TxDOT Tells Lawmakers Funding Crisis Around the Corner

After funding billions of dollars in roadwork through debt over the last decade, the Texas Department of Transportation is two years away from a severe drop in funding unless lawmakers find more cash, agency officials said at a budget hearing Monday.

TxDOT Chairman Phil Wilson told the Senate Finance Committee that the agency is at a crucial turning point as large state bond programs are set to hit their limit by 2015.

“The fact is, we’re running out of capacity to issue the debt — we’re maxed out — and that’s where most of our money comes from,” Texas Transportation Commission Chairman Ted Houghton told the committee.

More than a decade ago, lawmakers paved the way for an era of “innovative financing” at TxDOT in which the agency ramped up highway projects largely by issuing billions of dollars in bonds and approving more toll roads. The spending peaked in 2009, with TxDOT moving forward with more than $9 billion in highway contracts that year, according to written testimony submitted by the agency to the committee Monday. If new revenue isn’t found, TxDOT expects funding to drop to less than $3 billion in highway projects in 2016 — a level far short of meeting the needs of a state growing as fast as Texas, agency officials said.

Wilson told senators the agency needed at least $4 billion a year in additional funding: $3 billion for expanding the state’s transportation network and $1 billion to keep up with maintenance. Exacerbating the situation is truck traffic related to the natural gas drilling boom that has caused billions of dollars in unexpected damage to roads and bridges around the state in recent years.

Finance Committee chairman Tommy Williams, R-The Woodlands, described the situation as “a fiscal cliff of highway funding.”

“This is one of those areas where really the future of our state is hanging in the balance,” Williams said.

TxDOT officials said the agency has accrued about $13 billion in debt. Its proposed budget for the next two years proposes devoting $2.5 billion of its $20.8 billion budget to servicing that debt.

State Sen. Kevin Eltife, R-Tyler, said the amount of money TxDOT is having to put toward its debt shows that lawmakers have made poor decisions about transportation funding. He said raising taxes years ago would have been far cheaper than the situation the state currently faces.

“Sometimes the conservative thing is to pay cash,” Eltife said.

While Sen. John Whitmire, D-Houston, agreed with Eltife that lawmakers needed to find more revenue for TxDOT, he expressed annoyance that agency officials hadn’t spoken more urgently at the hearing and beforehand about how serious the problem is.

“Y’all don’t seem nearly as excited and anxious as I would expect. …Y’all got to get excited if you expect the Legislature and its constituents to respond,” Whitmire said.

He accused Wilson, who was appointed to head the agency in 2011, of passively taking his salary and not aggressively tackling the problems.

Wilson apologized if Whitmire didn’t feel a sense of urgency from the presentation but took issue with the notion that he wasn’t committed to finding a solution.

“I came back to try and fix this,” Wilson said. “I didn’t come here to draw a check.”

At the hearing, lawmakers discussed several options for raising more money for transportation, including increasing car registration fees and withdrawing $2 billion from the Rainy Day Fund to finance $4 billion to $6 billion in transportation projects. Williams spoke about restoring $400 million of the $600 million in gas tax revenue that is currently diverted from the state's highway fund each year to support the Department of Public Safety.

Wilson declined to tell lawmakers which options he preferred but stressed the importance of having a reliable stream of revenue for TxDOT. Any short-term fixes will make it tougher to plan for projects in the future which will drive up costs, he said.

“That ability to plan for five to 10 years is just mission critical,” Wilson said.