Transportation Budget Preview – ODOT and Public Safety issues to watch

Transportation funding in Ohio comes in two separate budget bills – the transportation budget, which spends primarily state and federal gas tax dollars, and the operating budget which includes a small amount of general revenue funds, typically for public transit, rail and airports. The Transportation budget must be passed by March 31 of odd-numbered years, and therefore is typically introduced before the state’s main operating budget.

Wednesday, February 23 marks the first hearings on the FY 2012-2013 transportation budget, with testimony from the Departments of Public Safety in the morning and ODOT in the afternoon in the House Finance committee.

Update: looks like we have a bill number – House Bill 114. A placeholder bill has been introduced, hopefully the full text will be posted sometime on Wednesday.

Because state and federal gas taxes cannot be spent on purposes beyond transportation (and limited other transportation-related uses, such as the state highway patrol), the spend is fairly predictable and tends to be less controversial than other areas of the budget. That said, things to watch include:

  • Privatization of the Ohio Turnpike . The Governor has repeatedly indicated he would be interested at the right price, indicating he is holding out for $3 billion. To put this into context, during the 2006 campaign, Ken Blackwell projected he could raise $4-6 billion by privatizing the Turnpike. An independent analysis pegged the number at less than $1 billion.In addition to funding infrastructure, Kasich has discussed Turnpike privatization as a budget fix, suggesting he would like to see part of the proceeds go to the State’s general fund. But the Ohio Constitution restricts funds derived from our roads to be spent on roads and bridges. Expect an immediate court challenge from the Ohio Contractors Association, the main recipients of state road construction dollars if such a proposal is included that does not invest all of the proceeds into road construction projects.
  • Aid to Public Transit. The Strickland administration established a $150 million, three-year Next Generation Fund to provide support to Ohio’s public transit agencies, but ODOT recently announced it would be cancelling all but the first $40 million that was already awarded in Fiscal 2011, then budgeting $20 million per year for the next two years to transit (compared to just over $60m budgeted by Strickland in GRF and Next Generation funds).Further, the State has committed $35 million to assist Cincinnati with its streetcar project, but Kasich suggested he is reevaluating.
  • Contracting Authority. The last budget expanded ODOT’s “design-build” authority, in which contracts for both the design and construction of a project could be combined, without an intervening bidding step. The process has already resulted in savings of $287 million on the Cleveland Innerbelt bridge, $250 million for Columbus’s I-70/71 Split and $47 million on the widening of I-71 in Morrow County. However, the Inspector General has raised issues about the practice of paying stipends to unsuccessful bidders. It will be interesting to see whether the department makes this a permanent tool for contracting or heeds the former IG’s (and now DPS chief) guidance to scale back.
  • Will tolling authority, created in the last biennial budget, will be continued or expanded. Governor Kasich recently indicated that he would look to a partnership with the private sector in order to make necessary improvements to the Brent Spence Bridge in Cincinnati. In order to attract a significant up-front investment (estimates are that improvements will run $2 billion or greater), a revenue stream from tolling would likely be required. Keep an eye on whether they expand, limit, or tinker with tolling authority.
  • Borrowing. Incoming Director Wray has indicated that he would like to take the funds that had been dedicated to public transit and instead use them to pay down debt. However, the budget proposal submitted by the Strickland administration in November included sufficient debt payment, so the question is whether the Department’s new goal is to pay down additional existing debt, or if they intend to increase borrowing.
  • Economic Development Focus. ODOT and the Department of Development developed a close working relationship in the Strickland administration, with ODOT assisting in the establishment of Hubs of Innovation and the logistics and distribution program funded by the state job stimulus initiative. Similarly, Development worked closely with ODOT to revise project selection criteria to favor those that created jobs and economic opportunity, as well as in the targeting of ARRA funds. With the looming privatization of the Department of Development and its exclusive focus on chasing development deals, will any sort of collaboration be possible?

PUBLIC SAFETY

Because they have traditionally received a portion of Ohio’s gas tax revenues to fund the State Highway Patrol, the budget Department of Public Safety is typically handled within the Transportation bill. Some issues to watch in this term include:

Funding for the Highway Patrol. As gas tax revenues decline as prices go up and motorists consume less fuel, there has been added pressure to remove the Highway Patrol from the gas tax completely, freeing up these resources for highway construction.

In the 2010-2011 budget, the Strickland administration introduced a bill that would completely remove the Department of Public Safety from the state GRF and the gas tax, through a set of fee increases. The GOP-controlled Senate balked at increases in the cost of registering motor vehicles in the State, instead pushing for more “avoidable” fees such as a $20 late fee on registrations and license renewals. In addition to the increased late fees, a tax credit for Petroleum Dealers was scaled back to provide the remainder of the patrol’s funding.

The late fees have proven hugely unpopular and legislators have vowed to eliminate them to spare themselves the wrath of angry constituents. What will replace them? Will the Patrol return to the gas tax, will other offsetting fees be increased, or will the  Petroleum Dealers finally lose the remainder of the tax credit they receive for filing their state tax returns in a timely fashion?

The Department of Public Safety has also identified a shortfall in funding for the Highway Patrol’s Security and Investigation fund, which provides security for the Governor and other dignitaries, and proposed in November to increase fines from traffic violations by $5 to fund the program.

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