Construction continues on the $798 million dollar Horseshoe Project near downtown Dallas in July. Proposition 1 on the Nov. 4 ballot would partially shore up TxDOT's estimated annual $5 billion shortfall. (David Woo/The Dallas Morning News)
Texans overwhelmingly agreed today to steer billions in existing tax revenues to the state transportation department, which estimated it faced a $5 billion annual shortfall. Landslide approval of Proposition 1 allows lawmakers to send some oil and gas production tax revenues currently headed for a swelling savings account instead to the Texas Department of Transportation.
The constitutional amendment is expected to give TxDOT an additional $1.7 billion a year. But even Proposition 1 supporters say lawmakers still need to better fund the agency’s needs. Those supporters plan to frame Tuesday’s dramatic victory as a mandate from voters as they lobby legislators for more transportation funds.
“It’s truly only taking care of one-third of the shortfall,” said Scott Haywood, president of Move Texas Forward, a non-profit whose political action committee backed the amendment.
The amendment is supported by a litany of chambers of commerce and business groups. Haywood said transportation infrastructure is needed for the economic viability of the state.
“Businesses understand for them to succeed and the economy of the state to succeed, we’ve got to get good infrastructure,” he said. “Transportation is a huge part of that.”
Proposition 1 dictates that the new funds must be used on highway maintenance and construction and that they can’t be used on projects with tolling components.
“These funds will be used for new road construction, road maintenance, safety improvements, and repair of roads in the energy sectors,” said TxDOT spokesman Tony Hartzel. “None of these funds will be used for toll roads.”
Even if the measure passes, TxDOT won’t get the additional funds free and clear. First, only production taxes above the amount generated in 1987 are eligible to go to the highway fund. Together, natural gas and oil production generated $1.1 billion in taxes in 1987. In recent years, they’ve generated more than triple that amount.
Second, the money only goes to TxDOT after the state’s savings account is funded to a certain level. A committee of the Texas House will determine what level is acceptable every two years. Texas Comptroller Susan Combs expects the state’s savings account, commonly called the “rainy day fund,” to have more than $8 billion in it by the end of the current fiscal year. That number includes the estimated $1.7 billion that would be transferred to the state highway fund if Proposition 1 passes.
TxDOT had an operating budget of about $11.7 billion last year. About $3.4 billion of that came from the state highway fund, the same account that would get an infusion from Proposition 1’s passage. The vast majority of the highway account’s funds have come from gas tax revenue and vehicle registration fees.
The gas tax drivers pay at the pump has remained at a flat 20 cents per gallon since 1991. Inflation, rising construction costs and increasingly fuel efficient vehicles have dramatically reduced TxDOT’s spending power – and Texans’ contributions to roads – in the 23 years since.
Lawmakers have traditionally been reluctant to raise the tax rate for fear of retribution from voters at the ballot box. Legislators and Haywood have said they don’t see that changing next year. That approach has led to the proliferation of toll roads that continue to pop up across the state. North Texas will soon be to home the nation’s largest network of managed toll lanes, which are being added to several of the area’s aging highways.
Proposition 1 has been sold to voters as way to provide TxDOT with more money without raising taxes, issuing additional debt or building new toll roads.
“They’re getting a significant investment in the state’s infrastructure without paying additional funds for that investment,” Haywood said.
While all three points made by supporters are true of the potential new source of funds, it won’t eliminate the need for some or all of those mechanisms to shore up TxDOT’s estimated shortfall.
To further narrow the gap, lawmakers could end so-called diversions, their practice of balancing the state budget by funding the Department of Public Safety and Department and Motor Vehicles with money from the highway account.
They are also considering sending the sales tax on new vehicle purchases directly to TxDOT. Haywood said that source of funds automatically keeps pace with inflation and population growth – and the revenue stream already exists.
“It makes a lot of sense from a policy standpoint,” he said.