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Funding transportation: The Corbett plan comes up short & raises new questions

| Saturday, Feb. 23, 2013, 9:00 p.m.
300 dpi Phill Flanders illustration of a bus traveling through scenic mountain countryside. The Miami Herald 1995

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In his proposed fiscal year 2013-14 budget, Gov. Tom Corbett lays out a plan to increase transportation spending for state highways and bridges, help with local roads, turnpike projects and mass transit. But it's fraught with problems.

The spending blueprint calls for raising additional revenues primarily through eliminating the cap on the Oil Company Franchise Tax, a tax applied at the wholesale level. Other transportation taxes will be lowered — such as reducing the liquid fuels tax on gasoline by 17 percent, or 2 cents, over two years — a partial offset to the retail price increase likely to happen as the franchise tax increases.

Some administration accounts have suggested that transportation-designated revenues will increase by about $500 million next fiscal year and over five years increase to about $1.8 billion annually beyond the current level in fiscal 2017-18. If the reports are accurate, the plan will raise and spend an additional $5.4 billion more than would happen without the tax increase over the next five years.

However, based on data in the budget, these figures appear to be overly optimistic if not unserious. And there are fundamental problems in outlays.

An immediate question arises concerning the use of the Oil Company Franchise Tax for mass transit. Motor fuels taxes are constitutionally not permitted to be used for purposes other than highways and bridges. Unless there is a plan to shift fungible revenues to mass transit, the plan as proposed probably will not pass muster. If there is such a provision, it is not spelled out anywhere in the state's transportation plan or in the recently released budget.

One thing is certain — motorists will not take kindly to having pump prices go up to pay for mass transit. Especially motorists in most of non-urban Pennsylvania where there is no public transportation. And even more especially when the income transfer is going to support transit agencies that are egregiously expensive and cost-inefficient.

Local transit should instead receive a large share of its support from a local tax levy that has been put to voters in a referendum. A local option sales tax, for example, distributes the cost of subsidizing public transportation to those who benefit most from the presence of the transit services.

A share of parking tax revenue in a county or city would be another option for raising revenues to subsidize transit. Beyond the funding source considerations, it is incumbent on the commonwealth as creator of the transit authorities to take more responsibility to help ensure efficiencies of operation and to keep costs under control. For instance, Pennsylvania should immediately end the right of transit workers to strike. The right to strike has been the single biggest factor in driving the Port Authority to virtual bankrupt status.

And the appointment of board members of the Port Authority exclusively by the chief executive of Allegheny County is another serious problem. The Legislature and governor should look for ways to ensure high-quality, nonpolitical appointments to such boards.

Moreover, Pennsylvania will continue to ill-serve its taxpayers until it eliminates the prevailing wage requirement on construction and maintenance projects that use state tax dollars. Many millions could be saved each year that could be returned to taxpayers or shifted to other core services.

Finally, the transit plan will gradually raise the local match to receive money for capital projects to 20 percent from the current 3.3 percent and gradually increase the match to receive operating dollars from 15 percent to 20 percent. These changes are designed to help ensure better local management.

It could help restrain unnecessary and poorly thought out capital projects. In Allegheny County, the 20 percent match requirement could lead to a hike in the drink tax, which was originally created to generate the local matching money but was lowered from 10 percent when it produced more than enough revenue to meet the county match.

Another provision in the proposed mass transit scheme requires local transit agencies to modernize services by carrying out consolidation studies. If cost savings can be realized and agencies implement the consolidation, they will have their match requirement drop from 20 percent to 15 percent. If they fail to adopt the changes, their local match will rise to 25 percent.

Unfortunately, what is meant exactly by consolidation studies is not clear. Does it mean consolidation of routes or service runs within a county's transit agency? Or does it mean consolidation of services with other counties' transit agencies? If the latter, the opportunities for the Port Authority are slim indeed because of its very high labor compensation costs compared to the other regional agencies.

Who will evaluate the studies to see if they have assiduously looked for savings or considered sufficiently radical changes that would produce significant savings? Rather than trying to force consolidation as a way to lower costs, the language of the bill ought to set outsourcing targets — with either private carriers or other regional carriers.

In short, the proposed mass transit plan offers little in the way of real structural change either in management or in the underlying drivers of cost.

Jake Haulk is president of the Allegheny Institute for Public Policy.

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