State transportation budget faces $250 million annual funding shortfall

Secretary of Transportation Brian Searles. VTD File Photo/Josh Larkin

Maintaining and operating Vermont’s transportation infrastructure will cost the state $250 million more per year than it can afford, according to a draft report headed for legislators’ desks in January.

The yearly cost of maintaining the state’s transportation system, with its roads, highways and more than 4,000 bridges, is estimated at $705 million; but transportation revenues will peak at $486 million at most, leaving an annual shortfall of more than $250 million per year.

This analysis of required funding to preserve the state’s existing transportation system doesn’t include expansion of rail or transit services, nor major roadway expansions. The typical amount budgeted for Vermont transportation is $450 million to $500 million, so the shortfall represents about half of the annual budget of the state’s Agency of Transportation.

“Unless we move to fix that revenue stream, we’re going to be looking at conditions in the transportation system that will deteriorate beyond where they are now,” said Brian Searles, secretary of the Agency of Transportation. “So we have some decisions to make.”

“The gap has been there for some time, but this is the latest attempt to identify it, and understand it. … We need some serious federal involvement, as do other states, to make sure that this gap is filled.”

About 60 percent of the state’s transportation funding came from federal sources in state fiscal year 2013, with state funding accounting for 34 percent. Searles said that part of the pressure on state revenues is a growing trend towards gasoline and diesel efficiency, which lowers gas tax revenues, traditionally the most significant contributor to state transportation revenues.

The 62-page draft report highlights other key causes of the state’s short- and long-term transport funding difficulties. One is the uncertain future of the federal Highway Trust Fund, which accounts for about half of the state’s transportation budget. The ability of the federal fund to sustain itself is threatened partly because the federal gas tax hasn’t been raised since 1993.

The prospects for the state solving this funding shortfall on its own, without federal assistance, are bleak.

The report, which considers how Vermont alone can combat this fiscal problem, lays out no less than 15 different taxes, fees and tax increases that could help to fill the gap. But the total raised by these potential modest measures comes only to about $135.44 million of a $250 million shortfall.

Those state funding options include potentially controversial taxes, like a tax on every mile traveled and a tax on the value of a vehicle.

“For the state to solve this problem [alone], we’d have to more than double what Vermonters are currently paying through a variety of sources – taxes and fees – to fund the transportation system. That’s simply not realistic,” Searles said.

During a meeting of the committee drafting the study, Rep. Diane Lanpher, D-Vergennes, suggested that the Shumlin administration join together with other small states in a coalition, to lobby for a continued minimum of federal transportation now allocated to such states, which could be eliminated in 2014.

Committee members and transportation experts agreed that a combination of federal and state strategies need to be actively pursued at this point, leaving nothing to chance.

But thankfully, fiscal cliff measures are not expected to affect federal transportation funds, said Searles at the meeting’s opening, because such funding is already fixed until 2014 under a separate budget authorization.

It’s unclear how urgent the state’s transportation shortfall is. Searles said a similar national gap has been discussed at the federal level since the mid-1990s, while a 2008 Joint Fiscal Office report estimated a gap of $203 million per year in 2008, to maintain workable roads and bridges.

Joint Fiscal Office senior transportation analyst Neil Schickner said that dealing with the shortfall immediately could be a political gamble, since key transit services would likely need to be cut, and because it’s unclear whether the state’s aging infrastructure can last safely for a few more years.

“If you want to prevent the infrastructure from deteriorating, you have to make tough decisions about other programs. It’s going to be a tough balancing act,” said Schickner. “The consensus among professionals is that, if we don’t fill that gap, then the system is gradually going to deteriorate.”

“But the big question is: Is it going to deteriorate at a greatly accelerated pace, so as to increase the repair costs down the road? If that’s the case, then you could say it’s a serious thing not to cover the gap because all we’re doing is piling up costs, unavoidable costs, that we’ll have to carry later on.”

Schickner said that the state’s bridges and highways are estimated to last about 80 and 100 years respectively, and that crucial repairs will be needed over the next five to 10 years to prevent bridges and roads deteriorating beyond the point of safe use. The end and midpoints of their useful lifespans have just happened to converge on a period lasting the next few years, said Schickner, which makes funding such repairs more urgent.

According to the governor’s dashboard, about a quarter of the state’s highway bridges are over 70 years old, with 254 structurally deficient bridges in 2011.

In 2011, about 25 percent of the state’s roads were rated “very poor,” though recent years have seen improvements.

State Senate appropriations Chair Jane Kitchel, D-Danville, a member of the study committee, said that the report represents the start of a sorely needed public conversation about how taxpayers want to deal with the state’s transportation infrastructure.

“People otherwise assume there’s no reason why their particular road, or other problem, whatever they’re seeing, why improvements can’t be done,” said Kitchel. “It’s a chance to become more knowledgeable about the realities here.”

Kitchel said she wasn’t sure if the Legislature would consider new transportation taxes and fees this coming session. “I think as tough as they are, yes, we’re going to have to consider them.”

In her view, another key question is: “What is the tolerable level of conditions, for this infrastructure, that people are willing to accept?”

Searle said the long-term solution probably lies in the federal government introducing within the next 15 to 20 years a tax on individual miles traveled.

“A mileage-based, or user-based system, is probably in our future. The technology already exists to allow that to happen,” he said. He compared such a system to utility rate payments, which need to be measured and metered, but also cautioned that complex questions around privacy and progressive taxation still need to be worked through.

“That’s probably 15 to 20 years into our future,” he said. The auto insurance industry is already examining this option, to see if they can base insurance rates on miles traveled, said Searles, and may come out ahead of federal and state experiments.

As for whether drivers would pay more or less under that system than they currently pay for fuel taxes, Searles said it was too early to tell.

Over the next decade or so, “transportation funding may very well be re-invented,” said Searles, in a broad move away from fuel taxes in light of greater fuel efficiency and new hybrid vehicles.

As for the state’s present predicament, the anticipated $250 million shortfall this year, he concluded: “I’m not suggesting that the sky is falling, or that this is any kind of cliff – a popular word these days – but it is a slope. And we’ve been on this downward slope for a while, and we need to find a way forward.”