January 26, 2018
Illinois has grappled with a number of financial challenges over the last decade, including structural deficits, pension underfunding and a two year standoff without a budget. Now, some leaders and advocates have begun to demand renewed attention to how the State funds transportation and other infrastructure. In recent testimony before the Illinois General Assembly House Transportation Committee, the Chicago Metropolitan Agency for Planning stated that the State’s transportation funding had “reached a crisis.” The Metropolitan Planning Council accused Illinois of putting transportation on a “starvation diet.”
Illinois has not had a major capital program since 2009. The Illinois Jobs Now! FY2010 capital budget included $18.0 billion in new projects as well as $11.0 billion of reappropriations from previous years. Since then, new appropriations have averaged approximately $3.3 billion annually.
The most recent state report card issued by the American Society of Civil Engineers gave Illinois a C- for the overall quality of its infrastructure. The road and transit categories both received a D+. The Federal Highway Administration reports 2,243 structurally deficient bridges in Illinois, 8.4% of the State’s total. A recent report by the Regional Transportation Authority accuses the State of chronically underfunding transit and states that capital needs are outpacing uncertain revenues.
In addition to transportation infrastructure, the Governor’s FY2018 Capital Budget calls attention to other infrastructure needs, such as the $7.0 billion backlog in deferred maintenance at State facilities, modernization of the State’s information technology systems and abating lead contamination throughout Illinois.
Addressing Illinois’ infrastructure needs will not be cheap. The Illinois Department of Transportation (IDOT) estimates that additional revenues of $1.7 billion are needed to keep up with maintenance of existing highway and transit infrastructure. Needed improvements in these systems would cost an additional $2.25 billion each year. These figures do not include other important infrastructure, such as airports, freight rail, waterways and non-transportation infrastructure.
While the need to maintain and expand infrastructure in the State is not in doubt, Illinois must weigh these priorities against other pressing demands on its fiscal resources. In order to justify embarking on a new major capital program, the State must satisfy two requirements. The first is the development of a capital improvement plan that comprehensively assesses and prioritizes the State’s needs. The Civic Federation opposed the Illinois Jobs Now! program and subsequent capital budgets for lack of such a plan. Taxpayers deserve to understand how money will be spent before taxes or fees are raised.
The second requirement is to identify a reliable, long-term source of funding. The Illinois Jobs Now! plan relied on a collection of revenue sources, such as video poker, leasing the state lottery, liquor taxes, vehicle license fees and expanding the sales tax on candy, sweetened beverages and some hygiene products. However, few of these sources have ever produced as much revenue as was originally forecast.
In November 2016 voters approved a lockbox amendment to the Illinois Constitution that restricts some transportation-derived revenue sources to transportation-related expenditures. While proponents argued that the amendment would prevent fund sweeps that divert transportation funds for other uses, the amendment did not result in expanded revenues for those funds.
Additionally, while the General Assembly’s FY2018 budget held transportation expenditures flat to FY2017 levels, according to IDOT officials it shifted approximately $300 million in transportation expenses from General Funds to transportation-related funds, effectively reducing transportation spending by that amount.
Finally, it is unclear when or if Illinois could receive any assistance under a federal infrastructure program. If the State is to go forward with a capital plan, it must identify a stable revenue source on its own.
For decades the standard funding source for capital investments in transportation has been the motor fuel tax (MFT). Although more reliable than video poker, the revenue produced by the MFT has eroded over time. Illinois has not raised the MFT from the flat rate of $0.19 per gallon in over 28 years. Since that time, construction costs have doubled while gas tax revenue has grown by only 20%. Since 2013, 24 states have raised or reformed their gas taxes, including three that border Illinois. The Chicago Metropolitan Agency for Planning suggests that Illinois may need to increase the tax by $0.10 to $0.15 per gallon to meet its transportation needs.
Illinois has made the pain of raising the MFT more difficult by being one of only a few states that also assess a general sales tax on gasoline. However, the revenue produced by the sales tax is not tied to transportation funding. The FY2018 budget also eliminated a 20% sales tax discount on gasoline blended with ethanol, which includes most gasoline sold in the Midwest. The elimination of the discount, which the Civic Federation advocated, is expected to produce approximately $100 million for the State’s General Funds.
In addition to the State sales tax, Chicago-area drivers pay more for special reformulated gasoline required by the Environmental Protection Agency. The metro area is in “non-attainment status” due to poor air quality. Despite these high costs, further raising the MFT could encourage alternatives to driving and help improve Chicago air quality.
Despite the relative stability of the MFT, transportation experts have concerns about its long-term viability. Average fuel efficiency has risen and is expected to continue rising. Transportation planners have recommended examining both congestion pricing and a vehicle miles traveled (VMT) tax, which would assess drivers based on the distance they drive, ensuring the reliability of revenues even as cars become more fuel efficient. A number of other states are testing VMT pilot programs to assess the feasibility of implementation and address the privacy concerns inherent in tracking vehicles.