Walker’s Massive Borrowing Scheme
His increase in road spending and refusal to increase gas tax could leave state paying 25% of transportation budget to debt service.
Gov. Scott Walker has made a big deal of decreasing the state’s structural deficit and increasing its rainy day fund. But meanwhile his plans to increase spending on roads and freeways could leave the transportation fund so in debt that 25 cents of every dollar would be spent on debt service by 2023.
During an announcement last Friday at the headquarters of the International Union of Operating Engineers Local 139, Walker proposed a two-year $6.4 billion transportation plan. This is up from $5.9 billion in the 2011-2013 budget. It’s quite a big bump considering no new revenue options were offered despite a call from the bipartisan Transportation Finance & Policy Commission to raise the gas tax by 5 cents a gallon and to create a new vehicle-miles-traveled fee to cover the cost of roads.
In making this recommendation, the commission noted that gas tax revenue has actually been declining because of increases in automobile fuel efficiency and decreases in total miles traveled. Each year, this leaves an increasing gap between transportation spending and revenues. And spending will go up dramatically under Walker’s proposed budget.
A press release from the governor’s office says that $550 million will be dedicated for the Zoo Interchange project so construction can begin as early as 2015 or apparently as late as 2018. If you’re keeping track at home, the $550 million is just a part of the total cost of the $1.7 billion project. Also reported to be in the new budget is $236 million for the Hoan Bridge.
But where does all this new money come from?
The official budget won’t be released until tomorrow, but Walker’s proposed budget is reported to include $662 million in new bonding. According to an Associated Press article, $307 million of new bonding will be dedicated to the Zoo Interchange and $200 million of new bonding will be dedicated for the Hoan Bridge. These two projects will help drive a $52 million increase over two years in the state Department of Transportation’s current bonding levels of about $610 million over two years.
A report from the bipartisan Transportation Finance & Policy Commission offers a grim assessment of the future debt levels. Even if the state issued no more transportation bonds after Fiscal Year 2013, the fund would be paying 13.5 percent of transportation monies to debt service by 2023. If the state continues to issue Transportation Revenue Bonds and General Obligation Bonds as it has in past years, at a total cost of $305 million annually, the amount of money going to debt service would a whopping be 24.9 percent by 2023.
But Walker intends to increase the amount of bonded indebtedness by $52 million over the previous budget, which is likely to mean the debt service would be in excess of 25 percent by 2023.
Where will the funds to pay the debt service on all of this new bonding come from? According to a story in the Journal Sentinel, “Walker spokeswoman Jocelyn Webster said the governor wants to sell state property and use the proceeds to pay off bonds.” As a solution to a long-term funding issue the idea of selling of state owned assets is, at best, a band-aid.
The Walker administration has indicated the assets they intend to sell could include state-owned power plants, making this a risky endeavor. The complexities, hurdles, and possible lawsuits, involved in selling such a public asset insure the sales won’t close quickly. And if they don’t? Those bonds will still need to be repaid, most likely from the general fund, further depleting funds from education, healthcare, and other vital services. In fact, Walker and the Republican legislature have already begun transferring money from the general fund to the transportation fund as part of the last biennial budget.
If this sounds familiar to Milwaukee County residents it’s because we’ve been down this road before. While Scott Walker was Milwaukee County Executive the budget regularly assumed sales of Park East land would occur and that those funds would be used to cover budget expenses. Of course these sales didn’t occur as planned, and budget adjustments and cuts became a regular event.
But to residents outside of Milwaukee County it might be hard to see how this troubling budget practice meshes with the image we were presented as candidate Walker. Remember the guy with the Brown Bag?
“Government should have to make some tough choices, and live within its means,” candidate Walker told us. He closed the advertisement with the final point of the message, “And don’t spend more than you have.”
That’s exactly what the bipartisan commission on transportation proposed: raise the gas tax and take other measures to stop spending more than the state has for road building. Apparently, that’s one tough choice the governor doesn’t want to make.
— ibuildroads (@AndyPujats) February 18, 2013