Legislators Borrow $350 Million for Highways

I-94. Photo taken in 2012.

State lawmakers have approved borrowing an additional $350 million over the next two years for highway construction and repair. That approval will drive debt repayment costs higher, take money from a pot intended to support education and health care, and once again put off a permanent solution to paying for Wisconsin’s highways.

When the budget was passed in July, lawmakers included a provision that allowed Governor Walker to seek up to $200 million this year and $150 million next year in additional borrowing authority for highways. On November 4th, the legislature’s budget committee voted to approve the entire two-year total of $350 million in borrowing authority in one shot. The vote was unusual in that it did not fall along party lines: All four Democrats on the committee joined with six Republicans to pass the measure, with another six Republicans voting no.

Wisconsin has allocated a growing share of transportation resources towards repaying money the state has borrowed to build and repair highways, and the approval of new borrowing will drive borrowing costs up even further. Over the past decade, the share of Transportation Fund revenues that have gone towards repaying borrowing costs has nearly doubled, going from 11.2% in 2005 to 20.6% projected for 2017. Keep in mind that that projection for the share of Transportation Fund revenues that will need to be dedicated to repaying borrowing costs was made before lawmakers approved additional borrowing for highways; that share will be driven higher by the additional borrowing that was approved.

Pushing debt repayment costs higher limits future transportation options. With more than $1 out of every $5 in transportation resources tied up in paying for past projects by 2017, we will have fewer resources to build the transportation network Wisconsin needs in the future.

Even Before New Borrowing, Debt Service Costs for Highways had Climbed

Half of the new highway borrowing approved yesterday will be repaid from the Transportation Fund, and the other half will be repaid with money from the state’s General Fund, which supports important priorities like public education, the University of Wisconsin System, and health care for people with low incomes. Because there is not enough money in the state’s Transportation Fund for all the highway projects that lawmakers want to carry out, they have used money from the state’s General Fund to pay for highway-related costs. Some lawmakers point to past transfers in the other direction – from the Transportation Fund to the General Fund – to justify their actions, but over the past 14 years, lawmakers have diverted a net total of $565 million from the General Fund to pay for transportation purposes.

(At the ballot box last year, voters approved a constitutional amendment that prohibits lawmakers transferring money out of the Transportation Fund to use for other public services. But the amendment does nothing to prohibit using money from the General Fund for transportation purposes.)

Highway Programs Rely on Transfers from the General Fund

In approving $350 million in additional borrowing, lawmakers chose to make a short-term fix rather than solving the longer-term issue at hand: There is not nearly enough money coming into the Transportation Fund to pay for all the highway projects lawmakers want. Lawmakers froze the gas tax – the main source of revenue for the Transportation Fund – a decade ago, and inflation has eaten away at the tax’s value since then, shrinking the amount of resources available to build and repair Wisconsin’s highways.

As a result of lawmakers’ short-term thinking, a large share of future Transportation Fund revenues will be committed to highway projects already completed, and Wisconsin will have fewer resources to support our schools, communities and families. Rather than pushing costs off into the future and taking money from the General Fund, lawmakers should take a hard look at either increasing the gas tax or scaling back highway projects.