State Faces Huge Highway Fund Shortfall

Get ready for a potential Capitol-paralyzing fight — the third in four years — over how to pay for Wisconsin highways. It’s a fight that could determine how soon that worn, washboard roadway you drive on gets fixed.

State Transportation Secretary Craig Thompson said his agency saved about $100 million in the budget year ending June 30 — enough to offset a $30-million drop in gas tax revenues and a $50-million drop in vehicle title and registration fees this year.

All 371 highway projects scheduled for this year will get done, despite the mid-March Safer at Home order that caused non-commercial highway traffic statewide to drop by as much as 48 percent, Thompson said in a WisconsinEye interview.

But, Thompson added, if the Covid-19 pandemic forces a major decline in gas taxes and registration fees through the budget year beginning July 1, the Transportation Fund shortfall could be “hundreds of millions of dollars.”

How many “hundreds of millions”? What’s his worst-case scenario?

“If we witnessed the reduction for an entire year of traffic, it could be $400 million to $600 million. But we really don’t anticipate that. I’m hesitant to throw out too many specific numbers, because we really don’t know.”

Still, it was the first public estimate of the toll a lingering pandemic could take on Wisconsin’s highway budget.

The Transportation Fund is separate from the state’s general fund that pays for health care, K-12 school aids, the UW System, prisons, state parks, unemployment benefits and aid to local governments.

The Transportation Fund was exempt from Democratic Gov. Tony Evers order that other agencies cut year-end spending by 5 percent. None of the Transportation Department’s 3,400 employees have been furloughed or laid off, Thompson said.

Why is Thompson’s worst-case scenario so frightening?

Because, according to a Legislative Fiscal Bureau (LFB) summary of the 2019-21 budget legislators approved and Evers signed last summer, Transportation Fund revenues were projected to total $2.1 billion in the fiscal year beginning July 1.

That LFB summary said $1 billion – or 52 percent – of that revenue would come from the gas tax, and $954 million – or 42 percent – would come from vehicle title and registration fees.

The math: a $400-million shortfall would equal 20 percent of all estimated Transportation Fund revenues next year; a $600-million shortfall, a 30 percent gap.

Both would pose big problems for the Democratic governor and Republicans who control the Legislature. They all did victory laps for passing what they said was a responsible budget that provided more cash for highways with a minimal amount of new borrowing.

Asked what choices Evers and legislators would face to make up any shortfall in highway funds, Thompson named three: delay projects scheduled to be bid in spring 2021, raise taxes or fees, or bond — borrow more money to keep 2021 projects on schedule.

Thompson named one 2021 major project he said would not be delayed: Widening and rebuilding I-39 between Madison and the Illinois border. “That’s too far along,” he explained.

Was Thompson calling for an increase in the 30.9-cent per gallon gas tax, which hasn’t been increased since 2006? Unleaded gas is selling for less than $2 per gallon across Wisconsin. “Every option should be on the table,” he said.

Republican legislators refused to raise the gas tax last year, although Evers wanted an increase. Instead, Republicans raised the $75 annual car/SUV renewal fee by $10 and more than doubled the cost of a vehicle title.

Debby Jackson, executive director of the Transportation Development Association (TDA), a coalition of business and transit groups, said TDA is “closely monitoring” any drop in highway revenues.

“Wisconsin finally passed a transportation budget last summer that slows the decline of system conditions,” Jackson said. “It would be a shame for conditions to resume their decades-long downward trajectory because of the pandemic.”

Airports and transit systems get financial help from Washington, Jackson noted, adding: “TDA supports a similar revenue backstop for the Transportation Department to avoid disruptions to operations and the possible delay or cancellation of transportation plans and projects.

“Given the historically low level of bonding in the current budget, low interest rates, and the severity of the current economic situation – including double-digit unemployment – a moderate increase to bonding should be considered.”

Rebuilding Wisconsin’s transportation infrastructure is “crucial” as businesses statewide recover from the Covid-19 emergency, Jackson said.

Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. Contact him at stevenscotwalters@gmail.com