Is it the Gas Tax?

With House Speaker Bob Deleo talking about whittling down the Governor’s tax plan, and separating component parts by filing a separate, soon to come transportation bill, there is much speculation on how the Speaker might fund budgetary increases for transportation. The Speaker has indicated that he has issues with an income tax increase so the question comes as to what he might utilize to achieve the necessary revenue increase? Without the income tax there seems to be no where else to turn but to the gas tax.

On the question of what is actually needed for revenue the Governor is talking about $1 billion for transportation. Based on the Speakers comments I made the “guess-estimate” of between $500 and $750 million. Now comes forward Michael Widmer, who gave testimony to the Legislature in which he said that $800 million might do the trick. Widmer arrived at his estimate by looking at the absolutely necessary items mentioned by the Speaker (MBTA deficit, removing DOT employees from the capital budget) along with some additional local funding for regional transit authorities (and forward funding for them) and an increase in Chapter 90. From the State House News Service:

According to Widmer, the $800 million would cover debt-relief for the MBTA; forward-funding and a 50 percent increase for the regional transit authorities; a transfer of all the MBTA and Massachusetts Department of Transportation employees off of the debt-financed capital budget; support for “an ambitious statewide capital program” of roads, bridges and public transit; a $100 million increase of so-called Chapter 90 local road funding; and the devotion of 20 percent of the capital budget to “expansions” and “enhancements.”

With the Speaker eschewing the income tax and looking to get to his revenue number through “user fees” it is fairly clear that the gas tax would have to be in the mix. Widmer talked about how much of an increase would be needed to get to $800 million.

Widmer specifically proposed a phased-in 15-cent increase to the 21-cent gas tax, combined with inflation adjustments to fees and fares, which he said would generate $821 million by 2017. Patrick has singled out the idea of a 15-cent increase in the gas tax as an inadequate fix that he said would force drivers to bear the brunt of the costs.

Widmer said an alternative would be to increase the gas tax by 3 cents per year for three years, while making steeper increases in fees and fares.

My guess is that the lower gas tax would create a politically unpalatable level of rate and fee hikes, with the phased in 15-cent gas tax increase the more likely option of the two, if that ends up being the vehicle chosen by Speaker Deleo.

The push-back from the Governor has been strong, with Transportation Secretary Davies calling for the entire $1 billion that the Governor filed for:

On the spending side, Transportation Secretary Richard Davey said that the Massachusetts Department of Transportation has saved $500 million on efficiencies since the 2009 transportation reform, and said that the MBTA has the lowest overhead of the country’s top-20 transit agencies.

“I don’t think there’s a lot of low hanging fruit left,” Davey said, though he singled out The Ride as a service where efficiencies could be found.

House Transportation Chairman William Straus (D-Mattapoisett) tried and failed to extract a lower revenue number from Davey, asking him, “What’s the level of spending that satisfies the core mission?”

“There are a lot of expansion projects that are not on this list that folks desire,” Davey said in his reply, noting that the so-called “urban ring” of public transit around Metro Boston and the rail connection between North and South stations did not make the cut.

Davey said the money would bring down the percentage of structurally deficient bridges from 8 or 9 percent down to 5 percent, which is manageable, and moving employees off the debt-funded capital budget would free up $250 million for construction projects. While noting changes can be made to project lists, Davey said the administration had worked hard to “whittle down” the transportation plan.

“I was anticipating that was the best I was going to do,” Straus said.

One transportation activist warned lawmakers against under-funding transportation.

“The MassDOT plan has been called ambitious. We do not see it so. As I said before, 91 percent of it is just to fix what we’ve ignored. Truly ambitious plans are like the interstate highway system of the ’50s, or the Boston transportation plan. We’re not talking about that. We’re talking about just a handful of needed and long-ignored priorities,” said Kristina Egan, director of Transportation for Massachusetts. She said, “Don’t be tempted to just build half a bridge or give us half a track. We need to have a whole transportation system.”

To bring the matter into sharper focus the Governor filed a transportation bond bill that puts the projects he prioritized in his budget to the fore, including the Green Line extension, South Coast rail, and the South Station expansion. When asked if the $800 million figure mentioned by Widmer would be sufficient the Governor advocated for the larger package:

“When folks say $800 million, I say show me what you’re talking about spending with that $800 million. What do the people of the Commonwealth get? So far, the only plan on the table is mine,” Patrick said, the bond bill filed later in the day bringing that statement into sharper clarity.

As I have said repeatedly since the Governor filed his package this will not be a simple exercise for the Legislature. Even members that are solidly anti-tax will be faced with diminished infrastructure spending, including the potential elimination of some projects that have wide support, if the revenue package produced is substantially less than the Governor’s recommendation. The Governor is forcing some hard choices on the Legislature, where hard choices are held in the same regard as leprosy.

My original prediction of between $500 million and $750 million still stands, with the amendment that it will be funded with a gas tax increase of 15-cents, (or less if the revenue package is smaller), with fare increases that are put on auto-pilot. Tough choices indeed.

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