Delegate Tony McConkey's Official Blog

The Debate On The Maryland Transportation Trust Fund

maryland transportation trust fund - tony mcconkey

Nov 20, 2013 – Performance, Not Politics, Should Govern Gas Tax Revenue – MDPol
Jul 12, 2013 – Surprising Facts About Maryland’s New Gas Tax – MDPol
Jun 25, 2013 – Maryland Taxpayers Can’t Afford the Baltimore Red Line – Sun
Jun 19, 2013 – With New Taxes, MD Gas Prices Rise As VA Prices Drop – Post
May 16, 2013 – $Billion For New Balt City Schools Made The Gas Tax Possible – Sun
May 16, 2013 – Gas Tax Signed Into Law W/Gift List Of New Projects – Sun
Apr 15, 2013 – Small Businesses Hit Hard By New Gas Taxes – Post
Apr 3, 2013 – Maryland Gas Tax Will Hurt Maryland’s Economy – Sun
Mar 29, 2013 – Senate Voting List On The Gas Tax – Blog
Mar 28, 2013 – Senate Committee OK’s GAS TAX, Adds Constitutional Amend – Sun
Mar 27, 2013 – Divided Business Community Misses A Chance On Gas Taxes – Sun
Mar 22, 2013 – House Passes O’Malley GAS TAX – Capital
Mar 21, 2013 – GAS TAX Increase Will Add 20 Cents To A Gallon Of Gas – Wash Post
Mar 21, 2013 – GAS TAX Hike On Fast Track In The House – MD Rptr
Mar 20, 2013 – GOP Delegates Denounce Gas Tax Increase – Balt Sun
Mar 19, 2013 – O’Malley Gas Tax LOCKBOX Is Easy Pickings – MD Rptr
Mar 18, 2013 – House Ways & Means Approves new GAS TAX – Balt Sun
Mar 17, 2013 – Gas Tax Hearing Draws Hundreds To Annapolis – MD Rptr
Mar 17, 2013 – Dems “Wheeling & Dealing” Schools & Hospitals To Get Gas Tax – Sun
Mar 13, 2013 – House Refuses To Return $1B In Highway Funds – MD Rptr
Mar 13, 2013 – Drivers Should Not Be Forced To Subsidize Transit – Balt Sun
Mar 6, 2013 – New Gas Tax Would Hurt Maryland Truckers – Biz Jour
Mar 6, 2013 – How The Governor’s Proposed Gas Tax Works – Wash Exam
Feb 28, 2013 – Few Support Tax Increases To Fund Traffic Fixes – Wash Post
Feb 27, 2013 – Bad Roads Cost Marylanders $1,800 Annually – Balt Sun
Feb 19, 2013 – O’Malley Still Looking For A Deal On Gas Taxes – Balt Sun
Feb 19, 2013 – GOP Called Neanderthals For Gas Tax Opposition – MD Rprtr
Feb 19, 2013 – We Need a Plan NOT A Maryland Gas Tax Hike – GOP Caucus
Feb 19, 2013 – Gas Prices On The Rise For 32 Straight Days – WJLA
Feb 8, 2013 – Design Work On Transit Stops Without New Tax – Wash Post
Feb 6, 2013 – Senate Questions High Transit Spending – MD Rprtr
Feb 4, 2013 – Legislators Question Road Funds Use For Transit – MD Rprtr
BACKGROUND – Jan 15, 2013 – Moodys Advises Against Gas Tax Increase – MD Rprtr
BACKGROUND – Jan 9, 2013 – Maryland Gas Tax Hurts The Poor – Fred News

Gas Taxes And The Need To Pave Roads

By Tony McConkey, February 28, 2013

If you own an automobile, when you renew your registration or buy gas you are paying taxes and fees that fund 56% of the Maryland transportation budget, or “Trust Fund”, that funds the construction and maintenance of roads and mass transit. Federal aid (also largely from gas taxes) funds another 21% for a total of 77% of the Fund.

The idea behind the creation of the “Trust Fund” (the Fund) was that monies paid by motorists would be largely repaid in the form of more and better roads, a user fee. Unfortunately, little by little that concept has broken down as more and more money from the Fund has been diverted for other purposes.

In 2014, $1.1 billion, a full 46% of the Fund, will be spent on public transportation that is used by only 8% of Marylanders. Roads on the other hand are funded only $660 million, a mere 27 percent for the other 92% of us who use the roads. We are spending nearly HALF the transportation budget on 8 percent of our population, and even most of the 8% use the roads when not commuting. Transportation spending is clearly out of alignment with Maryland’s needs.

Starting several months ago, the leadership in Annapolis began beating the drums about a crisis in transportation. They claimed that the Fund was short at least $800 million to meet the state’s transportation needs and only raising gas taxes would solve the problem.

To fix the “crisis”, they have proposed a 3 percent state sales tax on gas (which equals a 10.5 cents per gallon increase), a county gas tax of 5 cents per gallon, and the creation of two unelected Transit Benefit Districts, with an unlimited power to increase property taxes for projects within their taxing districts (yet undefined). Anne Arundel County is likely to be in both taxing districts even though almost none of the benefits will touch us.

When the Republican Caucus opposed these new taxes, the President of the Senate called us Neanderthals; still, a closer look shows a problem much different than merely a lack of funds: 1) During the last four years, Gov. O’Malley and the democrat leadership stole over $1 billion from the Fund for other spending; and 2) They repealed a law that mandated a portion of the sales tax increase, $220 million, go annually to the Fund (after using the need for transportation funds in part to justify the sales tax increase).

In asking you for more taxes, they are seeking to replace money that was already in the Fund, basically they want you to pay taxes for the same purpose twice. Worse, if they get the new money they are not planning to spend the new money on roads but more public transportation. The Governor has promised two shiny new subway lines, one for the DC suburbs and one for Baltimore, plus a new bus system for Montgomery County which will cost $5.5 billion over several years.

The Governor argues that greater public transportation “investments” will ease highway congestion, but it has not happened. Since 2005, the O’Malley administration has cut road spending by 20%, and increased public transportation spending by 30%. Yet despite an additional 30 percent spending increase, the use of public transportation has only increased one tenth of 1 percent, not much of a return on the investment.

Still if gas taxes are to be forced upon us, I would hope that the General Assembly would hold out for at least three conditions. First, given recent history, it is ridiculous that government ask us for more gas taxes until some method is found to truly protect the Fund and to guarantee that money paid toward transportation is used for transportation. Despite promises to that effect, the current proposals only purport to guarantee integrity UNLESS the governor declares an “economic crisis” which is far too open ended and meaningless (I think he declared 3 of those in just the last 12 months).

Second, we must align our transportation spending with the way Maryland travels. It’s absurd to spend 46 percent of our state transportation budget on 8 percent of the population. Moreover, users of public transportation should bear more of those costs. In the Baltimore area, fairs are only being charged at approximately 28% of costs instead of the 35% (down from 50%) mandated by law.

Finally, we must demand repayment of the $1 billion taken out of for non-transportation spending. This year, state spending is set to increase by $600 million. If this is a true crisis, let’s shift $300 million to transportation. That’s appropriate, since $370 million was shifted in 2010.

Protect, align and restore. We need to fix this dysfunctional transportation funding system before we ask taxpayers for more of their money.


Source for Transportation Revenues Proving Elusive

By Len Lazarick, February 1, 2013, The Business Monthly
(An excellent article by Len Lazarick of the Maryland Reporter analyzing the debate on the Maryland Transportation Trust Fund)

A tax-weary legislature has no stomach to raise needed transportation revenues.

Everybody agrees that a good transportation network of roads, highways, bridges and mass transit are an essential underpinning of the Maryland economy. It’s been that way for two centuries — when Baltimore was, and still is, the closest seaport to the Midwest, as well as where the National Pike to the west begains, along with the first railroad line in the United States.

But there’s no agreement on how to pay for this transportation system in the 21st century. The port of Baltimore and BWI Thurgood Marshall Airport turn a profit, but mass transit continues to be a money-losing proposition and the funds to pay for highways are drying up.

Business groups, lawmakers and the governor know all this, and have been discussing it for six years and longer. But legislators were never enthused about a gasoline-tax hike. They rejected Gov. Martin O’Malley’s proposal six years ago for price indexing of the gasoline tax.

This was at the time they were raising the sales tax by 20%, increasing income tax rates, hiking vehicle titling taxes, doubling the cigarette tax and raising the corporate income tax to the highest in the region. (The vehicle taxes and fees, and some of the new corporate taxes, went to transportation.)

A Boatload of Tax Hikes

Since, the legislature has raised income tax rates again, increased alcohol sales taxes by 50%, doubled the flush tax, taxed payments it makes to hospitals, doubled taxes on smokeless tobacco and cigars, raised recording taxes on special mortgages on commercial property, and doubled fees for birth and death certificates, as well as other government documents.

To the chagrin of legislators in affected communities, the Maryland Transportation Authority has also substantially raised tolls on bridges and tunnels. This will largely support not just maintenance but the building of new toll lanes on I-95, and help pay off the debt for the building of the Inter-County Connector from Laurel to Rockville (which has its own high tolls).

Just enumerating these taxes and fees makes it evident why legislators are weary of the plea for tax hikes, no matter how worthy the projects or goal. They also leery of the lure of “special funds” from taxes dedicated to special purposes.

Diverting Special Funds

Part of the real estate transfer tax which makes Maryland’s settlement costs among the highest in the nation are dedicated to purchase parks, forests and development rights on farmland. That money has been used for other purposes, and replaced with bonded debt, to be repaid with interest over 15 years, thus adding at least 20% to the total cost. Ditto the flush tax for the Bay Restoration Fund. This transfer of open space money will go on for another five years.

Money also has been shifted from the Transportation Trust Fund, though much of that has been repaid. That is not true of the $700 million in Highway User Revenues taken from the counties and municipalities. The governor’s chief of staff, Matt Gallagher, said they considered the funds used to maintain local roads and bridges as part of the local aid package.

O’Malley chose to increase school funding and reduce aid that had gone to public works, police and health departments. While all the “special funds” went into the big pot called the “general fund,” you can make the case that almost all the money diverted from other uses went to K–12 public schools and higher education.

As other states, such as nearby Virginia, cut funding to public colleges and universities (as Republican Gov. Bob Ehrlich had done in lean years), Maryland increased funding to public higher education, though not as much as it increased aid to public schools.

That’s the context for this session debate about transportation funding. There would be little debate at all, except for pressure from Senate President Mike Miller, who has been a strong, consistent advocate of increasing the gas tax.

This year, Miller has proposed a new wrinkle: giving local jurisdictions the power to raise their own taxes for transportation, through the gas tax or a local sales tax.

Serious Obstacles

Whatever Miller’s final proposal, and however much O’Malley and House Speaker Michael Busch are willing to go along, any increased funding for transportation faces serious political obstacles. Regardless of the arguments for more transportation revenues, the legislators are weary of taxes, and a Gonzales Research poll last month showed almost three-quarters of Maryland voters oppose a 10-cent gas tax hike.

Last month, at a briefing on the economy, senators asked Mark Zandi, the chief economist for Moody’s Economy, his opinion about raising the gas tax to fund infrastructure. “I would phase it in” over several years beginning in 2015, Zandi said, and “certainly not [raise it] in 2013.”

Zandi said the end of the 2% holiday on Social Security taxes was already a drag on the economy and will be difficult to absorb by lower-income residents. Even six-figure earners will see an extra $2,000 coming out of their paychecks.

The biggest problem with any fiddling with the gas tax is that it affects most households and businesses in the state and is seen as more regressive than even the sales tax, meaning it hurts lower income people more than those of higher incomes.

“I think it’s going to be difficult,” said Howard County Sen. Ed Kasemeyer, chairman of the Budget and Tax Committee. “We’ve waited too long,” with the last gas tax hike 20 years ago, and “now we’re stuck.”

Even a 10-cent-per-gallon increase “isn’t going to get what we need,” and “the public would probably scream,” Kasemeyer said. A 10-cent hike in the gas tax by itself raises about $300 million a year.

Need for a Lockbox

Given the way money for highways have been diverted in past years, many legislators and citizens say they will not support a gas tax hike without a guarantee that the money will only be used for transportation. This is called a “lockbox.” O’Malley said he is not opposed to this idea, but the only kind of lock on funding he has actually proposed is pretty easy to pick.

A more stringent proposal last year would have required a supermajority of the House and Senate to open the transportation lockbox. One proposal introduced this session by Sen. David Brinkley, a Frederick County Republican, would require the transportation trust fund to be used only for highways, with no exceptions. Sen. Allan Kittleman of Howard County is one of seven Republican co-sponsors, and there are five Democrats on the bill.

Republicans and rural legislators also feel that the Mass Transit Administration, which runs the buses and subway in the Baltimore area; and the Washington Metropolitan Area Transit Authority, which runs the Washington bus and subway system, do not collect enough at the fare box, perhaps 30% of transit operating costs. Raising that figure to 50% would require substantial increases in fares for transit riders.

Despite the strong, constant backing by the Greater Baltimore Committee, the Maryland Chamber of Commerce and the Washington Board of Trade, few major businesses have actually come out in support of a gas tax hike. In fact, aside from business coalitions, about the only individual businesses that have supported the tax hike are contractors and subcontractors who would specifically benefit from increased spending on transportation. Businesses that heavily depend on trucking are strongly opposed to the increase.

Add all those factors together and the likelihood of higher taxes on gasoline seem remote.

Budget Grows 30% in Seven Years

Gov. Martin O’Malley last month proposed a total budget for fiscal 2014 of $37.3 billion, a $1.5 billion increase or 4.3% more than this year’s total spending, including money set aside as a surplus and rainy day fund.

The governor emphasized “$325 million in spending cuts,” for a grand total of $8.3 billion in “spending cuts” over seven years. A portion of these “cuts” were indeed real reductions in state spending, a good slice of it though reduced aid to county and municipal governments.

However, much of the “spending cuts” were actually reductions in spending growth, mandated by state law, but no longer affordable.

The budget O’Malley inherited in 2007 from Republican Gov. Bob Ehrlich totaled $28.7 billion. The fiscal 2014 budget will be $8.5 billion higher than that, representing 30% growth. Federal funds to Maryland have grown 55% during that period to $9.8 billion.

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