Options for state transportation financing range from novel to complex

Coming up with ways to pay for highways, ports, and other forms of transportation is a problem as old as the nation. Since the first toll road opened in Virginia in 1772, policymakers have struggled to keep up with the demands of people and goods in motion.

It’s much the same in the Wisconsin of 2015 — and virtually every state in the country.

Gov. Scott Walker’s budget proposal calls for about $1.3 billion in borrowing over the next two years to meet the state’s transportation needs, from building or repairing roads and bridges to supporting mass transit to improving ports, airports, and more.

So far, key legislators are skeptical, arguing Wisconsin should adopt more of a “pay-as-you-go” approach to maintaining the transportation network. In settling on borrowing, Walker largely rejected a plan from the state Department of Transportation to raise fuel taxes, user fees, and transferring revenues from other state tax sources.

There’s nothing unusual about selling bonds, a long-term mechanism to borrow money, to pay for transportation projects. All but a few of the 50 states do so now, some to a larger degree than Wisconsin. The timing may also be right to sell such bonds, given that interest rates are still low and Wisconsin’s “credit score” is strong.

If lawmakers decide they want to spread the pain, the alternatives are reminiscent of a traffic circle, with multiple ways to move on and off. Here are examples:

No state raised gasoline taxes in 2010, 2011, or 2012, according to sources such as the National Conference of State Legislatures, but about 10 states have done so since. One reason: Fuel taxes stabilized and then fell, which meant state pump tax increases were less noticeable. Some states are adopting pump taxes that aren’t set per gallon, but tied to inflation, the wholesale price of fuel, or other economic factors.

For example, Michigan will soon move to a variable tax that replaces per-gallon taxes with a percentage of wholesale prices for gas and diesel. It’s an attempt to stop the slide in the purchasing power of fuel taxes, which declined over time as fossil-fuel vehicles became more efficient. All states levy excise taxes on fuel.

About 15 states have adopted sales taxes on fuel; 48 states have vehicle registration, license, or title fees; about 35 states tax vehicle weight — important because heavier vehicles wear down roads and bridges — and nearly 30 states dedicate sales tax collections from rental cars to transportation purposes.

About 35 states earmark general fund taxes, such as income and sales taxes, for transportation needs. Others have constitutional or statutory requirements that prevent governors and Legislatures from “raiding” segregated highway funds for non-transportation purposes. Wisconsin voters approved such a constitutional amendment in the November 2014 election.

Some state solutions are novel, such as selling “naming rights” for specific projects. Want a bridge named after Aunt Bertha? Pay up.

Others are tied to the belief that people who use transportation systems the most should pay the most. These options include tire taxes, battery taxes, congestion taxes, and other local option taxes, especially in cities with lots of commuters.

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One option used by about half the states, but not Wisconsin, is toll roads. Before you start thinking about Illinois, “FIBs,” and their unofficial tax on Badger State drivers, consider why it makes long-term sense.

Wisconsin agreed in the 1950s not to charge tolls on its portion of the interstate highway system in return for full federal funding of its construction. Two generations later, that deal is still in place, even if times have changed dramatically. In a state that depends on its highways for commerce and tourism, the idea of allowing toll roads — even if limited to a few interstate corridors — cannot be casually dismissed. For starters, tolls might help pay for “hot lanes” planned for I-39/90 from Beloit to Madison, and eventually to the Wisconsin Dells.

Tolls export a fair share of road maintenance costs to users from other states, which has some political appeal. Recent rule changes in Washington have left open the door for states caught in the 1950s I-system deal to move on.

Everyone should be happy that today’s cars are burning less gasoline; it’s good for the environment, national security, and conservation of what is still a finite resource. That doesn’t mean there are fewer vehicles on the roads, however. Financing society’s mobile needs is no longer as simple as a two-lane road; it’s a multilane highway with lots of on and off ramps for policymakers.

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