AUGUSTA, Maine — State Finance Commissioner Ryan Low says all of state government is facing revenue problems, but the Department of Transportation is facing the “perfect storm” of declining revenues, increasing costs and a huge backlog of projects.
“Asphalt prices, the fluctuation in gas prices and the effect that has on the revenues that go in to pay for projects — that all adds up to some very difficult decisions that have to be made,” Low said.
Fuel tax revenues have been down for months, but in March they dropped dramatically — by 23.3 percent. Through the first nine months of the budget year, fuel tax revenues are below estimates by $7.7 million.
“The revenue forecasting committee will be looking at this as they look at all revenues,” Low said, “but based on what we have been seeing, we expect the highway fund will have problems going forward.”
The highway fund was projected to have $342 million this year, and with three months to go, it is below estimates by $9 million. In addition to fuel taxes, the highway fund receives motor vehicle registration fees, vehicle inspection fees and some fines, forfeitures and penalties. Fuel taxes make up about two-thirds of the fund.
“We have been watching this get worse over the year,” said Sen. Dennis Damon, D-Trenton, co-chairman of the Legislature’s Transportation Committee. “We had revenues revised downward earlier.”
Damon agreed the highway fund is facing serious revenue shortfalls, and said that on a proportionate basis, it may face a larger problem than the state General Fund. He said Mainers are driving less and many have bought more fuel-efficient cars and trucks, resulting in lower fuel tax revenues.
Damon said that even with about $130 million received by the state in federal stimulus funds, the backlog of needed road and bridge projects will grow.
“We have a billion-dollar problem now, and I fear it will get worse before we address it in a meaningful way,” he said.
Complicating the highway fund problem is the annual adjustment of fuel taxes based on inflation. That has meant a small increase in the tax every year since the measure was adopted during the administration of Gov. Angus King, but in the next two-year budget, the economic forecast is for deflation.
“That means a decrease in the gas tax rate, under current law,” Low said.
Damon agreed, but said he did not think his committee, knowing the scope of the highway needs across the state, would recommend a decrease in the tax.
He said what the full Legislature would do is uncertain.
“I wouldn’t support doing that,” said Rep. Doug Thomas, R-Ripley, a member of the Transportation Committee and a critic of DOT. “We shouldn’t reduce the tax. But I don’t support giving the department any more money until I am convinced that they are using it well, and I am not convinced of that at all.”
Thomas said DOT is spending too much on bureaucracy. He said the agency needs to be leaner and more focused on the mission of road and bridge repair and construction.
“I think we will have to look at that, and everything else to find a solution,” Damon said. “We have to look at everything.”
The state is facing a crisis in its transportation infrastructure, Damon said, and will need to find new ways to fund needed improvements to support economic development. Failing to keep the state’s highways and bridges maintained will hurt efforts to recover from the recession, he said.
“I am looking at this with the mindset of cutting, consolidating, restructuring, and doing it in a way to balance it across the board,” Gov. John Baldacci said. “This is not the time to raise any taxes.”
But when asked if the fuel tax should be reduced as would happen under existing law, Baldacci said that would have to be examined as the budget of DOT is reviewed in the next few weeks.
“We should be looking at user fees,” Damon said. “The committee has been talking about that. User fees are usually translated out into tolling of some sort.”
He said any fee hikes or tolling will be controversial, but he said that without additional revenue to make up for reduced fuel taxes, the condition of roads and bridges in the state will continue to worsen.