June 5, 2014
At the close of the spring legislative session, the Illinois General Assembly passed HB 3794 and SB 3224, which together will provide for $1.1 billion in new bond proceeds to support transportation investment. This amount is considered a modest capital program in comparison with the preceding $31 billion, six-year Illinois Jobs Now! program for transportation and other capital improvements. While the new revenues authorized by HB 3794 and SB 3224 deliver additional resources for the State, they do not address any of the structural policy issues facing transportation funding in Illinois – namely, the need for steady, reliable revenues and performance-based project selection.
Under the legislation, the Illinois Department of Transportation (IDOT) will receive $1 billion for capital expenditures; eligible work types include engineering and construction of roads and bridges, bikeways, land acquisition, and facilities in support of the vehicle weight enforcement program. The remaining $100 million will be directed to local governments as follows:
- Municipalities: $49.1 million
- Cook County: $16.74 million
- Other 101 counties: $18.27 million
- Township and road districts: $15.89 million
The bills do not specify how funds will be distributed within each group of local governments, although the overall funding levels are consistent with the state's local motor fuel tax (MFT) sharing program. In that program, municipalities receive funds based on population, counties receive funds based on motor vehicle licenses fee receipts, and township and road districts receive funds based on mileage of township roads. Local governments may spend these new bond funds on a range of work types in support of "public infrastructure or other transportation improvement projects… related to economic development."
The $1 billion in funding for IDOT will provide an increase over planned expenditures: the current FY 2015-20 program schedules $1.89 billion in spending in FY 2015 and a total spending level of $8.6 billion through FY 2020. It is important to acknowledge that planned expenditures are below the levels needed to adequately maintain and modernize the transportation system. For reference, a 2012 report from the State Budget Crisis Task Force identified an estimated 30-year investment need of $171.4 billion for roads and bridges.
Adopted in May 2013, CMAP's principles for a new state capital program detail the necessary reforms to state transportation funding. Its three overarching principles include (1) new user-fee generated revenues, (2) ending the 55/45 split and moving toward performance-based project selection, and (3) providing additional capital funding for transit. The following analysis demonstrates how HB 3794 and SB 3224 fail to meet these principles.
- User-Fee Revenues
The source of revenue for the bills is of concern. The bills rely on bonding, which does not provide new revenue sources but rather borrows against future revenues. In this case, debt service will be provided by the Capital Projects Fund, which was created in 2009 and receives revenues from a variety of new taxes and fees imposed at that time. As described in this Civic Federation report, these new revenue streams include the legalization and taxation of video gaming, an expanded sales tax on certain products (e.g., candy, sweetened beverages, and some hygiene products), leasing a portion of the state lottery operations, increased liquor taxes, and increased vehicle registration and licensing fees. Beginning in 2013, less than half of the revenue sources accruing to the Capital Projects Fund have come from transportation user fees. It is unclear how much the new $1.1 billion issuance will burden the Capital Projects Fund over the long term, depending on the bonds' interest rate and term.
Bonding provides a one-time infusion of revenues, rather than an ongoing enhancement to revenues. GO TO 2040 notes that the State's past reliance on episodic bond programs creates "boom-and-bust" cycles of funding availability. In fact, the State currently expects its transportation resources to decrease as Illinois Jobs Now! comes to a close. A previous Policy Update discussed various issues that Illinois Jobs Now! has faced in providing adequate debt service.
Additionally, HB 3794 and SB 3224 do not address any of the structural issues that undermine the State's traditional revenue sources for transportation -- the MFT and vehicle registration fees. GO TO 2040 notes that inflation in construction costs and improvements to vehicle fuel economy leave these traditional sources unsustainable over time. In the near term, the GO TO 2040 recommends raising the state MFT by 8 cents per gallon and indexing it to inflation. In the long run, the plan acknowledges the need for a more sustainable source of user fees, such as vehicle-miles traveled fees.
- 55/45 Split and Performance-Based Funding
GO TO 2040 also calls for maintaining the existing system before modernizing or expanding it, and there is no language in the bills to steer these new resources toward maintenance. In fact, there is no language on the programming of these resources at all, and so there is no guarantee that the State and local agencies will employ a transparent, performance-based approach to investment decisions. In Illinois, the highway program is subject to a long-standing informal policy that directs 45 percent of transportation funds to northeastern Illinois and the remaining 55 percent downstate. This 55/45 split is not a law -- rather, it is an agreement established decades ago within the General Assembly and followed by IDOT -- nor is it based on any measure of investment requirements.
- Transit Capital Funding
HB 3794 and SB 3224 appear to be highway focused. They would appropriate funds from the Transportation Series D bond fund, which supports highway and bridge expenditures, and the legislative language makes no explicit reference to supporting transit investment. While there are substantial highway funding needs, GO TO 2040 specifically calls for an increased commitment to public transit. There is no dedicated source of capital funding for the region's transit agencies, which collectively face a ten-year, $20 billion state of good repair backlog and a ten-year, $13.4 billion need for normal capital reinvestment.
Short-Term Revenue Influx without Reform
Transportation funding issues have received attention in recent legislative sessions. For example, the Transportation for Illinois Coalition supported a proposal to substantially reform transportation funding in Illinois. HB 3794 and SB 3224 have passed both houses of the General Assembly, and as such have progressed further in the legislative process than any other recent proposal.
CMAP has well established positions on transportation policy. As this analysis demonstrates, HB 3794 and SB 3224 do not meet any of the agency's three adopted principles for a new state capital program. Further, GO TO 2040 supports other innovative approaches to transportation funding -- such as congestion pricing, raising and indexing the MFT, implementing value capture, and finding a long-term replacement for the MFT -- that might require or benefit from state legislation.
These policies are critical to ensure the long-term health of the regional transportation system and, by extension, the regional economy and quality of life. CMAP will continue to articulate these policies as it remains engaged in the broader conversation about transportation funding in Illinois.