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Wednesday, February 24, 2021

Credible Plan to Fix the Ailing Transportation Trust Fund Ignored

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The challenges facing the fund used to finance Delaware’s highway and bridge projects received some attention recently. However, ignored in the rekindled debate is a plan originally offered by House Republicans last May to deal with this troubling situation.

At the core of the problem are the demands being placed on the Transportation Trust Fund (TTF). Financed by tolls, transportation-related taxes and fees, the TTF was established solely to pay for the capital costs of maintaining and expanding the state’s transportation network.

The purity of that intent was gradually eroded to cover shortfalls in the state’s operational budget. Starting in 1993, state lawmakers began moving transportation-related operational expenses to the TTF. These expenses have grown over the years, as have the need to maintain a larger transportation system and build new projects. Meanwhile, the TTF’s revenue sources have not kept pace with the greater demands.

A task force empanelled to examine the looming shortfall between the TTF and what it was expected to finance indicated a cumulative gap of $3.7 billion over 12 years (Fiscal Year 2012 through Fiscal Year 2023).

While there is no easy fix, this problem can be addressed.

Under the recommended $346.4 million TTF budget that Delaware Department of Transportation (DelDOT) Sec. Shailen Bhatt recently unveiled, $78.9 million would be earmarked for public transit; $86.7 million for DelDOT salaries and wages; and $56 million for operating costs – a total of $221.6 million the TTF is financing beyond its original scope.

An additional $124.8 million will be needed to pay back interest and principal on debt incurred on capital projects.

That leaves only a little more than half the total TTF budget ($180.9 million) to finance road and bridge projects in the next budget.

As we did last May, we again propose moving DelDOT’s operational expenses back to the General Fund over a five year period, starting with the budget that begins July 1st. Assuming a three-percent growth, the agency’s budget will be $249.41 million in FY 2017. Transferring $50 million of these expenses annually from the Trust Fund to the state’s operating budget would bolster the TTF significantly.

Over the five-year transfer period, $749.41 million would be cumulatively”added” to the TTF. In all, transferring DelDOT’s operational expenses would make an additional $2.5 billion available to TTF projects over the next 12 years. This may not entirely fix the problem, but it would go a long way towards placing the TTF on a sound financial footing and restoring its long-term health.

Absorbing DelDOT’s operational expenses back into the General Fund budget is a process that will require tough choices and potentially unpopular decisions. Critics will, unfortunately, try to undermine this proposal noting the pain and difficulty of making the transition. But let’s put this into context.

Fifty million dollars, while a significant amount of money, is approximately 1.4 percent of the proposed $3.5 billion operating budget. And the money can be found.

Just last June the Jobs Infrastructure Fund was created, initially receiving $55 million. Office of Management and Budget Director Ann Visali recently indicated that the fund might get even more money if state tax receipts improve. We respectfully suggest that before creating new funds and obligations, we should first ensure the viability of the TTF, which in many respects is the original “Jobs Infrastructure Fund.” While there are numerous places we can look in the budget for the funding needed to address this problem, this might be one place to start looking.

The budget-writing Joint Finance Committee has just begun its deliberations. If we make this choice now, the committee can account for the expense shift at the start of the process.

When we first proposed this plan, Gov. Markell said he did not want to undertake any TTF reform until a new DelDOT secretary had been appointed. Instead, the Markell administration dedicated a fraction of the state’s unexpected $300 million revenue surplus to the TTF, placing a Band-Aid on the problem without addressing the underlying structural issues.

DelDOT Sec. Bhatt is now eight months on the job. We can no longer afford to address the symptoms and not the illness. We can no longer kick the can down the road, delaying the tough choices for another day.

We’ve suggested one path forward, but we recognize it is not the only route through the darkened woods ahead. In fact, we will seriously consider supporting any reasonable plan to restore the TTF to solvency that does not, yet again, rely on raising taxes, tolls and fees. The time to act is now, if not on our proposal than on another.

 

Greg Lavelle is a State Representative from the 12th district (Sharpley), and Gerald Hocker is a State Representative from the 38th District (Ocean View).

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