NOTE: This is the first in a three-part series on the transportation wrap-up to the 84th legislative session of the Texas Legislature.
The 84th session of the Texas legislature just concluded yesterday, but the fallout will be felt by taxpayers for decades to come. Over 75 bills were filed to replace or curtail tolling or to make it more transparent and accountable. When factoring in property rights and efforts to restrict eminent domain abuse, the total came to 96. So with a pipeline full of bills should have sent a strong message to leadership that the taxpayers sent elected officials to Austin to significantly curb if not stop toll roads. But the momentum quickly came to a halt when only a handful of anti-toll bills got a hearing, and very few key bills passed. Of those that did, most were watered down.
Transportation and toll road concerns have been front and center for many years as a toll road onslaught has taken hold across the state, but Texans overwhelmingly elected a new Governor, Greg Abbott, last year who campaigned against toll roads. He emphasized in the debates, “My plan does not involve any toll roads, period. I’m not interested in adding toll roads in my plan.”
So the expectation of voters is that Abbott is going to stop the march of toll roads. But Abbott’s sole focus during the session was getting additional funds to the highway department and restricting those funds to non-toll projects. Meanwhile, 100% of the state highway fund (comprised of gasoline taxes and registration fees), can and is being used to subsidize loser toll projects. In fact, over $6 billion has already been diverted to toll projects, which is a Texas-sized double tax.
The Texas GOP platform and grassroots advocacy groups want the flow of public money subsidizing toll roads to stop as well as to remove the toll once the road is paid for (ie -once the debt is retired). But neither the House nor Senate moved those bills. Only three of the grassroots’ top seven priorities made it through.
Rep. Jeff Leach tried to protect taxpayers from double taxation by offering an amendment to the budget to block state funds from from going to toll projects, but it failed by a vote of 89-52 (even after lawmakers watered it down). The Texas Department of Transportation (TxDOT) has a one trick pony that works most every time. They send out their troops to tell legislators if they stop the flow of public money to toll roads, all their projects will come to a screeching halt since virtually all new capacity is slated to be tolled, and these projects are using mounds of state money to do it. Leach filed an amendment to HB 13 to do the same, but it was blocked from even being heard by Speaker Joe Straus and his parliamentarian through executive fiat (outside the normal rules for how amendments get considered).
Senator Don Huffines who filed SB 1182 as well as a constitutional amendment to protect the highway fund from being raided for toll roads, also tried to tack it onto another bill (HB 13 or HB 20) in the Senate, but Lt. Gov. Dan Patrick ultimately failed to support it and Huffines was told it lacked the votes to pass. Without public subsidies, 99.9% of all currently planned toll roads could not be built. It would force the projects to be done as non-tolled expansion.
The big funding bill that did pass is SJR 5, which is a constitutional amendment that will come before Texas voters November 3. It was authored by Senate Transportation Committee Chair Robert Nichols to dedicate $2.5 billion of the general sales and use tax (above the baseline of $28 billion), and thirty-five percent of the vehicle sales tax (above the baseline of $5 billion) to non-toll highways. The general sales tax won’t be implemented until 2017, and the vehicle sales tax dedication won’t kick in until 2019.
Both provisions are subject to the whims of the legislature and can be suspended with a two-thirds vote, however, they cannot reduce the allocations below 50% of the anticipated amount. The sales tax dedication sunsets in 2032 and the vehicles sales dedication sunsets in 2029. A majority vote of the legislature can extend the dedication in ten year increments.
The far better version of this bill, HB 2686, by Rep. Matt Shaheen would dedicate 100% of the vehicle sales tax to the highway fund immediately and permanently. But after the legislature got a hold of SJR 5, it’s been watered down to the point of no longer being a reliable long-term revenue source.
Abbott campaigned on dedicating a portion of the vehicle sales tax to highways and made it an emergency item in his State of the State address. The purpose is to get a long-term, reliable revenue source for highways since, by law, TxDOT has to show how it will fund projects 25 years into the future and it cannot put a project into the long-range plan until it shows how it will it be funded.
Gasoline taxes alone have not been adequate to fund new capacity for quite some time, but fearing the wrath of voters if they raised the gas tax, the legislature at the cheerful insistence of former Governor Rick Perry, turned to toll roads as their get out of jail free card. However, paying tolls is ghastly more expensive (15 – 80 cents a mile compared to 1-2 cents a mile for a gas tax funded road) than any gas tax increase, so the punitive, escalating toll taxes have caused a backlash. The Texas Transportation Institute found in a survey last fall that of 15 possible transportation solutions, Texans ranked toll roads dead last.
Those pesky gas tax diversions
Another reason for the funding shortfall, which is a particularly sore spot with taxpayers, has been the legislature’s persistent raid of gas taxes for non-road purposes. So this session, the legislature did put an end to most diversions, funding the Department of Public Safety (DPS) through another source. Ending the DPS diversion does add an additional $675 million to the highway fund annually. However, twenty-five percent of the gas tax is still diverted to public education. To end it would require a change to the Texas Constitution, which the legislature is already doing with SJR 5, and they could have included an end (or even a phase out) of the school diversion on the ballot.
Instead of truth in taxation, the legislature chose to use some general sales tax to plug the road funding hole in SJR 5, when they could have used that same sales tax (which already funds schools) to replace the lost school funding in order to send 100% of the gas tax to the highway fund as taxpayers expect. This is a much simpler and more transparent approach, but that was rejected in favor of a complicated new formula the average citizen cannot possibly trace to the original tax.
Major boost to road funding
SJR 5 together with Prop 1 that passed in 2013 and was approved by voters last year, and the partial end to gas tax diversions, means a total net gain of $5 billion a year in new road funding is headed to the highway fund. By anyone’s measure, that’s the most significant infusion of highway money in a generation. You’d think this would stop the threat of toll roads in itself. But judging by the last two Texas Transportation Commission meetings chaired by Abbott’s new Commission Chair and former legislator Tryon Lewis, it’s business as usual at TxDOT. The only state funds approved by the Commission ($418 million) have gone to two toll roads – not freeways. Maybe he didn’t get the memo about Abbott’s campaign pledge.
HB 122 by House Transportation Chairman Joe Pickett will stop TxDOT from issuing new debt from the Texas Mobility Fund, a fund that almost exclusively subsidizes toll projects. Rep. Ron Simmons successfully amended the bill on the floor to block those funds from being used on toll roads (but only for two years). But even that wasn’t without a challenge. TxDOT’s one trick pony was trotted out once again, threatening lawmakers the amendment would stop all their projects. Pickett had to call in Chairman Lewis to call off the dogs and convince House members that the sky wouldn’t fall and projects would not stop if they restricted Texas Mobility Funds to non-toll roads. It sailed through the Senate with the amendment in tact.
Elimination of some toll roads coming?
Pickett also authored HB 2612 which requires TxDOT to give a report to the legislature on the possible elimination of some currently open toll roads. It will lay out a plan to accelerate the pay-off of toll debt or buy them out in a lump sum sooner. It does not apply to tollways funded completely with bond debt by another entity, like the Harris County Toll Authority or North Texas Tollway Authority (NTTA). It only applies to roads with state funding – not all toll roads.
So while passage of HB 2612 is progress, it doesn’t tell the whole story. Leadership in both chambers blocked the bill to eliminate all tolls once the debt is retired, SB 485 by Senator Lois Kolkhorst (and the House companion bill HB 1734 by Shaheen). SB 485 would also prevent most current toll projects from advancing due to the restrictions on Robin Hood financing schemes that rely on perpetual toll revenues from one road in order to finance and prop-up others that can’t pay for themselves known as system financing. HB 2612 by contrast requires a plan to eliminate some tolls, doesn’t end system financing, and does not prevent the current tsunami of planned toll roads across Texas.