Transportation Funding Presented by: Erich W. Zimmermann, Director Transportation Programs National Association of Regional Councils

Overview About NARC Federal Spending – The Big Picture Federal Transportation Funding Non-federal Approaches Q&A

About NARC National non-profit trade organization Represents multi-jurisdictional regional planning organizations – large and small, urban and rural Thank you for extremely strong AZ membership Formed by NACo and NLC Governed by local elected officials President Hon. Penny Gross, Supervisor, Fairfax County, VA Advised by Executive Directors Four core areas of concentration –Transportation –Economic & Community Development –Homeland Security/Public Safety –Environment Membership covers 97% of counties; 99% of population

FY14 & 15 Funding Debt Ceiling Sequestration Big Issues Reauthorizations Tax Reform Infrastructure Disaster/Recovery ECONOMY Agency Consolidation/ Reductions

Federal Spending 1994 was last time appropriations process was completed properly FY11 – nearly $40B in cuts FY12 – many additional reductions/cuts (HUD, HSR, CDBG) FY13 – more reductions  Sequestration CR with flat funding at FY12 levels $984B total; includes $85B sequester cuts Approx. -5% from domestic discretionary programs FY14 – Finally some progress (after the pain) Joint budget resolutions passed but only after a shutdown Approps bills complete; roll back of sequestration $1.1 trillion omnibus Relatively good news for transportation: TIGER, Amtrak, New Starts FY15 – Baby steps Sequestration rolled back (temporarily) Top-line number set

Sequestration 101 WHAT? Automatic, across ‐ the ‐ board cuts on federal domestic and defense discretionary and mandatory funds starting in FY13 HOW? Created under the Budget Control Act (BCA), the debt limit deal passed by Congress in August 2011 TOTAL? $1.2 trillion to be cut evenly over ($109B/year) EXEMPTIONS? Transportation Trust FundsSocial SecurityCHIP Medicaid/Medicare (2% cap)Veterans ProgramsFood Stamps (SNAP) Federal Retirement BenefitsChild NutritionSome tax credits Military PayPell Grants

Federal Transportation Funding Highway Trust Fund in trouble Maybe sooner than we think? Tax reform bill unlikely to save day Extensions going to be difficult General Fund Transfer again? $41 billion to date, plus $12.6b for ‘14 Another $15b would be need for ‘15 (CBO) Other offsets? (Implementable) ideas limited Gas tax increase (index?)/tax reform Rep. Blumenauer/Sen. Boxer VMT Increased tolling authority Financing ≠ Funding

Federal Transportation Funding CBO (July 2013): “Bringing the trust fund into balance in 2015 would require entirely eliminating the authority in that year to obligate funds (projected to be about $51 billion), raising the taxes on motor fuels by about 10 cents per gallon, or undertaking some combination of those approaches.” (emphasis added)

Source: CBO

Source: FHWA

Federal Transportation Funding

CBO (TRB, January 2014): “We were wrong, in a bad direction” Highway Account may not last until the end of MAP-21 Which begs the question: what then? Things May Be Even Worse

Flurry of activity in 2013 Likely to continue into 2014 Better News At State Level?

General themes: Gas tax increases Eliminating/reducing per gallon gas tax Wholesale taxes Indexing for inflation Better News At State Level?

The big ones: Pennsylvania Virginia Maryland Massachusetts Better News At State Level?

Debate went down to the wire; took special session PA has enormous bridge needs $2.3 billion –$1.65 billion for roads and bridges; $475 million for transit). Eliminates per gallon tax Uncaps & increases wholesale gas tax (oil franchise fee); indexes 5-year phase-in (increases in ’14, ’15, ‘17) Raises fees Separately: natural gas impact fees for bridge repair ($18 million/year to counties) Pennsylvania

Complex & innovative; nearly ¼ century since last increase Multi-modal approach $3.5 billion over five years Eliminated its per gallon tax (17.5 cents) Adds wholesale tax on gasoline (3.5%) and diesel (6%) State sales tax increase; portion committed to transportation Local taxes: adds taxes in NoVa and Hampton Roads Vehicle fees: $64 fee on hybrids Internet sales tax revenue Virginia

Intercounty Connector made a package necessary $4.4 billion over six years, including borrowing ability –$800 million annually at full implementation. Maintained 23.5-cent state gas tax and indexes it to CPI –Also indexes transit fares Added 3% wholesale tax on gasoline –To 4% if Congress lifts internet tax ban; 5% otherwise Modes aren’t defined, but funds unified state trust fund Lockbox Maryland

Big Dig Legacy $3B over five years ($500M/year; to $800M by 2018) Gas tax increase (3 cents, to 24 cents) and indexes to inflation for the future (starting in January 2015) –Indexing will appear on a future ballot, however Cigarette tax increase ($1 per pack); new business taxes Massachusetts

Vermont: sales tax on gasoline Wyoming: gas tax increase Ohio: Increased borrowing authority Arkansas: new bonding authority, temporary sales tax increase Washington: electric car fee, VMT fee study Oregon: VMT pilot program. Drivers pay 1.6 cents/mile and refunded state taxes they pay on fuel. California: Gas tax increase (with a caveat) Other States

Washington, DC: Replaced 23.5 cpg gas tax with 8.3% whole gas and diesel tax Nevada: Allows Clark County (Las Vegas) to index gas tax for inflation Raleigh, NC: $75 million bond issue, funded by property tax increase Non-States

The 17 states with gas tax rates tied to inflation, the price of gasoline, or both include: –California –Connecticut –Florida –Georgia –Hawaii –Illinois –Indiana –Kentucky –Maryland –Massachusetts –Michigan –Nebraska –New York –North Carolina –Vermont –Virginia –West Virginia. Source: ITEP, 2013 States that Index

Indiana: to allow central Indiana (including Indianapolis) to raise regional taxes to pay for transit; study commission approved the idea if voter referendum occurs Texas: $1.2 billion per year by diverting oil and gas revenues from the state’s Rainy Day Fund. Requires voter approval. Washington: debated a gas tax increase through December; will come up again in 2014 Missouri: plan to raise $7.9B over 10 years through one-cent sales tax increase passed both chambers, but final package was filibustered Looking Ahead

US Avg. Arizona? According to AASHTO: Arizona has a $63 billion gap in funding over 25 years ($2.52B annually)

Source: ITEP

ITEP estimates states are losing $10 billion each year just as a result of inflation erosion Pressure on state general funds Increasing costs over time as infrastructure is not adequately maintained Loss of competitiveness What Does It Mean?

This year was huge, but came after several years of no increases States can’t be expected to make up the gap by themselves –The low-hanging fruit may have already acted Still require a strong federal partner Conclusions

Institute on Taxation and Economic Policy (ITEP). Building a Better Gas Tax: How to Fix One of State Government’s Least Sustainable Revenue Sources. December ITEP. A Federal Gas Tax for the Future. September 23, Congressional Budget Office. Testimony: Status of the Highway Trust Fund. Kim P. Cawley (Chief, Natural and Physical Resources Cost Estimates Unit). Before the Subcommittee on Highways and Transit Committee on Transportation and Infrastructure. July 23, Bipartisan Policy Center/Eno Foundation. The Consequences of Reduced Federal Transportation Investment. September Cited Resources

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