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Serving Northern St. Louis County, Minnesota

Highway funding

All agree on the need, but GOP aversion to new revenue may block a deal

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Everyone agrees on the urgent need to fix Minnesota’s crumbling roads and bridges, but how to pay for those repairs is emerging as the key battle of this legislative session.

The need is apparent. According to state officials, Minnesota faces a transportation-funding gap of well over $1.5 billion a year. Minnesota Department of Transportation statistics show more than 65 percent of the state’s roads and 40 percent of its bridges will be more than 50 years old by 2025. Over that same time frame, semi-truck traffic is projected to rise by 30 percent, and the state will have 430,000 additional residents using the state’s roads.

The House GOP’s plan would, in theory, pump $750 million into roads and bridges over the next four years, comparable to the nearly $800 million annually that would be generated for roads and bridges under the Minnesota Senate DFL’s proposal, which closely mirrors a proposal put forward by Gov. Mark Dayton.

But there are big differences between the two plans and, unfortunately, that could prevent enactment of new road funding this year, despite the obvious need.

The problem comes down to the GOP’s ideological aversion to any additional tax, including any increase in fuel taxes or license fees.

Instead, their plan calls for draining the unreserved fund balance from MnDOT’s Trunk Highway Fund, using $200 million from the current state budget surplus, and forcing MnDOT to find $65 million in cuts, money which would be earmarked for road improvements. The problems with that plan are obvious. For one, it’s a very short-term solution to a problem that is long-term in nature. It’s also unrealistic to expect a state agency that is supposed to increase its workload to make significant cuts in their budget. Gov. Dayton described it as “fantasy,” which isn’t far from the mark. It’s not going to happen and Republicans know it.

The DFL plan provides a long-term source of additional funding, which is a step in the right direction. The plan accomplishes that by extending the state sales tax to motor vehicle fuels and by increasing license tab fees, and dedicating the additional dollars raised to roads and bridges.

The DFL plan is consistent with the widely-accepted view that those who utilize the state’s transportation system should pay for it. That’s the concept behind the gas tax.

The gas tax has flaws, of course, that are most apparent these days, when vehicles have become noticeably more fuel-efficient. Even though Minnesotans are putting on more miles, they’re buying less gas and that makes it hard for gas tax revenues to keep pace with the rising cost of road construction.

Further, the gas tax, by itself, lets some users off the hook. Drivers of electric cars, for example, currently contribute nothing through the gas tax. Raising license tab fees helps to capture more revenue from these vehicles, although a wheelage tax would be a fairer way to achieve the same goal.

The DFL plan is not perfect by any means. For one thing, by extending the sales tax to gasoline, the state runs the risk of creating greater instability in its funding stream, since variations in gas prices would significantly impact the amount of revenue generated. Gov. Dayton has already acknowledged that the recent drop in gas prices means his tax proposal could fall short of his revenue goal.

And that’s not the only problem. During times of rising gas prices, the extension of the sales tax will only exacerbate pain at the pump for Minnesotans. At $2 a gallon, Minnesotans would pay an additional 13.7 cents a gallon under the plan. But at $4 a gallon, the DFL plan would tack an additional 27 cents to the price of a gallon. That’s probably too big a lift, especially for rural and working class Minnesotans who often have to commute long distances to work.

If anything, that mechanism should be reversed, and the state should adopt a system whereby gas taxes bump up slightly as the price falls, but ease off during times of high prices. That levels out the price swings and minimizes pain to Minnesotans.

The details of a new funding mechanism are important, but unless the Legislature can first forge agreement on the fundamental issue— of whether the state’s roads will be fixed with a new revenue stream, or by taking funds from other funding priorities— any highway proposal is likely to remain stuck in neutral. If so, expect rough roads ahead.