Transportation lockbox is too easy to open, but is still worth passing

By Len Lazarick

Len@MarylandReporter.com

Shouldn’t the money we pay in the gasoline tax be used to fund the roads and bridges it was supposed to build and maintain?

Yes, of course, you say.

That’s the answer voters need to give to Question 1 on the state ballot this year.

Ballot language for Question 1 faithfully summarizes the constitutional amendment passed by the legislature last year for the voters to approve. Here’s what it says.

“This proposed constitutional amendment would require that funds in the State Transportation Trust Fund be used only for transportation purposes and prohibit transfers from the Transportation Trust Fund unless the Governor declares a fiscal emergency by executive order and the General Assembly passes legislation by a supermajority vote approving a different use or a transfer of the funds.”

Proposed for several sessions

This constitutional amendment was proposed in several legislative sessions. It only passed in 2013 as a condition of enacting the higher gas tax, and was somewhat watered down to gain passage.

This amendment is needed because governors for decades have raided the transportation trust fund when general fund revenues such as the sales tax and income tax were down or flat during recessions. When economic downturns hit, people spend less, reducing sales taxes, and earn less, reducing income taxes. They may even drive a little less, but, even if unemployed, they still must buy gas, which we tax, and food, which we don’t.

It’s true that most of this money “borrowed” from the transportation trust fund has been repaid — but in the meantime highway projects, bridge repair and routine road maintenance have been delayed.

It’s also true that legislators had to approve these raids and they did so readily because they faced tough choices about which ongoing programs to cut.

Tough choices

During the recession, Gov. Martin O’Malley chose to continue funding K-12 public schools and public higher education at the same levels, while other programs were cut, such as local road money. Which would you rather have, a good road to a bad school or a bad road to a good school? In the short term, that’s not the choice.

The choice is whether you lay off teachers and professors (or cut their pay) or you layoff the guys who build roads and bridges.

In the Great Recession, some states did choose to reduce school funding, and many states did cut aid to public colleges and universities. Maryland did not. From a more jaded point of view, Democratic leaders chose to continue funding people who supported them at the polls (teachers unions), and cut funding for guys who tended to vote Republican.

Hands are not tied

It is argued that this amendment ties the hands of the governor and legislature when revenues are down. But, as you read above, the amendment provides that the governor can declare, by executive order, that a “fiscal emergency exists.” What is a “fiscal emergency?” It’s not defined. The governor will know one when he sees one, and so will the legislature.

Did we have fiscal emergency in 2009 and 2010? Probably.

The legislature must go along, and approve any raiding of the transportation trust fund by a three-fifths supermajority to bail out this fiscal emergency. Sounds daunting, but the Democrat-dominated Maryland legislature routinely comes up with much larger supermajorities to pass the Budget Reconciliation and Financing Act, which changes funding mandates and formulas, and makes transfers from special funds to the general fund. It’s become routine.

Sounds like a good idea

This lockbox sounds like an eminently good idea, but it is too easy to break.

What’s more, this lockbox only protects one of several special funds filled by special taxes passed to pay for special projects.

Doesn’t the special fund from the real estate transfer tax, created to fund Program Open Space and farmland preservation, deserve the same protection?  Isn’t the Chesapeake Bay Restoration Fund, funded by the “flush tax,” worthy of the same protection as the Transportation Trust Fund?

All those funds have been raided during the recession. The cash taken out has been replaced by bond funding to pay for open space, parkland, development rights on farmland, and enhanced sewage treatment plants and septic systems, the principal beneficiaries of the Bay Restoration Fund. Using credit to replace money from special taxes increases the cost of these programs, and makes these special tax funds not very special at all.

There have been legislative proposals to give them the same sort of lockbox, but none has  gotten out of committee.

Coalition supports it

It’s a pretty sure thing the way Question 1 is phrased on the ballot that it will pass easily. A coalition of two dozen groups representing motorists, truckers, labor and business has formed to support it, and they’ve been running ads.

It seems like a no-brainer and the arguments against the lockbox are weak, as is the lockbox itself. At least it provides some limited protection that when state government chooses to pass a new or higher tax for a “special” fund, that it actually will use the money for that special purpose, and not for anything it pleases just because times are tough and revenues are down.

P.S. on highway user revenues

Unfortunately, the constitutional amendment in Question 1 does not cover the Highway User Revenues that counties and municipalities lost during the Great Recession. This traditional sharing of gas tax money with the local jurisdictions to build and maintain local roads has yet to be fully restored. Public works employees and construction workers lost their jobs when the governor and legislature cut this program.

Both Anthony Brown and Larry Hogan promised the Maryland Municipal League last month that they will restore that highway funding. We’ll see.

In December 2012, O’Malley Chief of Staff Matt Gallagher told Maryland Reporter that the Highway User Revenues are “considered a category of local aid” and the money was taken to avoid cuts in other state aid to localities. “The overarching goal was (to) protect education aid,” Gallagher said.