House, Senate Leaders Confirm Transportation Funding Deal

Texas House and Senate leaders have come to an agreement on a deal to significantly boost the Texas Department of Transportation’s funding.

Both Senate Transportation Chairman Robert Nichols, R-Jacksonville, and House Transportation Chairman Joe Pickett, D-El Paso, confirmed Tuesday that differences between the two chambers on how to dedicate some state tax revenue to roads have been resolved.

“I feel great about it,” Nichols said. “This is a win for Texas.”

Both Nichols and Pickett had passed measures in their respective chambers this session that would ask voters to amend the state constitution to dedicate some future revenue stream to the highway fund. Nichols’ Senate Joint Resolution 5 would have dedicated a portion of the sales tax already collected on vehicle sales. Pickett’s House Bill 13 would have dedicated some of the broader sales tax revenue. With one week left in the session, both measures will need to be amended to reflect the compromise and then approved by both chambers.

Under the deal, Texans would be asked to amend the constitution to dedicate $2.5 billion of the general sales tax to the highway fund right away as well as a portion of future motor vehicle sales taxes beginning in 2020, Pickett and Nichols confirmed.

Both funding streams will have triggers attached to them in case of downswings in the state economy. The general sales tax revenue dedication could be halted if sales tax revenue comes in lower than about $28 billion in a fiscal year, which is around what the state collects today, Pickett said.

“As long as you’re over $28 billion in any fiscal year, there will be $2.5 billion transferred,” Pickett said. “It’s a really good safe number. If sales tax were to drop that low, then more than transportation would be in trouble.”

The motor vehicle sales tax dedication is more complex. The deal worked out there is for the state to transfer 35 percent of the growth of that revenue stream beyond $5 billion beginning in 2020.

Texans pay a 6.25 percent state sales tax on automobiles. As it stands, all of the vehicle sales tax collected, about $4 billion annually, goes into the state's all-purpose general revenue fund.

Pickett and Nichols said they are planning provisions to allow for future lawmakers to periodically reassess the funding dedications.

For years, TxDOT has warned lawmakers its funding is several billion dollars below what it needs to maintain current levels of congestion in a fast-growing state. Since 2013, Nichols had lobbied for dedicating some of the vehicle sales tax to road construction and maintenance, arguing that it is a logical funding source as it is expected to grow with inflation as well as with the state’s population. Pickett had argued that the general sales tax makes more sense, expressing concern that motor vehicle sales tax revenue is too volatile and doesn’t include people who do not purchase cars but do benefit from the state having a robust transportation system.

“Everyone who benefits from transportation does participate in sales tax,” Pickett said. “And it’s a broader number, so it’s less volatile.”

On top of this emerging deal, budget writers also managed to boost TxDOT’s budget this session, in large part through ending about $1.3 billion in so-called diversions, in which gas tax money was going to pay for items other than road construction and maintenance, primarily the Department of Public Safety. Budget writers also allocated $2.5 billion from funds raised through Proposition 1, a constitutional amendment voters passed in November that dedicates some of the tax revenue being collected from the oil boom to road construction and maintenance.

“I think the combination of several things we’ve done, one is with Proposition 1 from last session, the removal of the diversions from DPS combined with this, that basically will put us where we need to be,” Nichols said.

In February, Gov. Greg Abbott called transportation funding one of his five emergency items for the legislative session. Last week, a broad coalition of business groups including the Texas Association of Business, the Texas Retailers Association and the Texas Oil and Gas Association sent lawmakers a letter urging them to come to a deal before the session ends.

“We need a dedicated revenue flow to handle traffic growth and to keep people and business moving effectively and efficiently,” the letter read. “The state’s strong business climate and economic prosperity will become threatened if our transportation system falls further behind.”

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