Broken promises? Texas lawmakers fail to end gas tax diversions

The Texas Constitution restricts the use of state gas tax revenues to "...the sole purpose of acquiring rights-of-way, constructing, maintaining, and policing such public roadways..." Yet lawmakers continue to raid the gas tax to fill holes in the budget for non-road purposes like funding public pensions and benefits for state agencies other than the Texas Department of Transportation (TxDOT).

Meanwhile, lawmakers boosted funding for Medicaid and schools ($2.5 billion in the House budget, $1.5 billion in the Senate with more planned in both chambers) and continue to hold the most fiscally sound, long-term road funding solutions hostage to more tolls and debt rather than discipline the use of the taxes already paid by road users.

JoAnn Fleming, TEA Party Caucus Advisory Committee Chair and Grassroots America director, and Jeff Judson, Vice President of the San Antonio Tea Party, warned of the road funding 'fiscal cliff' before the 83rd legislature convened, and lawmakers, though aware of it, continue to do nothing. Existing transportation funding sources end in 2015 leaving TxDOT with no funding for new capacity and barely enough to maintain existing roads. In fact, in last the biennium budget, lawmakers borrowed money to maintain roads.
Judson notes, "It's good that Senate Finance Chairman Tommy Williams acknowledged the transportation 'fiscal cliff' when the Senate adopted the budget last week, but he and his colleagues have got to act fast or TxDOT will truly run out of money to build new roads before we have time to fix it next session."

Many Texans feel the truth in budgeting promise by the top three state leaders is all talk, no action. Bills that would solve the road-funding shortfall by dedicating the existing vehicle sales tax (SB 287/HB 782) to roads and the constitutional amendments to end gas tax diversions (HJR 29/SJR 31) have yet to get a hearing.

"If our leaders insist on dealing with the problem with more tax hikes, more tolls, and more debt, there will be a voter revolt. Just as we cannot afford more tax and spend from government, we cannot afford more borrow and spend for roads," insists Fleming.

"Some of the folks inside the Capitol are the architects of this debt cliff - they've maxed out the state’s credit card. We can get out of it, but it will take leadership and somebody standing up for the taxpayers," Fleming said.

Texans expect lawmakers to do their jobs and properly fund roads, a core function of government just like education. Lawmakers wouldn't dream of failing to fund schools, so why would they think it's okay to not fund roads? After all, without roads, many students, faculty, and staff couldn't get to school to fulfill their mission.

State leaders have essentially been asking TxDOT to fulfill its mission with debt (whether state or local) absent adequate funding. It's creating a reckless, unsustainable debt spiral the next generation cannot possibly repay.

‘Rainy Day’ Raid for Infrastructure Bank
Governor Perry's endorsed solution is to put Rainy Day funds into the State Infrastructure Bank (SB 1632) to be used to guarantee toxic local toll road debt and even mass transit projects, (which these funds currently cannot be used to do). Perry's proposal also encourages local taxes and tax hikes to bailout toll projects that can't pay for themselves.

Senate Finance Committee Chair Tommy Williams proposes (SJR 38) a similar loan guarantee program for economic development toll road and mass transit projects using the Rainy Day Fund. Perry backs another bill, HB 3363, authored by Rep. Bill Callegari, to create a whole new class of bonds, called century bonds, that take 100 years to re-pay -- outlasting the useful life of the road. None of these solve the long-term road funding shortfalls nor get the state back to pay-as-you-go.

Unsustainable Debt
Securing a reliable, long-term source of revenue is necessary for proper highway planning and the avoidance of more debt; however, the state has no sustainable policy for funding roads. The Grant Thornton audit of TxDOT from 2010 states that Texas' debt is unsustainable.

Texas leads the nation in road debt ($31 billion, principle and interest). Despite Perry’s claims otherwise, incurring more road debt, whether at the state or local level, is not fiscally responsible, conservative, nor sustainable.

Road taxes should fund roads
Any tax collected from road users should be going to fund roads first, especially before lawmakers asks taxpayers to dig deeper into their wallets to fund roads with more debt and more tolls. Tolls are taxes the way they're being done in Texas today, since $10 billion in public funds are going to build toll roads, yet they're still charging motorists a toll to drive on those roads.

Just like politicians in Washington are doing, Texas leaders are looking to tax increases, rather than dedicating existing taxes to roads, to solve the funding shortfall.

At a public policy event in Texas yesterday, Grover Norquist of Americans for Tax Reform gave his take on why Republicans get sucked into hiking taxes. He explained that Democrats ensure general revenues are all used up on education and health care forcing tax hikes to fund other necessities like roads. Norquist used Virginia Governor Bob McDonnell as a case in point, who just passed the largest tax increases in the state’s history to fund transportation which effectively ended his career in politics as far as the taxpayers are concerned.

When forty-seven percent of Texas’ state gas taxes are diverted to non-road purposes, asking for tax hikes to bailout politicians is not popular among the grassroots.

“Texans are fed-up with out-of-control government that never gets its priorities straight, and keeps asking us to pay more when the taxes already collected aren't going for their intended purpose," reiterated Fleming.
.
Gas tax hasn't kept pace
Yet the gas tax has its own challenges long-term. State and federal gas taxes, the primary source of revenue for TxDOT, has remained unchanged for 20 years. This has caused a reliance on toll roads to bridge the funding gap, which costs Texans prohibitively more than a tax-funded road (1-2 cents a mile vs. 15 - 75 cents a mile for tolls). We cannot expect to build today's roads with a 20-year-old revenue source.

Between 1990 - 2012, Texas state spending rose 310%, while population growth plus inflation totaled only 132%, according to the Texas Public Policy Foundation analysis of Legislative Budget Board documents. Lawmakers should refocus spending on the core constitutional functions of state government. Clearly, Texas has a spending problem, not a revenue problem.

Senate Bill 287 along with several proposals in the Texas House, phase-in the dedication of vehicles sales/use tax to roads. A dedicated vehicle sales tax revenue stream will keep pace with inflation on its own and help meet the growing transportation needs of Texas WITHOUT raising taxes.

The vehicle sales tax currently represents $3.3 billion a year (and growing), and coupled with ending gas tax diversions, which the Governor estimates is $650 million a year, it gets the state very close to the $4 billion TxDOT needs to build and maintain the state highway system without more tolls, and get back to pay-as-you-go.

It’s an idea whose time has come.