconstructed will be about the same or more, though the cost per mile is decreasing significantly.”
The budget stretching strategy has required a shift from longer-term capital investments to shorter-term expenditures including light capital paving, known to many as “skinny mix” paving. For example, for this budget, MaineDOT shifted about $4.2 million from its capital accounts to achieve the widely accepted goal of 1,200 miles of light capital paving on state aid roads in very poor condition in the coming biennium.
That trend, said MBTA President Randy Mace, sets a dangerous precedent. “Skinny mix paving has a maximum life of five to seven years.
If we have a bad winter or two, that could be as little as three years,” said Mace. He noted that traditionally, capital projects have been defined as having a life of 10 or more years.
“MaineDOT has become adept over the past 10 years at ‘doing more with less,’ given the budget constraints faced by the Highway Fund. We are putting the best face on the problem that we can, but my concern is that we are just kicking the can down the road. We have dire transportation needs and every year we delay, those problems are growing.”
Representative Mazurek said that, thanks to MaineDOT’s aggressive paving schedule, much of the impact of the budget cuts won’t be felt during the next two years. He stressed the important role “skinny mix” plays in holding together a deteriorating highway network.
“Eight to 12 months from now, things will get tight and we’ll begin to feel the effects in 2013-2014,” said Mazurek.
Gas tax indexing, which for nearly a decade has served as a hedge against rising transportation costs was one important piece of the funding equation that lost out during the session.
Both Senator Collins and Senate President Raye said the repeal of gas tax indexing was an issue that was very important to the new Republican majority in both houses. Senator Collins described indexing as a “noble experiment” that had outlived its popularity as the economy and political make-up of the legislature has shifted. “Originally it was a pretty good concept, but not with the high cost of gas and the fact that not increasing taxes is one of our goals at this time.”
“Indexing has been very unpopular,” said Senator Raye. “It has been seen as a tax increase on auto-pilot, and it has allowed legislators to avoid accountability.”
House Minority Leader Emily Cain (D-Bangor) disagreed, noting that the automatic tax increase argument was simply not true. She said that indexing legislation passed a decade ago has required a legislative two-thirds vote every two years before Mainers saw what typically amounted to a penny increase at the gas pump. Still, she said, it was precisely that accountability that made indexing so easy for many legislators to overturn.
“In repealing indexing, we’re simply taking money away from the roads,” said Cain. “It was just another blow to the Highway Fund.” Still for many, like herself, the decision not to fight for indexing was caught up in current political realities that also made passage of a bond bill impossible during the first session. She spoke of having a new governor with an anti-bond agenda and a legislature with strongly divergent opinions on how best to pay for needed transportation improvements.
“It is no small feat getting a two-thirds vote with this governor and this legislature,” said Cain.
Republican leaders expressed disappointment that more could not be done to bolster flagging Highway Fund revenues with non-bond funding. At the beginning of the session, there was a call for a $20 million transfer from the General Fund. Governor LePage included the funding in his original budget, but that support waned as the session proceeded. First, the proposal was cut back to $10 million, then eliminated altogether as the budget progressed through the Appropriations Committee.
Senator Collins said many in his caucus support increased General Fund support for transportation.
“It’s about creating a partnership between the General Fund and the Highway Fund and working with Appropriations to find other revenues for transportation,” said Collins. He noted that Maine lags the nation in General Fund support for transportation. The national average is 17.65 percent according to data from the Federal Highway Administration. If Maine were to achieve that level, it would represent an additional $104 million in General Fund support every two years. He said that the $20 million pledge from the governor’s office was a hopeful sign.
“Initially, we were very optimistic, but everything was on the table and when you’re talking about having to make deep cuts in other areas, we were vulnerable. The truth is, the Highway Fund certainly could have used it,” said Collins.
Question of police funding
One proposal that appeared to gain traction among Transportation Committee members was for a change in the funding formula for the Maine State Police. Currently the Highway Fund provides 49 percent of state police funding. Two recent studies have found that a more equitable split would be 33-35 percent from the Highway Fund and 65-67 percent from the General Fund – a split that is consistent with the Maine State Constitution.
Senator Collins believes that, although the measure didn’t take hold in the appropriations process during this session, it is something his caucus in the Transportation Committee will continue to push. “We want to reduce the Highway Fund contribution to the mid-30 percent. We submitted legislation on it and it did not pass, but we will keep stressing it, because we believe that is money we should be using for our roads.”
Senator Raye agreed that a second look at how much the Highway Fund pays for state police will “continue to be a priority.” He said he supports a 35-65 split because “it’s logical and it’s fair.”
Governor supports sustainable solutions
According to MBTA’s Fuentes, recent conversations with Governor LePage indicate he understands the importance of a strong transportation system and will propose strategies to provide more predictable streams of revenue. Jonathan Nass, the governor’s senior policy advisor on transportation, said that “the governor has been clear that he does not support tax increases, including indexing or an over-reliance on bonding to fund ongoing transportation needs. Instead, the governor wants to set statewide priorities and reform transportation funding for the long-term by shifting General Fund sources relating to transportation. He supports a reallocation of state police funding and wants to reallocate other General Fund, transportation-related revenue sources such as the sales tax on motor vehicles.”
Transportation Committee leaders agree. L.D. 52: An Act to Dedicate a Percentage of the Sales and Use Tax on Motor Vehicles and Motor Vehicle Parts to the Highway Fund was sponsored by House Chairman Richard Cebra (R-Naples) and carried over until next year. The bill calls for 20 percent of the transportation-related sales tax revenues going to the General Fund to be redirected to the Highway Fund, an estimated boost to the Highway Fund of $36 million per year. In combination with the reallocation of the state police funding formula, this would significantly address the current shortfall in an ongoing manner.
“This is very encouraging to the transportation community,” noted MBTA President Mace. “Given the choice, we would prefer pay-as-you go financing, if the revenues were available.”
Early in the session, Senator Raye and Representative Cain were among those who spoke in favor of a bond, and Representative Cain called the inability to pass an infrastructure bond “a missed opportunity . . . I’m very disappointed we left without passing a bond.”
She said that much of the anti-bonding sentiment didn’t take into account Maine’s conservative borrowing philosophy and favorable debt status. “Instead of borrowing for 20 or 30 years like most states, Maine borrows for 10. And that gives us very favorable rates.” She noted that Maine has very low debt compared to other states in the region. (Recent data from the New England Public Policy Center shows Maine’s interest on debt – $286 per capita – is just 53 percent of the region’s average –$481 per capita.)
Both Raye and Cain believe that a general obligation infrastructure bond – one that would include much needed investments to roads, bridges, sewer and water systems – would have a positive effect on the state’s economy, particularly now, when jobs are scarce. Both are pushing to back infrastructure bond legislation in the next session that would go out to voters as early as June 2012. “Those kinds of long-term, lasting investments create jobs, and they also provide long-lasting benefit to our communities,” said Raye.
Several legislators interviewed for this story were optimistic that the legislature would find a way to make transportation a greater priority in the coming session. Collins is pushing for reallocation of state police funding and discussions about increasing General Fund support. While Collins is not a fan of bonding, both Raye and Cain have an infrastructure bond in their sights.
“Transportation has to be at the top of the list in the second session,” said Representative Cain. She expects her caucus to push for a sizable bond package – one large enough to have a positive impact. “We’re ready to negotiate in good faith and push to get [bond legislation] done,” she said, stressing that the earlier that it goes to vote, the better it will be for the state’s economy. “We need this right now. We need the jobs and we need economic development. We have to do better. The longer we wait, the more it’s damaging to our business climate.”
Senator Raye said he thinks that a transportation bond is something voters can get behind, as well, because the benefits are so apparent. That is essential, because any bond issue passed by the legislature still needs to go to the voters for approval, and Mainers have overwhelmingly supported infrastructure bonds at the polls since the late 1960s.
Raye said that in the current economic climate, it will be important to formulate a bond package that is focused on “bread-and-butter” investments. “This clearly won’t be the typical ‘Christmas tree’ approach,” said Raye noting that “basics” like roads, bridges, water, sewer and, maybe research investments, will play better among his conservative colleagues and voters than a bond package loaded with “pet projects.” In that scenario, capital transportation investments will play well, he said, making a bond the best hope for immediate relief to the funding crunch.
“Borrowing for transportation is as solid a reason for a government to borrow as there is,” said Raye.