State Analysis: Transportation Fund Revenues Rising, Not Falling

Since December, Gov. Dannel P. Malloy and his staff have been warning of dangerous declines in state transportation funding, but the latest figures from state experts indicate that the fund’s revenues are actually on the increase.

Overall, according to this latest state estimate, net revenues for the transportation fund are projected to rise by about $447 million during the next five years, to $1.841 billion.

The new analysis takes into account those rising transportation tax revenues, planned bus and rail fare increases, some proposed transit service cutbacks, and putting a number of proposed projects on hold. Using those assumptions, state experts project the Special Transportation Fund would have a cumulative balance of $234.2 million by June 2022.

“There’s been a change in the landscape,” Chris McClure, a spokesman for Malloy’s Office of Policy and Management, said last week. “It’s improved… so it’s not quite so dire.”

Republicans like the Senate’s top GOP leader, Len Fasano of North Haven, believe Malloy and Transportation Commissioner James P. Redeker were deliberately “overselling their case back in December … It definitely was, ‘The sky is falling,’ ” Fasano said.

The governor’s bleak warnings that the transportation system “is at a crossroads” and similar doomsday predictions from Redeker are linked to a laundry list of $4.3 billion in state projects that have been authorized but not yet funded.

The projected transportation revenue increases wouldn’t be enough to cover the cost of those big, unfunded rail and highway plans, most of which were authorized by the General Assembly in 2015. They include projects like the I-84 viaduct replacement in Hartford, the Waterbury I-84 “mixmaster,” and various new train stations along the planned New Haven-Hartford-Springfield rail service.

Malloy has repeatedly called improvements to Connecticut’s deteriorating transportation system a top goal of his tenure as governor, which ends next January. But he has been unable, largely because of major and ongoing budget deficits, to convince state lawmakers to approve things like tolls or new gas tax hikes that would be needed to pay for the ambitious transportation plans.

“This is just the status quo,” McClure said of the new transportation fund analysis, which assumes those projects would remain on hold and other spending cuts.

The House chairman of the legislature’s transportation committee, Rep. Tony Guerrera, D-Rocky Hill, said the new revenue estimates don’t change his opinion that the status quo isn’t enough.

“Nothing would get done,” Guerrera said. “Once you start adding projects costing billions of dollars, there’s no way the transportation fund can sustain that.”

Guerrera and other House Democrats this week launched a new pro-toll offensive, warning that the state’s roads and bridges will continue to deteriorate without a big injection of new funding. A recent AAA poll found that 47 percent of Connecticut residents favor tolls.

Fasano agreed that transportation funding “does have serious issues.” But he argues there are ways to fix the system without raising taxes. “You don’t need to do a gas tax [hike]…,” he said. “You don’t need tolls.”

This is a legislative election year and lawmakers are typically reluctant to approve politically unpopular measures like tax increases or tolls when they’re about to run for re-election.

Malloy said in December that the transportation fund crisis has been caused partly by a drop in state taxes on gasoline and the gross receipts of oil companies that are the primary funding sources for the transportation system. He also cited a trend toward electric cars and high-mileage vehicles as reasons for declining revenue.

New figures compiled by state treasury analysts and Malloy’s fiscal experts show revenue from the transportation tax on oil companies is projected to increase from $238.4 million in the 2016-17 fiscal year to $359.2 million by 2022 — a 50.6 percent jump.

The increase in state sales taxes being directed to the transportation fund is even more dramatic: from $188.4 million in the last fiscal year to $498.8 million in 2022, a rise of more than $310 million. A big part of that rise is related to a new tax on automobile sales scheduled to take effect in 2021.

The additional sales tax revenues are largely due to a half-cent hike in the sales tax, with the new revenue going to the transportation fund, that Malloy convinced the legislature to approve in 2015.

Gasoline tax revenues are expected to remain relatively flat through 2022, and McClure said the amount expected to be collected in this fiscal year is roughly the same as 2005 gas tax revenues.

The problems of the transportation fund weren’t helped by a 2015 decision to take $37.5 million out of the fund to help plug major state budget holes — a tactic approved by the General Assembly and Malloy.

The new transportation financing analysis was done by Malloy’s budget experts and the staff of the state treasurer’s office to prepare for a sale of $800 million in transportation bonds. The money from the bond sale will be used to pay for existing projects and the state’s portion of work on projects that have already been approved for federal funding and are part of the state’s five-year transportation plan.

In order to convince Wall Street that the bonds will be repaid, state officials have to show that the transportation fund will remain solvent for the next five years.


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