MoDOT faces severe budget crisis; stops adding new projects to 5-year plan

We have been talking for some time about the financial crisis that MoDOT is facing--the so-called "fiscal cliff." 

MoDOT

We are now starting to go right off the edge of the cliff, as both state and federal transportation funding sources continue to decline in purchasing power, as the fuel taxes that were last raised in the 1990s decline inexorably in purchasing power due to inflation and other factors.

Earlier this month, the MoDOT Commission voted to suspend adding any new projects to MoDOT's 5-year project list (the STIP) and took other strong measures to reduce spending.

If the crisis continues, further deep spending cuts will be required.  The 1 cent transportation sales tax, currently proposed for the November 2014 ballot and the first in Missouri history to fully integrate funding for bicycling, walking, transit, and other transportation modes alongside roads and bridges, appears to be the proposal most likely to move forward as the solution to the problem.

MoDOT's press release has the facts, figures, and details:

Uncertainty about future federal funding, declining fuel tax proceeds and increasing costs of doing business have spurred the Missouri Highways and Transportation Commission (MHTC) to stop adding new projects to its five-year construction budget and to suspend its popular Cost-Share Program. The MHTC voted to do so at its January 8 meeting.

MHTC Chairman Joe Carmichael, Missouri Department of Transportation (MoDOT) Director Dave Nichols and MoDOT Chief Engineer Ed Hassinger discussed the foreboding financial future at today's annual Missouri Transportation Conference in Jefferson City, co-sponsored by the Missouri Chamber of Commerce and Industry, Farm Bureau, the Missouri State Highway Patrol and MoDOT.

"Believe me when I say this is not what we wanted to do," Carmichael said. "But when considering the financial forecast for the rest of this decade, we had no choice. We aren't even going to have enough money to maintain the system we have today."

The reasons for the funding downturn are many. Fuel tax revenues have become a diminishing revenue stream as cars become more fuel efficient and as people drive less, while the costs of doing business are increasing. Inflation has decreased MoDOT's purchasing power by more than 50 percent. What was 17 cents (state fuel tax per gallon) of purchasing power in 1992, the last time fuel taxes were increased, is now about eight cents and decreasing each year.

The cost of asphalt, concrete and steel - the staples of the industry - are as much as 200 percent more than they were in 1992. And employee healthcare and retirement costs have also steadily risen.

The looming insolvency of the Federal Highway Trust Fund - expected in the fall - is a big reason, too.

MoDOT projects its annual construction program - which just a few years ago was $1.3 billion - will be just over $700 million in 2015, before dropping to $325 million per year from 2017 through 2019. Nichols said the baseline annual amount required to keep the statewide system of roads and bridges in the condition it is today is $485 million.

"When we fall below that number," Nichols said, "it is obvious that our system is going to begin to deteriorate.

Carmichael said the Commission opted to take this action now, rather than wait, because this is the time of year when MoDOT and its local planning partners begin to prioritize future projects in order to add an additional year to the five-year Statewide Transportation Improvement Program.

"It makes no sense to be adding projects that eventually increase our maintenance responsibility when we won't be able to maintain what we have today," Carmichael said. He emphasized, however, that projects already in the STIP are the Commission's commitment to Missouri taxpayers, and they will be delivered. "We may have to delay some a year, but they will be constructed," Carmichael said.

Nichols noted this is not a federal or a state problem, "It's both," he said. "In 2020, we won't have enough state revenue to be able to match federal funds. That means those unmatched dollars will be directed to other states and lost to Missouri forever. If our federal funds would increase, we'll be unable to match them even sooner."

"I'd call it a ‘crisis of progress,'" Carmichael said. "In the last decade, MoDOT made great progress and demonstrated the kinds of improvements it could deliver with resources. But continued progress in delivering system safety improvements and the types of projects that stimulate the economy and create jobs is coming to a halt in the near future."

Nichols said MoDOT has taken dramatic steps to reduce costs and form a leaner, more efficient agency. "We've reduced staff by 1,200, closed facilities and reduced the size of our fleet. Those actions have saved $500 million. But we can't cut our way to a solution for this transportation funding problem.

"We've done a lot of great things in the last 10 years to make our roads safer, to bring innovation to our projects, and to deliver some really big initiatives. But without a solution, we can't do any more going forward."

Read much more about the MoDOT funding crisis, the proposed 10 year, $8 billion solution, and the impact on biking and walking in Missouri here.

Image: Waiting for MoDOT by Zaskem, FlickR. License: Creative Commons BY-NC-ND 2.0