Road tax diversions have long been a sore spot with the public. Currently, 47% of the state’s gas tax is diverted to non-road purposes, primarily public education (25%) and the Department of Public Safety (5%), while 100% of the state’s vehicles sales tax ($3.3 billion/yr) gets diverted to non-road uses.
By Terri Hall | August 19, 2013
It’s a wrap. After over 200 days in session this year, the Texas legislature finally agreed upon a transportation funding bill that will go to the voters for approval in November 2014. The Constitutional amendment would divert half of the oil and gas severance tax that funds the state’s emergency fund, or Rainy Day Fund, to roads, giving the highway department a potential boost of $1.2 billion annually. Lawmakers readily acknowledge it’s a stop gap measure since the agency needs $4 billion more per year.
The enabling legislation, HB 1, seeks to protect the Rainy Day Fund by having a select committee recommend a minimum balance to be maintained before any money can be diverted to roads – a number that must be approved by two-thirds of the legislature. If lawmakers can’t agree, then the committee’s number will take effect. It also requires the Texas Department of Transportation (TxDOT) to find $100 million in savings within its operations to apply toward the agency’s mounting debt. The diversion of the severance tax will sunset in 2025 unless the legislature votes to continue it.
While the senate passed its version last week, identical to the one it passed at the end of the second special session, the House spent nearly five hours debating its version. The House fell short of the 100 votes needed to pass the senate’s bill during the second special session, necessitating a third special session. House leaders, primarily Rep. Joe Pickett, spent the weekend hashing out concerns and proposing amendments that would gather enough votes for passage.
After adopting Pickett’s carefully brokered amendments, the House also adopted two others – one by Rep. George Lavender to appropriate $600 million in unspent funds to highways, and another by Rep. Joe Deshotel to allow Texas Mobility Funds (TMF) to be used to loan money to port projects. The Senate rejected the former but kept the latter. The lone dissenting vote in the Senate was Sen. Kel Seliger who viewed the TMF raid as taking yet more money away from roads and giving it to non-road purposes, in this case, ports.
In the second special session, the House came up with its own funding proposal that would put an end to gas tax diversions and start to end other road tax raids. Currently, 47% of the state’s gas tax is diverted to non-road purposes, primarily public education (25%) and the Department of Public Safety (5%), while 100% of the state’s vehicles sales tax ($3.3 billion/yr) gets diverted to non-road uses. However, the Chair of the Senate Finance Committee has persistently refused to allow one dime of the vehicle sales tax money to go to roads, and other senators rejected the idea that the school diversion would be guaranteed to be filled by diverted severance tax.
Road tax diversions have long been a sore spot with the public and it’s overwhelmingly their preferred, long-term solution that gets TxDOT the $4 billion a year more it needs, and, even better, gets those dollars directly from road users without raising taxes. Though Texas is experiencing a boom in oil exploration that’s bolstering severance tax revenues and the state’s emergency fund, it’s a fairly volatile revenue source. House members admitted during the lengthy debate that oil and gas severance taxes are not a reliable long-term source of funding.
Highway planning in particular relies on a predictable revenue stream since federal law requires state DOTs to produce both short and long-range plans that are fiscally constrained. In other words, a road project cannot be placed into a plan (and hence move forward) unless the highway department can show how it will be funded in the year built. Absent reliable revenues, a highway department literally cannot do its job.
National highway program just as broke
The federal picture isn’t much prettier. The Federal Highway Trust Fund is broke, too. Congress passed a two-year bill in 2012 that will take ten years to pay for. Federal gas tax receipts can no longer keep up with the need. Like Texas, federal gas taxes haven’t been raised for 20 years. Some in Congress have begun the discussion about what to do to make the trust fund solvent, putting every option on the table from a vehicle miles traveled tax, tolls, and privatization, to increasing the gas tax, tapping other road-related taxes, and even devolving the highway program to the states. There is currently no real consensus on the best course forward.
Anxious to return home, weary lawmakers may have passed a road funding bill after three tries, but they’re well aware that the job of coming up with a reliable, long-term source of funding for highways is far from over. Indeed, the final bill tasks an interim select committee in both chambers to study just that. So when lawmakers return in 2015, they’ll hopefully be ready to tackle the thorny issue without another extended stay at the Capitol.
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 eight turned citizen activist. Ms. Hall is also a contributor to SFPPR News & Analysis.