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Republicans unveil $7 billion transportation plan for Minnesota

MinnPost photo by Briana Bierschbach
“We think this is what Minnesotans have been asking for,” Republican House Speaker Kurt Daudt told reporters. “They’ve been telling us they want investment in our road and bridge infrastructure, and they’ve been telling us they don’t want a gas tax.”

The terms of the Minnesota transportation debate are now set, after legislative Republicans unveiled a new $7 billion plan to fund road and bridge repairs over the next decade that doesn’t raise any new taxes.

House and Senate Republicans released a revamped transportation plan Monday that shifts about $3 billion of existing general fund money from taxes on auto parts, rental cars and auto leases into a new fund dedicated to road and bridge spending. The plan also dedicates $228 million of the state’s budget surplus to roads and bridges, $1.3 billion in Trunk Highway bonds, $1.2 billion from “realigning” resources within the Minnesota Department of Transportation (MnDOT) and promises to do more than $1 billion in bonding for roads and bridges over the next decade.

“We think this is what Minnesotans have been asking for,” Republican House Speaker Kurt Daudt told reporters. “They’ve been telling us they want investment in our road and bridge infrastructure, and they’ve been telling us they don’t want a gas tax.”

The new plan shows some movement — at least in terms of total dollars — toward what DFL Gov. Mark Dayton and Democrats in control of the Senate have been pushing. Dayton and the Senate are proposing a 16 cent per gallon increase in gas taxes, higher fees and a hike in the sales taxes in the metro area to pump about $11 billion into roads, bridges and mass transit over the next decade. An earlier plan from House Republicans put just $750 million into roads and bridges over the next four years.

Comparing transportation funding plans
Republicans’ new plan shows some movement — at least in terms of total dollars — toward what DFL Gov. Mark Dayton and Democrats in control of the Senate have been pushing.
GOP ProposalGov. DaytonSenate Democrats
Amount of funding
  • $7B over 10 years
  • $11B over 10 years
  • $800M in 2016
  • $1.1B annually starting in 2017
Source of funding
  • Moving existing auto part sales tax, car rental and leasing taxes into new "Transportation Stability Fund ($3B)
  • State budget surplus ($228M)
  • Trunk Highway Bonds ($1.2B)
  • "Realigning" resources in MnDOT ($1.2B)
  • General Obligation Bonding ($1.05B)
  • New 6.5% wholesale gas tax ($4.4B/10 yrs)
  • Increased vehicle registration and license fees ($1.45B/10 yrs)
  • ½ ¢ metro-area sales tax increase for transit projects ($2.8B/10 yrs)
  • MnDOT efficiencies (15% of agency budget — total unspecified)
  • General fund for Greater MN transit and bike/pedestrian upgrades ($145M/10 yrs)
  • Trunk Highway bonds ($2B/10 yrs)
  • New 6.5% wholesale gas tax ($580M/yr)
  • Vehicle registration fee increase($125M/yr)
  • ¾¢ metro-area sales tax increase for transit projects ($251M/yr)
  • MnDOT efficiencies (Unspecified amount)
  • Bonding for local bridge/road repair($567M)
  • Motor vehicle lease tax increase for Greater MN transit ($32M/yr)

But Democrats say the problem isn’t the amount of money, but rather how Republicans are funding transportation, using “budget gimmicks” that will take general fund money away from other things.

“The Republican plan is the same old shifts-and-gimmicks budgeting we've come to expect from them,” said House DFL Minority Leader Paul Thissen. “Siphoning money from schools and hospitals and relying on the state's credit card is no way to fund Minnesota’s transportation system. This is a ‘Give the Deficits Back’ Act.”

Republicans are pushing back on that narrative, saying the $3 billion they are shifting from the general fund is permanent, and a nearly $2 billion budget surplus for the next two years gives them enough wiggle room to prioritize funding within the rest of the state’s two-year, $40 billion budget. Full budget targets from House Republicans will be released on Tuesday. 

“It is out of the general fund but it is just as permanent as anything the governor has talked about,” said GOP Senate Minority Leader David Hann. “People in this state do not want additional taxes on gasoline.”

There’s also a huge gulf between DFLers and the GOP in another area — transit. Republicans dedicate just $16 million to metro and rural transit per year over the next decade. Dayton and Senate Democrats want closer to $3 billion over the next decade for transit development across the state.

Most of the money in the GOP plan would go directly to the state road system, while some would head to cities, counties and townships for their own repairs. Republicans say the plan will repair 15,500 lane miles and 330 bridges, but they didn’t designate specific projects like Dayton, who earlier this year released a list of more than 600 roads and bridges that would be repaired under his plan.

Republicans say they will leave it up to MnDOT to allocate funds to individual projects, but they believe the agency could fund nearly all the same projects with their plan.

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Comments (17)

I'm very curious how one

I'm very curious how one would 'realign' 1.2 billion dollars in existing MNDOT resources.

Efficiency

I think it's the same thinking as the DFL/Dayton proposals that talk about efficiencies within MnDOT. 10% of the FY2013 budget was spent on "Program Planning & Delivery" & "Agency Management/Other" - about $314 million. Dayton's plan specifies 15% of agency budget, of ~$47m a year (despite saying "total unspecified"). The GOP proposal shows ~$120m a year in savings over the next 10 years (average), so quite a bit higher (38% of agency management costs!). Of course, this assumes I'm pulling from the right buckets. Both targets seem hard to hit.

Ah, I see

"Dayton's plan specifies 15% of agency budget, of ~$47m a year (despite saying "total unspecified"). The GOP proposal shows ~$120m a year in savings over the next 10 years (average), so quite a bit higher (38% of agency management costs!)."

You are right, both targets ARE hard to hit, the 38% number seems unreasonably large (and just plain unreasonable), but I would easily make the same argument about the 15% of MNDOT budget target. I wonder if Dayton plans to add funding or other revenue to MNDOT to help offset that, and that's why it's listed as 'unspecified?'

Same old tricks

So Republicans want roads too, but here is their approach:
1. Borrow billions, which will need to be repaid with interest, sucking money out of the general fund that is now used for other purposes.
2. Directly transfer tax from the general fund and other sources that also now used for other purposes.

While Dayton identified new revenue sources (in detail) and got very specific on what projects were in and why - e.g. the long-overdue bottleneck at 35W and 494), Republicans are neither specific about what programs will have to be cut to "free up" the other funds or where they will be spent.

Theirs is a "solution" that just creates more problems and is on the "trust us to get it right" principle. Just like cuts to snow plowing and lax bridge maintenance during the Pawlenty administration, which resulted in the roads not being plowed up to Minnesota standards and "35W bridge is falling down" - definitely not a nursery rhyme. And not paying schools, forcing them to take out loans, to balance the state budget. And Pawlenty is making noises about coming back into Minnesota politics. Boy, doesn't that just fill you with confidence for the future of our state.

In case, you hadn't noticed, Minnesota in the last few years has got its financial house in order, while adding new programs and having unemployment and business growth rates that are the envy of many other places. Really, in the region, only North Dakota has done better. Unfortunately they are at the start of bust part of the boom-bust cycle. However, as they didn't assume their prosperity would be permanent, so they did tuck away money for a rainy day.

In contrast, Republicans would like to spend the vast portion of the surplus on Jesse checks and a piddling amount on the state's unmet needs, undoubtedly focus their cuts on the poor. Child poverty is going to impact us just as much as anyone else and Dayton has a plan to deal with it. Republicans would rather be out spending a tax refund than worrying about getting what we need and paying the bills - cost shift and borrow to get what they want - didn't work before and won't work at this time.

It's an interesting plan

…that relies on magical thinking. "Let's spend more, even though we don't really have any more to spend" is a method of fiscal operation that doesn't work at my house, and probably not in terms of the state, either. Since there's no assurance of a continued surplus in the state coffers, I think we can rely on the Republican tendency to fund stuff THEY like (roads, tax breaks, bribes to get businesses to move here) at the expense of stuff the DFL likes (schools, higher wages, transit, aid to the poor). As always, it's rarely a case of either/or, but more often one of where the emphasis will be placed.

There's more than a little irony is saying "The people of Minnesota don't want an additional gas tax" (something about which they may be correct), while simultaneously emphasizing the building of roads and bridges. There's quite a bit in this program that promises stuff for greater Minnesota while flipping the bird to the Twin Cities metro, which is where most of the money to fulfill those promises is likely to come from. A psychologist might call it "cognitive dissonance," or perhaps "ignoring the consequences of one's actions."

I'm inclined to think Republicans are correct in saying that a great many people don't want an additional gas tax. Children often don't like eating vegetables, either. Agreeing with that "no more tax" sentiment doesn't equate to good policy, and particularly good fiscal policy. Personally, I'd like roads and bridges to be free. I'd also like everyone to have glorious love lives, flowers in their yards (or balconies), and butterflies flitting happily from bloom to bloom. That doesn't mean it's going to happen. Paul Thissen is probably pretty close to the mark: this is a policy proposal that will return the state to those good ol' days of robbing Peter to pay Paul, starving the state's schools, and returning to a substantial state deficit.

Of course, a return to a sizable state deficit makes it easier for some who like to call themselves "conservative" to rationalize cuts to education and social programs they don't like, but should that come to pass, the public ought to keep in mind that the next deficit is likely to be a peculiar form of self-inflicted punishment.

meaningless

Entirely meaningless without explaining what they will be cutting from the rest of the budget to pay for it.

Are they going to screw over the schools again with a new shift, delaying funds? Wipe out health care? Pretend that there will magically be new revenue appearing because they say so, using their usual economic projections made up of pixie dust, sunbeams, and myrrh?

Hey, does this mean they're going to take down those moronic "give it all back!" ads, since they're now on record as planning to spend at least some of it?

Frauds, the lot of 'em.

GOP needs to account for inflation

The problem with the GOP assertion that the "budget surplus for the next two years gives them enough wiggle room to prioritize funding" is that the state (by GOP accounting rules) accounts for inflation when projecting future revenue, but DOES NOT account for inflation when projecting future expenditures. When you actually account for inflation when projecting future expenditures, the surplus dries up and disappears. The $3 billion transfer now actually results in cuts in order to be accounted for - what do they plan on cutting? You cannot determine the merits of this proposal until you can compare what is being gained against what is being given up. Will the cuts come from public schools? Higher education? Grandma's nursing home? Give us the details - then we can actually discuss the merits of this proposal.

Credit ding

It sounds like the Republican plan is to use one credit card to pay the minimum on another credit card and vice versa. That's a losing proposal. Especially since transportation, particularly one that doesn't rely on more highway miles to maintain, is essential for future growth. No one with any intelligence would claim that paying your mortgage with a credit card and then taking out a HELOC to make payments on your credit card is a solution to anything. And that's what the Republican plan is.

They might be right that relying on a gas tax isn't a good idea--but not the reason. The reason is that cars are more efficient, and may of them use no gas at all, a trend that will increase. Though, the gas tax shouldn't go away. If you're going to cling to your gigantic gas guzzling status symbol vehicle, you should contribute to upkeep of the infrastructure that it degrades. But, as green as the Tesla might be, its wheels still contact the pavement.

Maybe a new source of funding for road use should happen--it would be based on vehicle weight class and mileage, payable semi annually. It would be called Road Club Membership Dues (NO NEW TAXES!). If the usage fee is not paid, plates will be suspended for the vehicle and you will make up for unpaid membership dues and then some when you get pulled over. Trucks entering the state will be assessed electronically or manually based on systems already in place (weigh stations). Bypassing this system will result in significant fines that exceed the expected membership dues. Non-truck visitors will remain reliant on gas taxes until a better system can be figured out.

VMT+

I like Rachel's idea of combining mileage with weight. Vehicle weight has far more to do with pavement damage and subsequent maintenance expenses than any other single factor, including weather. We might never get a practical handle on the privacy issues surrounding electronic monitoring of mileage, but by comparison, weight is easy – even if we used actual weight and not just manufacturer's numbers. Accurate scales are not that difficult to build, and they're mechanically (and even electronically) relatively simple compared to a computerized road mileage device and the associated monitoring.

I see a lot of weight stations closed along the interstates, but Rachel's proposal might see them returned to fully-staffed, 24/7/365 status, which would be a good thing.

It's interesting that much of the opposition to increased gas taxes is coming from the same people who, in a different context, would argue in favor of "user fees," which is all that a gas tax really is. I'm not opposed to higher fuel taxes, but as vehicles continue to improve their efficiency (my year-old SUV has averaged 30 mpg – about 30% better than the "subcompact wagon" it replaced), fuel taxes are going to have to at least be supplemented by something else, and the combination of VMT and weight monitoring sounds to me like a good way to do that.

No Matter How Carefully They Try to Hide It

It's still the same old Republican "agenda,"...

yes, it may seem ironic, but the people who accuse everyone else of having an "agenda" have long used that accusation to hide a massive agenda of their own,...

in this case shifting the cost of paying for our states roads and bridges from the gasoline tax, which collects the money to pay for the system directly from those who use it most heavily,...

most specifically big business and transportation,...

to the general public,...

while borrowing massive amounts of money with ZERO plans to pay it back for the exact and sole purpose of creating a budget crisis in the future,...

which will allow them to cut things which the vast majority of state's citizens support while claiming "we can't afford them,"...

i.e. programs to assist the poor and disabled (including those who are so by virtue of their age - welcome to your non-retirement boomers),...

public education - for no other reasons than that the teachers are unionized and they reflexively detest ALL forms of labor organization,...

and all members of those organizations,...

and, of course good schools teach kids to see through this kind of bull excrement far more easily.

We, the citizens of Minnesota have been down this Republican path before during the Pawlenty years. We're NOT EVEN REMOTELY interested in going back,...

except of course for that "conservative" (reactionary) portion of the Republican base who continued to love Tim Pawlenty even after he did so much damage to the state,...

and would have loved him even more if he stayed and did even more damage.

What was that song?

Now look at them yo-yo's that's the way you do it
You play politics on the TV
That ain't workin' that's the way you do it
Roads for nothin' and your bridges for free!

Future Tax Increases and Cuts

I realize it's just a $320,000,000 nit-pick, but the actual Republican total listed in the article is $6.68 billion.

Here's how it breaks down in terms of percentages:

Trunk Highway Bonding: 18% (1.2 billion)

General Bonding: 16% (1.05 billion)

MnDot "Realignment" (savings): 18% (1.2 billion)

General Fund Shift: 45% (3 billion)

Surplus allocation (one-time?): 3% (0.23 billion or 228 million)

That boils down to:

34% of the total being borrowed (deferred taxes);

18% from Department of Transportation savings (but how?);

A whopping 45% coming from General Fund Shifts; and

A seemingly "miscellaneous, one-time, 3% rounding error" surplus "give back" kind of thing.

If anyone knows the formula for (quickly and easily) calculating the interest on $2.25 billion in bonds it would be interesting to know the REAL cost and what that would mean in terms of future tax increases.

(Seems to me "I heard one time" that it's something like $50 million per year per $1 billion bonded/borrowed??? which would be $100 million+ per year X 10 years which would add another $1 billion, or nearly "1/2 again" that would need to be paid back by the hard working taxpayers of Minnesota "later" for "roads and bridges" instead of paying $2.25 billion in "as we go" cash. Is that anywhere near correct?)

And, as has been mentioned, where will the $300 million per year of General Fund Shifts/cuts come from and how do you suppose THOSE things might poll with voters?

Not "Fiscally Responsible" or smart or like anything any sane "Minnesota family, sitting around the kitchen table, balancing their checkbook" would do (as Rachel Kahler put so well)... But I guess it DOES make it possible to tell the voters that you dedicated $7 billion to "roads and bridges in a common sense way" without raising their taxes when you actually did.

And by the way, I had to look up "Trunk Highway Bonding" and, from what I can tell from the "Debt Management Policy" page of the MnDot web site, they're not big fans of doing that and seem to say it should be used as a "last resort" only, and when it is, every effort to "cancel" them, by using appropriated funds instead, should be made prior to the bonds being sold.

http://www.dot.state.mn.us/policy/financial/fm007.html

The rough number

For a loan of $2.25 Bil @ 3.5% compounded weekly (no principal pay down) $1,514,423 (a week) $78,750,000 per year, over 20 years $1.575B, plus you still owe the principal.
Monthly: $6,562,500, $78,750,000, $1.575B
Wonder if that's where the Amerprise CEO makes part of his $97M a year?

Thanks

I kept wondering, so I called up the MMB (of all things!), talked to a nice guy, told him I was just an average idiot wondering if he could tell me roughly how much the interest, or debt service, would amount to on a "per billion basis."

He looked around at some stuff, asked me to hold on a minute, put me on hold, came back and said, "Can I call you back tomorrow on that? Our real expert isn't in the office today, and I'd like to ask her instead of giving you my best estimate."

"Sure," I said.

He called back (first thing this morning - great service!) and, in those "roughly" terms, it goes like this:

Interest rates vary, depending on when bonds are sold, but right now the rate on Trunk Highway bonds would be 4.5% and General Obligation bonds would be 4.4%.

$1 billion of TH bonds would cost $1,442,158,133 over 20 years (which is the period they use, I guess); and

$1 billion of GO bonds would cost $1,402,625,431.

Naturally, I forgot to ask him if that means that's the "payback" of the entire bond, which would mean the interest paid on it would amount to $400+ million over 20 years ($20 million per year, I think?), of if it means the total INTEREST paid over those years would be $1.4+ BILLION which would seem a little too insane, no?

I'll have to call him back one of these days to clear that up, but I suspect it's the first option.

Between the time I first talked to him and this morning, I found myself wondering about the whole "bonding thing," and one of the things that occurred to me (and that he confirmed) is how the "payback" is paid by ALL taxpayers - whether they drive or not.

"Hmmmmmmm," I thought. "Maybe that's not such a bad idea because, when you get right down to it, who DOESN'T use the roads?"

Anyway... It's no wonder to me people have a hard time figuring out what any of this stuff actually costs - no matter WHAT it is. The numbers are so huge that they're tough to grasp all by themselves.

Like a "40 billion dollars" is what, 40 thousand million?

"So let me see... If I was making a million a year, and I took two weeks vacation, that would mean I'd get a $20,000 (gross pay) check every week? I wonder what the actual take-home amount would be....

"What if I made 40 billion next year? What kind of weekly paycheck would I get then? Let's see... $20,000 times 40,000 is what?.. Oh, man... My calculator can't handle that... I gotta go to bed. I'll think about it tomorrow, maybe put it in a spreadsheet, see if I can figure out how much tax I'd probably have to pay on THAT. I bet that'd REALLY tick me off!"

OK Bill Willy

You owe me one! Not bad for a back of the envelope calculation! if I say so myself!

Yes it is

"We think this is what Minnesotans have been asking for,”

Very insightful, yes, we all agree , we want a free lunch. Unfortunately, only the GOP actually believes there is such a thing as a free lunch. Global climate change is being caused by Teddy Roosevelt spinning in his grave at the speed of light.

"...telling us they don’t want a gas tax"

Then the grown-up thing to do is tell them they don't get a new road if they won't pay for it. It seems a bit daft of the people who bill themselves as the fiscally responsible ones to build anything at all with borrowed money and no good plan to pay those loans back, but hey that's the next guy's problem, right?

I also like how wiping out all transit funding for the metro is called "realigning" resources. Nice doublespeak there. I'm sure all the moderate suburbs in the metro that might have leaned right this election will be super thrilled when all the money the metro pays goes outstate and things get worse and worse in the core.