Texas Proposition 1 road funding ballot measure raises doubts, as oil production drops

The euphoria lawmakers felt last year after placing a Constitutional amendment on the ballot for Texas voters to decide if they wanted to raid half of the state’s oil and gas severance tax on new oil wells and divert those revenues to the State Highway Fund, without ending existing diversions of the gasoline tax to make up the difference, has quickly turned to doubt as the plummeting price of gasoline has severely tempered oil production in the Lone Star State.

By Terri Hall l January 14, 2015

When Texas lawmakers punted on road funding with passage of Proposition 1 last year, they never anticipated the Texas oil boom would abruptly crater. It took three special sessions last year to round up the two-thirds majority needed to place a Constitutional amendment on the ballot for Texas voters to decide if they wanted to raid half of the state’s oil and gas severance tax (a tax on new oil wells) and divert those revenues to the State Highway Fund. With the promise that the new funds could not be used to build or support toll roads, Texas voters gave the green light. But the euphoria lawmakers felt after getting away with gaining new highway funds without ending diversions of the gasoline tax has quickly turned to doubt as the plummeting price of gasoline has severely tempered oil production in the Lone Star State.

Outgoing Texas Governor Rick Perry made building toll roads the centerpiece of his transportation legacy, particularly the advent of public-private partnerships (or P3s). From the controversial Trans-Texas Corridor toll road network that would have confiscated over 580,000 acres of private property and transferred it to a private toll road developer with direct ties to the Governor’s office, to slapping tolls on most every freeway in metro areas and building tolled outer loops around most semi-rural and even rural communities, Perry’s toll road network has proven to be one of the most unpopular and most expensive new taxes ever conceived on Texans. Tolls in urban areas are now based on congestion, not the cost of building the lanes and retiring the debt, and can be as high as 50 cents a mile to use them during peak hours or over 80 cents a mile when the toll lanes are privatized using P3s.

So it’s no wonder Texans voted for more highway funding. They thought it would mean fewer toll roads. Yet several local planning boards set-up by federal law known as Metropolitan Planning Organizations (MPOs), in Dallas-Ft. Worth and San Antonio, quickly announced that Proposition 1 funds freed-up other money in the highway fund to enable them to push urban rail and other public transit projects. They also promised more toll roads.

So far, Proposition 1 will not be used for major congestion relief projects as legislators intended and the Transportation Commission affirmed in its December meeting. Many Johnny-come-lately projects that appeared out of thin air are snagging the new road funds while all the current toll projects continue full steam ahead – and there are hundreds currently on the books. In San Antonio, the MPO board specifically promised that if new funding became available, they would turn toll lanes back to free lanes on US Highway 281. Not only is US 281 not getting Proposition 1 funding, the Alamo Area MPO just added over 70 miles of new toll lanes to its plans in December. So Texas voters are already feeling betrayed by the broken promises and road funding bait and switch that never seems to come to an end.

Gas tax diversion problem

Like many other states, Texas diverts a portion of the state gasoline tax to non-road purposes. Twenty-five percent gets sent to public schools per the Texas Constitution, and an additional 10-15% gets diverted to fund the Department of Public Safety and other state agencies, mostly to shore-up public pension funds. But some diversions have gone to enhancing benefits in the Attorney General’s office or for things like tourism promotion or computers in the Comptroller’s office.

The state highway fund routinely gets plundered to plug holes in the budget. Budget writers made some modest improvements in the 83rd session in 2013, but by and large, the gas tax diversion problem has yet to be fixed. Texas taxpayers only saw $534 million of $1.2 billion in non-education diversions returned to roads, with a heavy reliance on more toll roads to fill the $4 billion (now magically claimed to be a $5 billion) annual funding gap.

All taxes and fees levied on vehicles and trucks should be going to the highway fund, period. Over $3.3 billion in sales taxes on rental cars and new and used vehicles get dumped into the general fund, not the highway fund, annually. Many lawmakers see this as the answer to road funding shortfalls, yet the least volatile, most affordable, and most efficient user fee to fund roads, the state gasoline tax, has remained fixed at 20 cents a gallon for over 20 years. Any talk of increasing it to keep pace with inflation has been dead on arrival.

Proposition 1 was another get-out-of-jail-free card played by the legislature, and now the promise of oil and gas severance tax gold has deteriorated into the proverbial lump of coal. Unlike oil and gas production that’s tied to the price of oil, the state gas tax is a fixed amount and doesn’t vacillate as easily. With the next legislative session starting in just a few days, Texas lawmakers need to engage in some real introspection and start dealing with the road funding shortfall without more unproven gimmicks nor the reliance on volatile, unpredictable revenue sources that aren’t directly tied to usage of the road.

Many argue tolls are the ideal user fee, however, there are no more Texas toll projects that can pay for themselves with just the toll users. All require massive taxpayer subsidies, which is double taxation. So the best user fee remains the gasoline tax. End all gas tax diversions, institute sweeping changes in how road funding gets allocated (ie – all road funds go to roads only, not transit or rail boondoggles paid for at auto users’ expense), and fix the structural road funding shortfall without delay. That’s a pro-taxpayer prescription to get Texans moving again.

Terri Hall is the founder of Texans Uniting for Reform and Freedom (TURF), which defends against eminent domain abuse and promotes non-toll transportation solutions. She’s a home school mother of nine turned citizen activist. Ms. Hall is also a contributor to SFPPR News & Analysis.