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Is it possible to pay for Minnesota's transportation needs without raising taxes?

MnDOT
As part of the House transportation bill up for debate on Tuesday, Republicans would require MnDOT to find 15 percent efficiencies in its budget to pay for new projects over the next two years.

For Mark Dayton, it was a blessing and a curse.

In December 2012, a 19-member panel called the Transportation Finance Advisory Committee (TFAC), found that Minnesota faced a major gap in the future funding of its transportation needs. To address the issue, TFAC recommended spending $21 billion on roads, bridges and mass transit over the next 20 years. 

A little more than two years after the report was released, the TFAC recommendations would become the spine of Dayton’s transportation plan — a push to capture more than $11 billion in new revenues to pay for roads, bridges and transit over the next decade.

But while it provided the justification for Dayton’s initiative, the committee’s findings were also the origin of an idea that’s been seized upon by opponents of the governor’s plan: the notion that  “transportation providers” could help fill the state’s funding gap by finding “efficiencies” in their budgets.

“It was a very small, almost a footnote in the report,” said MnDOT Deputy Commissioner Tracy Hatch. “What has happened since then is it has really gained a life of its own.”

That is probably an understatement. Since the start of the 2015 legislative session, the word “efficiencies” has become a buzzword in St. Paul. Republicans and business groups like the Minnesota Chamber of Commerce — who’ve opposed Dayton’s call for tax increases to pay for his plan — say the Minnesota Department of Transportation (MnDOT), in particular, should help pay for new projects by finding efficiencies in its budget.  

In response, Dayton has said those figures don’t add up, going so far as to say that his opponents numbers are from “La La Land” and “Fantasy Island.” 

Dayton’s colorful rhetoric hasn’t stopped Republicans from pursuing the idea, though. In fact, as part of the House transportation bill up for debate on Tuesday, Republicans would require MnDOT to find 15 percent efficiencies in its budget to pay for new projects over the next two years. 

There is something of a wrinkle in that approach. There’s still a lot of debate about what “efficiencies” mean, exactly — and where they should come from.

So what are “efficiencies” anyway? 
As defined in the TFAC report, efficiencies are “transparent, accountable and cost-effective capital improvements with a high return-on-investment.”

MnDOT Deputy Commissioner Tracy Hatch
MnDOT
Deputy Commissioner Tracy Hatch

In practice, MnDOT’s Hatch says it means saving money through the design, management and real-time actions related to a construction project. That can mean getting around to a road or bridge project before damage gets worse and the costs increase, but it can also mean taking advantage of low interest rates and nabbing steel or other construction material for a big project at a time when prices are low.

Savings can also be found in good “risk management” strategies. In the Minnesota construction world, that often means planning for the state’s sometimes-unpredictable weather, like the early onset of winter or a major storm. 

All that aside, around the Capitol, the term has morphed into more of a synonym for general savings in the department, in whatever form they can come. 

Was the TFAC report the first time anyone talked about this?
Yes and no. The idea of finding extra savings in the transportation budget always tends to surface when new money is on the table. It was brought up back in 2008, during the transportation debate that ultimately led to the first gas-tax hike in Minnesota in about two decades. The Minnesota Chamber of Commerce supported the revenue increase, but asked MnDOT to set up a task force to figure out an approach to be as prudent as possible with the new dollars. The task force developed recommendations, but in the end, it was difficult to track exactly how efficiently the department was spending the money, said Bentley Graves, the chamber’s director of transportation policy.

Then, in the 2014 legislative session, a handful of legislative Democrats started pushing a funding increase for transportation. The chamber came back and asked for the status on finding efficiencies in the department. In the end, no new revenue was passed last year, but a proposal was approved that required MnDOT to find and document 5 percent efficiencies in its total state construction budget by the end of 2015.

Said Graves of the proposal: “Let's not just say we are being more efficient, let’s catalog it and document it and invest it back into the system so people can see it. Before we start talking about new revenue, let's make real progress on the efficiency front.”

Well, did they make progress in finding efficiencies?
According to MnDOT: Yes. The department has found about $50.5 million (of a $60.2 million goal) in savings for 2015, Hatch said. They’ve found other savings, too. Last April, MnDOT announced it saved $50 million through creative ways of routing traffic and managing the St. Croix River bridge project, as well as developing more cost-effective designs for the replacement of a bridge in Red Wing. The department used those dollars to put a long-sought third lane in on Interstate 494 in Plymouth and repair 50 miles of I-90 in southern Minnesota.

If they’re already doing this, what’s the problem?
The TFAC report. Members of the committee introduced the idea of finding efficiencies of around 15 percent (even as high as 17 percent), but they specified that the savings would be generated out of any new money put toward transportation projects. MnDOT Commissioner Charlie Zelle said he would be committed to finding that savings to help fill the funding gap, and when Dayton and Senate Democrats rolled out their 10-year funding proposals, they adopted that position.

But House Republicans aren’t proposing finding those savings within any new money, MnDOT officials say. Their transportation plan would spend $7 billion on roads and bridges over the next decade by moving some transportation-related revenues into highway funds; tapping into the projected budget surplus; and, yes, finding 15 percent in efficiencies.

Yet under the language in their bill, those savings must be found in the “total appropriations” used for transportation in the 2014-2015 budget, money that would then go toward repairing roads, bridges and patching up potholes in the 2016-2017 budget. 

By Hatch’s calculations, that would mean more than $850 million would need to be found in the state’s nearly $6 billion transportation budget to spend over the next two years. That includes all the money MnDOT spends, from administrative costs to road and bridge construction to the aid they give directly to local governments.

So MnDot doesn’t have $850 million lying around?  
MnDOT officials say 15 percent would be a steep hill to climb. They way they see it, finding transportation efficiencies is mostly about timing. But many of those things are outside the scope of MnDOT’s control, Hatch said, and they take time to realize. Department officials wouldn’t speculate on how they would find the savings, but Hatch said it wouldn’t be easy. Less than 3 percent of the total transportation budget goes toward running the agency, or about $40 million. “If we had piles and piles of money around here but nobody to cut purchase orders or load trucks or drive the trucks it’s not going to help us achieve our goals,” she said. “In many large organizations, the first area that they cut is staffing.” 

“We can find some savings, but we can’t find $850 million there,” she added. “I believe MnDOT is already running extremely efficiently.”

How MnDOT allocates its funds
MnDOT officials wouldn’t speculate on how they can save $850 million over two years, but deputy commissioner Tracy Hatch said it wouldn’t be easy. Less than 3 percent of the total transportation budget goes toward running the agency, or about $40 million.
Source: MnDOT

What do House Republicans say about their plan?
Republicans House Transportation Policy and Finance Chairman Tim Kelly said he’s asking for the same savings Dayton and Senate Democrats are asking of MnDOT, and it’s similar to what Republicans are seeking in their budgets from state agencies across the board. “We are reaffirming that goal and trying to be efficient in management, program and delivery,” he said.

Kelly was clear that he didn’t see this as a cut to the department — most of the savings would be found on the design and construction side of things, not on administrative costs. “I think we are partnering with the agency to allow them to do things a little differently,” Kelly said.

“It’s giving us some flexibility to work with them,” he added. “It’s not as much of a discussion as people might think right out of the gate. We are not talking about cuts to the department; we are talking about savings.”

So what’s next?
All sides agree this is still only the first step. Republicans who control the House will likely pass their transportation bill off the floor Tuesday, but they still need to find a compromise with Senate Democrats and Dayton, who must sign the final bill. With four weeks left in session, a lot can still change.

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Comments (22)

Governing by crisis doesn't work if there is no crisis.

In fact, the MN budget finally has achieved structural healing and an unwinding of the cost shifts, borrowing and moving of funds around to avoid raising revenues.

Back on February 17th there was an excellent transportation discussion by the Governor. I think Minnesotans (especially Republicans) should read or watch it.

"The Governor and Transportation Commissioner Charlie Zelle today released a detailed list of more than 600 road and bridge improvements that would be completed if the Legislature passes the Governor’s proposed investments in transportation. The comprehensive list, sorted by county, details the more than 2,200 miles of state roadways and 330 bridges that would be repaired, replaced, or expanded over the next ten years under the Governor’s proposal. "

A comprehensive list of the work to be done is here: http://www.mn.gov/governor/images/transportation_county_projects_fact_sh...

The Governor's presentation is here: http://mn.gov/governor/blog/the-office-of-the-governor-blog-entry-detail...

Politicians should notice the calendar and help get this stuff done, as it needs much planning and Federal funds to work efficiently. Wasting our construction season with stalling and do-nothing tactics are the stuff of D.C.

Let's pay for our roads and stop pretending it will be free.

Anybody who has to get around town

knows there's too many road construction projects going on simultaneously. If we spread them out over a longer period of time and quit trying to do everything at once, we don't need so much money per annum to pay for it all, hence, no need to increase taxes.

"Abridged" version: People

"Abridged" version: People are patient with potholes.

I'm Sure If We All Just Click the Heels of Our Ruby Slippers

together enough times, we can change the past so that our predecessors were able to foresee and compensate in advance for all the likely bottlenecks in our road system,...

so that nothing already built now needs to be improved,...

and our ancestors will have been willing to pay the gas taxes necessary to overbuild our freeway system far beyond the needs of their OWN time so that WE wouldn't have to build anything new now.

I'm sure the same technique will work to make winter only happen in ways which damage roads in a few parts of the metro area each year so that we can limit the resurfacing projects that need to be done.

But lacking that, road repairs, restructuring and expansion will continue to be done as needed (and as we can fund them) in response to the existing needs and available funds.

Of course we could alleviate a lot of that by simply making far more mass transit available in far more places,...

or somehow convincing our ancestors NOT to dismantle the street car system but expand it and add light rail to it so that most people in the metro would not now need to drive cars.

Under those circumstances, metro-area highway construction would cease to be much of a factor at all.

This...

Would also be known as doing nothing. The status quo has us repairing roads on an annual basis, unfortunately, the pace of those repairs have not kept up with the decline of the roadways. The only way to reverse this trend is to repair things at a significantly faster rate. Given the shape of our system, fixing "everything at once" essentially would stop all transportation. The 10 year plan is the right plan at the right pace. Now we just need the courage to reliably fund it. "Efficencies" are akin to a free lunch and there ain't no such thing as a free lunch...

Wow, Dennis...

So by virtue of that logic, I should just ignore any strange sound coming from under the hood of my car. That way, I won't have to put any money into it right now...until the problem becomes so bad that I'll have to pay triple to fix it or replace it all together. GOP economic theory in a nutshell.

Use a much simpler system.

They want "efficiencies" because they claim they exist. DONE DEAL.

They find those "efficiencies" and get to claim the funds for their uses. HOWEVER, if fail to delivery service "on time to EVERYONE", then they have to pay the cost of restoring that service out of those "efficiencies realized", because "cutting people off from service" is not a valid "efficiency"--it is a CUT. The claim is they are able to offer the SAME goods and services, just at a lower cost (hence, "efficiencies"). Watch them RUN from that one in a hurry--because having "no skin in the game" is one thing, but when THEY have to pay for screwing up, they RUN !!!

Hmmm

Imaginary money will not fix potholes, reduce congestion, or keep bridges from falling down.

I look forward

…to the Minnesota GOP finding 15% in efficiencies in its own operations over the next year, so that it can pay off the sizable debt it continues to owe. Then I want the party to show us how they did it. Fewer personnel? Lower expenditures on advertising during campaigns? Fewer services offered to members? No need to name names. If they're able to come up with 15% in efficiencies themselves, especially given their current unenviable financial position, then perhaps insisting on 15% efficiencies from MDOT isn't just partisan bloviating.

Maybe the republicans could arrange

to have a pipeline of public employee union money funneled into their coffers like the DFL does. Like most government operations, the DFL will never run out of money as long as they can keep billing the taxpayers for more union dues.

Minnesota Republicans are not poor.

Their spending has been seriously stupid, excessive, and without any real merits.

Tony Sutton basically ran a useless propaganda shop without any long term funding.

You lost the old people who used to be Republican when the rude, in-your-face, Tea Bircher, style was adopted. People don't like you. Your party is full of racists and Confederates that will not respect settled law or the needs of government itself. You openly try to hurt our ability to govern. You keep trying to take away a women's rights to her own body.

Shut downs are your policy-enablers. It's your way or the highway.

Your union ideas seem a bit conspiratorial. I doubt the truthfulness of your assertion.

Shouldn't you be moving to Wisconsin where unions are dirt under the feet of Republican lawmakers?

Dennis, politics is public relations. If you and your party despise people, it is time to get away from trying to tell others how to do the people's work.

I Love Those Old 1980s "Unions are Ruining Elections" Songs

some Republicans are still singing!

Of course they're just as accurate on the truth about campaign financing as those old song lyrics were about what it takes to make healthy, long-lasting love relationship.

If the Minnesota Republican Party could get ANYONE to give them money, they wouldn't be in the financial hole they're in.

And good grief! You'd think they could come up with a new meme or two that they could point to to claim that their failures are not their own fault,...

because everybody's heard their golden oldies and they're just NOT convincing us of anything these days,...

anymore than we now see the old "Police" song "Every Step You Take" as a song about true love and devotion.

Whereas Republicans

Blow all their money on mismanagement and overpriced contracts to cronies who do nothing.

Need for transportation not being fully addressed

Even the much larger Dayton budget for transportation doesn't fully meet the need, after decades of underfunding the state's roads, bridges and transit systems. To say that anything done over the next five years will take care of unmet needs is dishonest., The real question is that are we increasing our financial commitment enough that we don't continue to get farther and farther behind. I don't think the Republican proposals addresses that, as they seem to be saying that business as usual with greater efficiency is enough. Remember too that they plan to offer large tax cuts and take funds from other areas of need, with borrowing, to even come up with the limited amount of money they are willing to spend.

I encourage people to watch the Governor's presentation.

The Transportation needs are complex and require advance planning in order to use Federal monies and to be ready to actually let contracts.

Please, House Republicans, make a commitment to maintain our infrastructure.

Remember you are using the infrastructure somebody else paid for years ago.

Now it is our turn.

It appears

That we are paying for that infrastructure today. Note that approximately 6% of the $6 billion dollar budget is used for debt service according to the bar chart.

Republicans ran MnDOT for 16 years

For 16 of the last 24 years Republican governors ran MnDot. Both Gov. Carlson and Gov. Pawlenty pledged to remove waste from government and make it more efficient. Surely MnDot was made as efficient as possible under the control of those two loyal Republicans.

Non-starter

As long as the starting point for anything the Republicans propose is "no tax increases" or "no new taxes" nothing will get done. Their transportation "proposal" is the same kind of gimmickry that characterized the Pawlenty administration's budget tricks and "fees" that were "not taxes." Also like those gimmicks, this proposal puts off the problem while giving the false impression that something is actually being done.

Grover Norquist's advice that government should be "drown in the bathtub" is the guiding light for the Republican party. Their ideas give merely the semblance of governing. They have no ideas. They are not interested in governing. They want Government to go the hell away and return to their magical thinking that the Market will solve everyone's problems.

Government inefficiencies...

Having spend 32 years at a great MN company, 3M, and having seen the power of Six Sigma at work, I can easily see 15% savings from immediately and probably 25% savings from inefficiencies in our state government!

Productive us of taxpayers dollars have never been an objective of either our federal government or our state government.

The Power of Six Sigma?

Do you mean its power to stifle creativity and innovation, breeding automaton workers who can't think beyond a narrow metric? Your ability to divine 25% savings from a system that you only see from behind a wheel is testament to how narrow minded and arrogant some Six Sigma devotees are.

Found It!

Just cancel the LRT project to Brooklyn Park. Budget problem solved and my neighbors and I would not have to move. Win win.

how about we....

how about we use the money collected from vehicle owners and operators on the roads and use all the money collected from the bicyclist,joggers and public transportation users on the buses,trains and trails?