Transportation Funding on Track to Becoming Major Issue in 2015

When this year’s first special session dramatically concluded last month in the Texas Senate with an energized crowd shouting to block passage of a controversial abortion bill, proponents of the measure were not the only ones upset.

Among the other bills that died in the intense parliamentary battle was legislation to increase financing for the cash-strapped Texas Department of Transportation. Gov. Rick Perry has included abortion and transportation financing to the agenda of the second special session.

But the leading transportation proposal would only reduce TxDOT’s financing shortfall, not erase it. Whether or not it passes, the agency’s financial woes are likely to loom larger than ever when lawmakers convene for their next regular legislative session in 2015.

“This is part of that solution. It’s not the whole solution,” said Senate Transportation Chairman Robert Nichols, a Jacksonville Republican and author of Senate Joint Resolution 1. The legislation would require voters to approve amending the state Constitution to allow sending half of the oil and gas severance taxes that traditionally fill the coffers of the Rainy Day Fund to the state’s highway fund. Thanks to the current shale-drilling boom in Texas, the measure is estimated to steer about $900 million more to TxDOT per year.

“I’m hoping that we can get this passed this special session so that the citizens can vote on it in November and when we come back next session, we’ll work on other revenue streams,” Nichols added.

Finding other revenue streams to finance road construction and maintenance was a top legislative goal this year. Yet many lawmakers refused to support proposals that involved raising taxes or fees or increasing public debt.

Sen. Kevin Eltife, R-Tyler, said he supports Nichols’ proposal but worries that the piecemeal approach would make it tougher to find a more sustainable revenue source in 2015.

“I almost believe a crisis in transportation would force us to a better solution,” Eltife said.

Most of the state’s transportation funds come from a 20-cent gas tax and vehicle registration fees. Neither revenue source has kept up with inflation. Over the last decade, Texas has increasingly relied on debt financing and tolls to expand its highway system.

Citing strong population growth and rising costs, TxDOT officials told lawmakers in January that the agency needs an additional $4 billion a year to maintain current traffic levels. Budget writers found the agency $200 million a year toward narrowing that gap.

A lack of urgency on the issue permeated the Capitol in part because there are major road construction projects underway across the state. That will change after TxDOT’s bond proceeds dry up in about two years, TxDOT Chief Financial Officer James Bass said. Drivers would still see some road construction work in 2016, but the signing of contracts for new projects would slow considerably.

“It would take a while for that to work it’s way through the process but you’d eventually see less and less activity on the highway system,” Bass said.

Nonetheless, some lawmakers are already laying the groundwork to address the issue more vigorously in 2015. On Tuesday, the House Appropriations Committee will meet to hear testimony on several transportation financing proposals. The hearing is expected to help promote revenue options that will be on the table in two years, according to people involved with its planning.

In the meantime, should Nichols’ plan draw the support of enough lawmakers this month, voters will be asked to approve it in November. State Rep. Joe Pickett, D-El Paso, predicted that lawmakers and business groups campaigning for the proposal would promote it without giving the impression that it represents a complete fix.

“I think they’ll do what they can to put a positive spin on it to get it passed but leave the door open to doing more,” he said.