Did Louisiana Treasurer John Kennedy, a potential 2015 gubernatorial candidate, recently give a green light to tax increases for transportation? If so, he’s off the more solid ground he occupies in his lectures of the virtues of prioritization.
Kennedy, in speaking to the Transportation Funding Task Force, noted that the public was wary of any additional funding requests for roads building and maintenance unless it was convinced these were carried out in a fashion that reflected true needs of the state, citing other spending uses of capital funds on construction projects that very few would call an important priority. The group is to meet four times prior to next year’s legislative session to give recommendations on how enable the state to eat into a roughly $10 billion backlog of roads requests.
If Kennedy meant he was open to a tax increase to do this, he would be joining for him unusual company. Also on the panel is a former secretary of the Department of Transportation and Development, Kam Movassaghi, who made it a habit during his tenure than encompassed the last six years of the former Gov. Mike Foster Administration to call for tax increases. Even now, one recommendation he wants the group to forward would be to replace the existing regular gasoline tax, the main source of funding for roads, of 16 cents per gallon with an 8 percent levy, which at present oil prices would work out to be around a 50 percent increase, arguing that the tax has less than half of its purchasing power when it was enacted three decades ago.
When Kennedy flirted with running for governor in 2003, he raised Movassaghi’s ire by claiming the state took about 15 percent overhead in its operation, to which Movassaghi alleged it was only 4.6 cents on the dollar. In reality, the fiscal year 2004 budget, the last Movassaghi constructed, put the cost right around the national average at 6.8 percent. Regardless, Movassaghi’s and Foster’s leadership over the function garnered much criticism about efficiency, as by the end of their terms, with Movassaghi replaced by the next Gov. Kathleen Blanco shortly thereafter, statistics showed Louisiana’s highway costs as 4.6 percent above the weighted average of nearby states.
But now out of office for a decade years, Movassaghi suddenly has new ideas about the issue besides the old one of raising taxes. He also wants the group to propose to move to a transportation commission model as a number of states use to oversee their similar departments, where collectively members appointed to staggered fixed terms of some length make decisions instead of a single executive appointed by the governor and confirmed by the Senate. He argues that single appointed executive approach can leads to too much political interference and not enough continuity in planning, given the ease at which a head can come and go.
As these commissions have been around for awhile along with knowledge of the advantages and disadvantages of each model, one wonders why Movassaghi never brought this up when he held the job that he now wants abolished. Regardless, there’s nothing that prevents DOTD in its current configuration from long-term planning because legally it provides the legislature annually with a priority list of projects that the body only may reduce, not add to. Further, a single executive has the advantage of looking at the state and its needs as a whole, while a collective executive would encourage logrolling among its members that would deemphasize statewide prioritization. So there’s no real evidence that this approach would improve the quality of spending decisions.
Rather, Kennedy’s notion that better prioritization of overall capital spending, joined with a reallocation idea floated by another committee member, state Sen. Robert Adley, makes more sense. The state overfunded this year money for roads going to parishes by giving $46 million instead of the legally-required $30 million to be delivered to the Parish Transportation Fund, which Adley said should be changed to the minimum. Also extra coming out of the state’s Transportation Trust this year was almost $60 million to fund continuing operations of the State Police. Adley maintains that getting parishes to fund more of their own work (or do less of it) and funding only capital operations would save a baseline $76 million annually that could be put entirely to the regular repair needs of the state which got $27 million this year when Adley believes $70 million a year is more realistic.
While additional funds will be made available through a reallocation process of vehicle sales taxes, that kicks in only when a budget deficit due to a decrease in forecast revenues occur, and then only gradually. Assuming that doesn’t happen for next fiscal year, it would be almost a decade before the full amount of around $450 million becomes available to work on the backlog. The theory is growing revenues plug for where the vehicle sales taxes were going; clearly the cavalry is on the way to reduce the backlog.
But until then, maintenance need not be neglected. The $16 million shift is easy enough from the state’s perspective, but the $60 million may be another matter as it needs an equivalent amount to come from somewhere. Among announced 2015 gubernatorial candidates, Sen. David Vitter pledges against the diversion but has no solution at this time to substitute for it, while state Rep. John Bel Edwards seems more likely to raise taxes to fund for that (presumably if allowing for the diversion of up to 20 percent to keep occurring by raising the regular retail gasoline tax to compensate). However, other solutions already abound, such as by getting rid of nonproductive tax exceptions like the motion picture investor tax credit or the earned income tax credit. Yes, next session is during an election year, but if roads really are a priority, tax exceptions like these can be axed instead of taking more of the people’s resources and raising the cost of business as a whole.
Reorganizations won’t solve for underfunding roads, nor are tax increases necessary. Prioritization not just among roads projects but among all capital outlay requests and in judging the utility of tax exceptions will, providing enough resources to conduct adequate maintenance while waiting upon the diversion of retail vehicle sales taxes to ramp up in the coming years to erode the backlog. It’s this strategy the panel should pursue, and recommend next year to the Legislature.