State Must Rethink Transportation Funding

Interstate 94 freeway at N. 16th St. Photo by Jeramey Jannene.

The status-quo for transportation funding across the state will not hold much longer.

Paying for roads and transportation infrastructure is a perennial problem for Wisconsin, but policymakers will face new challenges in the coming years as the current formula for funding roads and highways falls ever shorter of what’s needed, according to a new report by the Wisconsin Policy Forum (WPF), a non-partisan research organization.

A number of variables are at play, some of which are the result of decisions made decades ago.

Wisconsin has 115,000 miles of roads and highways, managed by a matrix of state, county and local governments. Funding for the roadways comes from registration fees, a gas tax, debt and, increasingly, the state’s general fund composed of state income and sales tax revenues.

In 2006, a state law indexing the gas tax to inflation was repealed, and since then inflation has eaten away at the state’s primary source of transportation funding, especially during the significant inflation of recent years.

Whether adjusted for inflation or not, transportation funding has slowed since 2007. However, when adjusted for inflation, the study found transportation funding has actually decreased between 2007 and 2023. Increasing registration and title fees have helped offset some of this, but state policymakers have increasingly been forced to rely on debt and and revenue from the general fund to pay for transportation infrastructure, according to the report.

Since 2007 the state has been financing road projects to a greater degree with debt. But by 2017, with mounting debt costs, this policy was replaced with a greater and greater reliance on the general fund of sales and income taxes.

Further reliance on the general fund could be troubling, as it will force transportation funding into direct competition with state funding for education and health care.

Many of the state’s major industries, important to the overall economy, rely heavily on the transportation network. Timber and forest product services, manufacturing and agriculture are all critical to the state’s economy; and each require the infrastructure needed to transport heavy cargo over long distances, according to the report.

The state’s highway program has always gobbled up the largest share of transportation funding. In the latest biennial budget, 46.8% of all transportation funding was used to reconstruct, maintain and expand the state’s highways. This includes spending on highway “megaprojects” like the Marquette and Zoo Interchange projects and the upcoming widening of Interstate 94 from six lanes to eight lanes.

Meanwhile, local roads and public transit systems have suffered. An increasing share of local roads in urban and rural communities receive a poor rating. Spending on local roads has lagged inflation. Since 2000, the number of miles of public transit has declined by approximately 28.1%. State limits on local governments’ abilities to raise revenue have contributed to this decline.

Going forward, the state has three general options, according to the WPF report. It can fix the roads and maintain spending increases for the state highway system; it can cut funding for the highway system; or it can undergo “belt tightening” and zero out spending increases for both local road maintenance and the state highways.

Only under a belt tightening scenario would the state not need to find additional revenue. This scenario would help the state return to a traditional formula for funding transportation: relying on gas tax revenues. However, it would do so at the expense of road quality and the state economy.

The state has existing levers to pull for more funding, like increasing registration fees, greater reliance on income and sales tax, or increasing the gas tax.

There also remains a handful of new methods for funding transportation, including tolling, regional transportation authorities, variable registration fees based on weight of the vehicle, local option sales taxes for transportation, charging utilities for access to right-of-ways when installing infrastructure or a sales tax on motor fuel. Each come with potential downsides, and would require new political effort to implement.

There is also a largely untested mileage-based fee that has been tried out in Oregon, Virginia and Utah. It could, conceivably, help the state transition the formula for funding transportation from a fossil-fuel-based system to one dominated by electric vehicles. However, it is a very new approach to collecting transportation revenue and has proven unpopular when tried, according to the WPF.

“In short, Wisconsin risks falling behind on transportation, and it has few if any shortcuts it can take,” the report concludes. “Either the state will have to forego spending and sacrifice road quality, or it will have to tap one of a few available funding sources such as the gas tax, vehicle fees, general tax dollars, mileage fees, local taxes and fees or tolling.”

Legislation Link - Urban Milwaukee members see direct links to legislation mentioned in this article. Join today