Tag Archives: transportation

Let’s Make Deal on a Transportation Bill

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Democrats and liberal op-ed writers are busy beating up Republicans for refusing to do what Republicans are supposed to always do, shut and vote for higher taxes to fund roads, bridges and public transit.

Republicans should agree on some revenue enhancements when Democrats are ready to make two key concessions. First, Democrats will agree to unlink highway funding from transit funding. The issues need separate priority and have many differences when it comes to the best way to fund them and at what level they should be funded. Second, Democrats will stop opposing the elimination of prevailing wage requirements.

Simply having Republicans hold their noses and vote for revenue enhancements for transportation will not serve the Commonwealth’s long term best interests. Savings opportunities will have been foregone and needed structural changes will not be enacted.

There is a reason Pennsylvania is now facing a multiplicity of serious financial problems. The state government-for too long-has kicked cans down the road as it kowtows to the power and influence of unions. Teachers, transit workers and other government workers have had their way with legislation regarding strikes, prevailing wages, pensions, layoff rules, and so on for decades. Every problem is met with demands for more money to feed the monster that has been created. Especially noteworthy are the Port Authority of Allegheny County as well the largest school districts in the state.

Previous governors have redirected highway funds to keep the Port Authority from going on strike robbing Southwest Pennsylvania of dollars needed to keep roads and bridges maintained. Why do the complainers about Republican inaction not want to hear about that abuse of power? Then too, tens of millions of Federal highway funds were redirected to the North Shore Connector in Pittsburgh. Where was the outrage over that? Likewise, almost a hundred million in state and local tax dollars were required to build the Connector. That’s a lot of road and bridge work. But as always the supporters of public transit were 100 percent behind building the tunnel regardless of costs: one that provides free rides to users.

The mindlessness encapsulated by this venture is the single greatest argument for Republicans to demand some concessions from Democrat and transit supporters before folding and voting for the higher revenue status quo fans want.

Proposed House Transportation Amendment Serious About Costs

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According to newspaper accounts, the proposed House amendment to the transportation funding legislation takes a very sensible and long overdue approach to difficult issues that have been time and time again kicked down the road. As presented earlier this week, the proposal takes on special interests and offers money saving solutions.

 

 

First, and of paramount importance, the proposed legislation would eliminate the prevailing wage requirement on some road projects. The monetary savings from elimination of the wage requirement would be substantial and, depending on the type of project, could amount to as much 20 percent of the current cost of the work.  Moreover, it frees up work to bidding by non-union contractors, a freedom enhancing move.

 

Second, the amendment would drop the $100 add on charge for traffic violations that would be used primarily for mass transit. This provision in the Senate bill has been roundly criticized as an inappropriate and problematic method to generate funding for transit. 

 

Third, the House proposal offers local communities tax options to increase the local share of transit funding.  Fare revenue, which provides about 25 percent of total funding, combined with the 15 percent local match requirement to receive state aid means the transit service area is providing far less than 50 percent of the funds needed to operate the mass transportation system. Raising an additional five percent locally seems more than fair. By putting any transit funding levy option on a referendum ballot, local voters will have a say in how much the local transit agency has to spend.

 

Fourth, the amendment calls for privatizing ten percent of bus service at the Port Authority of Allegheny County (PAT) and SEPTA. Privatization is a step that was recommended years ago by the Rendell Transportation Task Force. Privatization does not mean shutting down routes and letting private firms come in. The transit agency would put routes up for bids.  Authority funds, including state and Federal subsidies, would be used to pay a company that enters into a contract to provide service.  The idea is to get the service delivered at a lower cost than the authority can provide it. There are successful examples in Southwest Pennsylvania and Denver, Colorado.

 

To be precise and more effective, this provision should be retitled as “outsourcing” or “competitive contracting” as opposed to simply privatizing. Indeed, regional transit agencies in the PAT area should be able to bid on routes that make sense for them to incorporate into their service capabilities.  It is well known that the employee compensation costs at these agencies are well below those at PAT.

 

Finally, the House amendment greatly reduces the three year increase in funding for transit agencies, in large part due to the elimination of the $100 add on traffic violation charge. 

 

The advocates of mass transit are all up in arms over these provisions with the usual claims that the state underfunds mass transit already. Too bad the critics never bother to look at the outlandish cost structure the authorities, especially the Port Authority, face because of a long history of excessively generous labor contracts and a massive buildup of legacy costs.  Why is it so hard to understand that most taxpayers have no interest in paying more for retiree benefits at PAT that most of them can only dream about?  There are many studies that illustrate the high and unsustainable cost structure at PAT. They should be examined.

 

The objection to eliminating prevailing wage is nothing more than special pleading for union construction workers.  It is simply a mechanism to transfer wealth from taxpayers to union workers beyond what the marketplace would do through market determined wages.  The right to strike by teachers and transit workers accomplishes the same result.

 

The objection to privatizing a share of bus service at PAT and SEPTA is predictable with claims that before PAT the private bus service was a disaster.  But PAT’s outsourcing of service is not a return to the pre-public transit days. The authority would enter into contracts with providers to obtain service delivery at a lower cost than it can accomplish. It would, in effect, pass along a large share of the subsidy it receives in its payments to the private provider. There is no way a purely private bus operation can compete with a heavily subsidized public transit agency such as PAT.

 

Then too, opponents claim the House Republican transportation proposal is too ideological-which really means that it threatens to reduce union clout.  Who are the ideologues in this?  Efforts aimed at limiting the increase in taxes that would otherwise be necessary to continue on the path of funding the status quo are deemed to be ideological. Would raising taxes and rewarding past irresponsible behavior be considered non-ideological? 

 

The opposition to the proposed House transportation legislation is of a piece with resistance to meaningful state employee and teacher pension reform that is so desperately needed and the full court efforts to prevent liquor store privatization. Talk about ideological. It is all about government kowtowing to the demands of its public sector employees. This unfortunate situation is demonstrably at the heart of severe government financial problems from sea to sea shining sea.

County Priorities Set for 2013

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The County Commissioners Association of PA is a statewide association representing the interests of the state’s counties, and it has released its "wish list" by setting priorities for its members of what they would like to see the General Assembly act on. The priorities for county government include action on human services, Marcellus Shale, and 911, but let’s focus briefly on three issues that we have written about:

Property Assessments: The Association talks about the 2010 study done on assessment practices by the Legislative Budget and Finance Committee, task forces, work they have done with other professional associations in the state, and would like to see the recommendations of the 2010 study (training, funding, tools to determine timing of assessments, etc.). No word on the Association’s feelings on the court battles that took place in the member counties of Allegheny and Washington over doing a reassessment.

Transportation: The Association supports the work of the 2011 Transportation Commission on how to fund the state’s road, bridge, highway, and transit needs overall, but points out that it "does not have a unified position on mass transit" because of the differences between systems across the state.

Prevailing Wage: The Association notes how the prevailing wage requirement on public projects has not been updated since the 1960s and how a court decision brought what was considered "maintenance" under the auspices of the wage requirements. Priorities the Association would like to see acted upon include indexing the amount, opt out provisions, or a full repeal.

How Much Do Users Pay for PA’s Roads?

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The Governor has let the cat out of the bag, or maybe, more apropos, some of the air out of the tire, on a holistic transportation fix for the Commonwealth. Part will be a proposal to take away a cap on the Oil Company Franchise Tax, a tax that is levied upon gas at the wholesale level but presently applies to the first $1.25 of the wholesale price. Removing the cap to apply the tax to the entire wholesale price, and by one estimate reported in a newspaper article would generate $1.8 billion on top of the $1.3 billion currently collected with the cap.

That was but one recommendation made by the Governor’s Transportation Commission in 2011; others include paying more in fees and registrations but lessening the frequency at which driver’s licenses and auto registrations must be renewed.

Its not clear what lifting the Franchise Tax cap, license proposals, etc. will mean for the end user, the person filling their gas tank and traversing one of Pennsylvania’s roads. A recent study by the Tax Foundation shows that nationally gas taxes, tolls, and other user fees generated just a third of the spending on roads-the rest comes out of general revenues. According to their analysis Pennsylvania is right at the national average: 33%, ranking it 18th out of the 50 states. Outliers include Alaska, Wyoming, and the Dakotas generating 20% or less of road spending from "user fees" and Delaware, Florida, and New Jersey at 49% or more of road expenditure coming from gas taxes, tolls, and driver related charges. Another Foundation document shows that as of 2013 Pennsylvania has the 7th highest gasoline tax at 39.2 cents per gallon (Connecticut has the highest at 56.2 cents, Alaska the lowest at 8 cents).

Governor Taking Heat over Transportation Funding

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And the cries for the Governor to find new revenue to fix roads and bridges -and fund mass transit -grow louder. This while the Governor wants to protect taxpayers from higher costs. He knows other problems are looming large such as the whopping increases in pension funding that will be required over the next few years. Where will that money come from? There are projected Federal Medicaid funding cuts. How will that be made up?

It is marvelous to watch the crowd that supports an outrageously expensive and inefficient mass transit system and wants the state to pour more money into it grouse about transportation needs. Indeed, the Governor, against his own better judgment and the strong case that was made not to bail out the Port Authority, has committed $35 million a year in additional state tax dollars for the Authority. No one knows where that money is coming from.

What is really galling about the latest round of caterwauling regarding the Governor’s inaction on raising taxes and fees for transportation is the assent given explicitly or tacitly by the same complainers when the previous Governor was moving hundreds of millions in highway funds to underwrite the Port Authority’s egregious spending. That money was wasted rather than fixing road problems.

Moreover, why was it that the people who are now so exercised about the Governor’s inaction could not contain themselves at the prospect of tolling I-80 to raise funds for transit? Anyone who bothered to look at the law could have known that tolling I-80 for any purpose other than funding maintenance and improvements on I-80 was not going to happen. Yet the then Governor, the Legislature and all the spendthrift supporters of mass transit all thought it was great idea and that somehow the presidential administration would get it approved notwithstanding the law. Mirabile dictu, it did not cave to political pressures from the former Governor. Years were wasted in dealing with cost issues and seeking funding sources. And then the sharp economic downturn put on hold any meaningful discussions.

Road work does need to get done. How about we ask the Feds to lift the Davis-Bacon prevailing wage requirements? That would lower costs dramatically. Not that it will ever happen. But the state could eliminate prevailing wage requirements on projects not using Federal dollars. Where is the clamoring for something sensible like that? Why is it always the taxpayers who must make the sacrifices? Why not some concessions from those who drive the costs far above where they would be in market based system?

No PAT Fix in Budget Address

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The Governor devoted two short paragraphs in his budget message (ten pages in all in this printed version) to transportation-he made no distinction between mass transit, roads, or highways-and indicated that it will be treated as a "distinct and separate topic". That could mean there will be a special session on transportation the way there was one for property taxes in 2006. But that also means there is no quick fix for the woes that plague the Port Authority, which is facing a $64 million deficit and plans to eliminate a substantial number of routes in September.

Whether the transportation plan encompasses some, all, or none of the recommendations made by the Transportation Commission in its report last August in unknown. The Commission suggested various increases to fees and taxes to pay for transportation needs.

The Governor also stated that the solutions need to be long-lasting. While transit advocates are hoping for long-lasting and growing revenues, perhaps there will be focus on the cost-side changes that are long overdue: the power to strike, the impact of monopoly power, and the need to look at bankruptcy for legacy costs.

The real question is how the Governor will handle the issues related to PAT in the coming months with the deficit and previous history of temporary flexes to get the agency through tough spots and avoid a planned round of service cuts.

Pennsylvania Policies Increasingly out of Touch

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Notwithstanding its incredibly good fortune in being the home of vast natural gas deposits that are propelling much of the economic growth being experienced currently, the Commonwealth of Pennsylvania is losing its ability to compete for capital and jobs. The state has antiquated and seriously inadequate laws regarding property assessments, it faces enormous future government spending to keep its pension promises to teachers and state employees, it is a perennial leader among the states in teacher strikes, it is one of two states that still owns liquor stores, one of the state’s two largest transit agencies is in undeclared bankruptcy, and its bridges and roads are ranked among the worst in the nation.

Meanwhile, Wisconsin and Indiana have passed legislation that dramatically curtails the power of unions and their ability to drive jobs away and raise the cost of government. Neither state allows teacher strikes and in the case of Indiana has greatly expanded a voucher program to allow students choices other than failing public schools. Two things Pennsylvania has notably been unable to get done or in the case of banning teacher strikes has not come close to doing.

So, while we can congratulate ourselves for Marcellus related jobs and incomes gains and laud the powerful growth in education and health employment, it must be remembered that the extent of the state’s dependence on education and health for jobs cannot be the basis for sustained, long term economic health.

Pennsylvania must address the pension crisis, the teacher and transit worker right to strike, the state of transportation infrastructure and continue its recent efforts to contain the spending that grew so profusely under the previous administration. And if it really wants to get bold, it could eliminate the dues withholding for public sector employees and begin to talk seriously about doing with prevailing wage requirements on public construction projects. But in a state that cannot even get itself out of the liquor selling business, the much desired reforms enumerated here are probably best regarded as fantasies.

A Big Year for PAT

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Tomorrow is the first day of the 2011-12 fiscal year for the Commonwealth, virtually all of the state’s school districts, and for special purpose agencies like the Port Authority. The operating budget for PAT is $322 million, with a gap between revenue and expenses covered by the final piece of the flex money Governor Rendell found and was approved by SPC as well as budgetary reserves. The employee headcount for PAT is 2,495, which is unchanged from the end of the 2010-11 fiscal year.

Obviously PAT is waiting with anticipation for the results of the Governor’s transportation task force, which is to deliver its recommendations on how to fund all of the state’s transportation needs in a month. Already increases in registration and licensing fees have been floated as a real possibility, but it is unclear if the revenues from those sources will be tied to a particular use. PAT’s budget presentation opines that "unless statewide transportation funding crisis resolved satisfactorily over the next 14 months, massive unfunded deficits will be projected in FY13".

Unfortunately as we have pointed out on many occasions there are numerous cost-side drivers behind PAT’s funding problems. First and foremost is the cost of labor, which is front and center in the next year as the authority is entering the final year of its four-year contract with the Amalgamated Transit Union. This year workers get a 3% raise (non union workers’ wages are frozen), and there is projected to be a jump in pension contributions from PAT ($20 million to $33 million) and healthcare expense for active and retirees are still around $70 million. It is also important to look at the ratio of retirees to actives at the agency: in 2002 there was 0.71 retirees to every 1 active; now there are 1.13 retirees to every 1 active. If PAT and, by extension, County officials, feel the 2008 contract did "good" things then the 2012 contract is going to have to be even "better".

And last, but certainly not least, let us not forget that spring of 2012 will mark the commencement of service via the North Shore Connector. If the timeline holds as well as cost projections did, look for the first trips to occur well after the anticipated launch of service.

Buses, and Trains, and Trucks, Oh My!

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The Governor’s transportation panel met in Harrisburg on Monday to hear presentations on mass transit, rail, and truck modes and discuss funding options for what is pegged at $10.7 billion of "unmet needs" in the state’s infrastructure. With three separate modes to receive testimony upon, there is a lot of information for the panel to digest as it works toward issuing recommendations by August.

Here are some of the interesting factoids taken from the presentations:

Transit-When considering the funding for the state’s transit agencies, Federal and state subsidies provide 50% of SEPTA’s budget with local funding and fare revenue providing the remaining 50%. All other systems derive much more funding from Federal/state sources with PAT at 65%, other urban systems (in total) at 70%, and rural carriers at 80%. PAT accounted for 15% of the 432 million boardings in FY 09-10. The highest base fare for transit-levied by five systems-is $2.

Trucking-Roughly 1.2 million tons of freight are moved each day in PA. The industry in PA pays $1.39 billion in state and Federal taxes and fees annually. Truck-related fatalities per 100 miles driven fell in recent years.

Rail-Some $40 million from the capital budget and the rail funding assistance program is dispensed in Pennsylvania.

How to fund the state’s transportation needs? That question was given a 16 page treatment looking at existing sources, new sources, short-term, long-term, etc. Everything from increasing registration fees, tire fees, rental and lease fees and taxes were mentioned, along with dedicating certain sources of revenue to specific uses (like driver license fees to the state police or small games of chance for transportation) along with new forms of local taxation for transportation needs (sales tax, income tax, etc.). Many of the funding options were raised by the previous Governor’s transportation panel in 2006.

Commission Mechanics

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Yesterday’s blog discussed the rather limited scope under which the Governor’ Corbett’s Transportation Funding Advisory Commission (TFAC) will operate. Governor Rendell’s task force-the Transportation Funding and Reform Commission (TFRC)-likewise dealt with transportation issues, and the Executive Orders creating each respective group provides a good starting point for comparing and contrasting the two efforts.

Some Similarities:

  • Both Governors designated the Pennsylvania Secretary of Transportation as the titular chair of the Commission
  • Both Executive Orders stipulated that Commission members would not be compensated for their service, other than travel and related expenses
  • Both Commissions received staff support from the Department of Transportation

Some Differences

  • Governor Corbett’s Commission is much larger with 35 members, whereas Governor Rendell’s had 9 members
  • Governor Corbett will select all members of his Commission, whereas legislative leaders made 4 of the 9 appointments on Governor Rendell’s Commission
  • Governor Corbett’s Commission is working on a much shorter time frame: the Executive Order was signed on April 21st, and the final report is due on or before August 1st of this year. Governor Rendell’s Commission was created February 28, 2005 and its final report was due on or before November 15, 2006 (it was actually submitted on November 13, 2006)
  • Governor Rendell’s Executive Order ordered operational audits of SEPTA and PAT
  • Governor Corbett’s Executive Order includes public and private use airports as part of the transportation mix