It’s been a long road to finding the funding necessary to shore-up the Texas State Highway Fund, but with passage of Proposition 7 on the ballot November 3, Texans will finally see a significant boost to the state’s road funding shortfall without raising taxes. Early voting begins October 19.
Prop 7 dedicates $2.5 billion of the general sales and use tax (above $28 billion) and thirty-five percent of the vehicle sales tax (above $5 billion) to the construction and maintenance of non-toll highways. The general sales tax takes effect in 2017, and the vehicle sales tax dedication starts in 2019.
Both provisions can be suspended with a two-thirds vote of the legislature, however, they cannot reduce the allocations below 50% of the anticipated amount. The sales tax dedication sunsets in 2032 and the vehicles sales dedication sunsets in 2029. A majority vote of the legislature can extend the dedication in ten year increments.
The Federal Highway Trust Fund and Texas State Highway Fund have suffered from a lack of a long-term, reliable source of funding. Both are primarily funded by the gasoline tax — 18.4 cents per gallon levied by the federal government and 20 cents per gallon levied by the state of Texas. Both have remained unchanged for over 20 years, causing a long-term shortfall. Congress and the Texas legislature have lacked the will to increase the gas tax or adjust it to inflation due to the unpopularity of voting to hike taxes, so they’ve turned to tolls and leveraged debt to bail them out.
However, both federal and state lawmakers are discovering tolls are just as unpopular as a gas tax hike and that they’re far more expensive for taxpayers than a gas tax funded system. The U.S. Senate tried to expand interstate tolling in its draft of the federal highway bill only to have it slapped down by a coalition of anti-toll groups, with Alliance for Toll-free Interstates leading the charge. The U.S. House is contemplating the same expansion and is running afoul of the same angry taxpayers.
In Texas, taxpayers and state anti-toll groups, Texans Uniting for Reform and Freedom and Texans for Toll-free Highways, have insisted on using existing road taxes to shore-up the highway fund versus turning to tax hikes. Currently, none of the tax on the sale or rental of vehicles goes to the state highway fund and twenty-five percent of the gas tax goes to public schools, not the highway fund. Governor Greg Abbott and Lt. Governor Dan Patrick both campaigned on dedicating vehicle sales tax to highways last year (http://www.texasturf.org/2012-06-01-03-09-30/press-releases/texas-state-wide/1567-anti-toll-candidates-snatch-key-positions-in-texas), with Abbott running statewide commercials pledging to fix Texas roads without raising, taxes, fees, or tolls.
Abbott and Patrick, along with lawmakers, delivered by passing a constitutional amendment, SJR 5, that will capture a percentage of both the general sales tax and vehicle sales tax for non-toll highways and retiring existing road debt, which appears as Proposition 7 on the ballot. Abbott recently emphasized the need to address congestion as the priority for the new funds.
Prop 7 together with ending some gas tax diversions and passage of Proposition 1 last year (http://www.texasturf.org/2012-06-01-03-09-30/latest-news/1471-what-s-involved-with-prop-1) that captured a portion of the oil and gas severance tax for non-toll roads, the highway fund will experience a $5 billion annual boost. The Texas Transportation Institute estimates the Texas Department of Transportation (TxDOT) will need an additional $5 billion a year in order to completely eliminate toll roads and debt from current state plans. However, independent analysis does not corroborate such a high figure.
Regardless, lawmakers know there’s more work to be done to secure the funds needed for a long-term, sustainable and affordable funding stream for highways. Without Prop 7, that mountain will be much harder to climb.