Address the Spending Side on Road Funding First

The Pennsylvania Department of Transportation issued a statement responding to our blog post that explains state transportation spending has increased 121% since 1995, more than triple the rate of inflation.  Click here for the full transportation spending data.

PennDOT's response says inflation for road projects should not be measure against the Consumer Price Index, but against the bid price index, which increased 122% in that time.  The reason we don't use that measure, is that is entirely based on road construction projects within a state.  Since there are no private road operators in Pennsylvania, the bid prices are entirely determined by state and local government spending - hence we have a chicken-or-egg question. Did higher prices drive up state road construction costs, or did state government spending - without any concern over controlling costs - contribute to higher construction prices?

But even using the bid prices, it is false to say that "PennDOT’s buying power over time has seriously eroded" - the 121% increase in spending (and 124% on highway funding) almost identically matches bid prices.

PennDOT goes on to cite a report that Pennsylvania needs to spend $1.7 billion more per year in transportation.  However, that same report recommends that "no additional funding should be provided for highways, bridges and transit unless a series of parallel actions are taken to reform funding structure and a number of transportation business practices."

The problem is that PennDOT and the transportation industry have put the cart before the horse - demanding more funds without reforming spending.  It is difficult to justify higher taxes or tolls, citing decaying bridges, when the state has funding to build new roads named after politicians; to fund bike trails, parking garages, street lighting, and beautification projects from highway dollars; to put up PR signs thanking politicians for spending our money on each construction project; to “flex” highway dollars to mass transit; and to fund billions in excess on prevailing wage laws.

Tolling I-80 is a Recipe for Disaster

With a renewed interest in tolling Interstate 80, I find it necessary to reiterate several points of concern surrounding Act 44 and its implications on Pennsylvania’s economic future:

• Act 44, as it currently stands, is in violation of federal law requiring that tolls on federal highways be used exclusively on the highway itself. The tolls collected from I-80 would be used for other transportation projects, including funding mass transit in Philadelphia and Pittsburgh.

• In a November 2006 report, the Transportation Funding and Reform Commission recommended that “no additional funding should be provided for highways, bridges and transit unless a series of parallel actions are taken to reform funding structure and a number of transportation business practices.” Act 44 is designed to generate additional funds without putting the required reforms in place.

• The notion that transportation is underfunded is merely a myth. PA’s spending on transportation has increased 121% from 1995-2009, more than triple the rate of inflation. Even before Act 44, highway spending had increased 90% in 2007 alone, facilitating one of the highest gasoline tax rates in the country.

• Pennsylvania’s prevailing wage law requires all public projects to pay state mandated wage rates, increasing the cost to taxpayers by as much as 30%. In fact, by not allowing the market to determine wage rates, taxpayers pay an additional $9 billion dollars annually to pay these union wages. By continuing this policy, true transportation reform remains unattainable.

• Finally, Act 44 would place tolling I-80 in the hands of the notoriously corrupt and inefficient Pennsylvania Turnpike Commission. It is no coincidence that State Sen. Vince Fumo, who was convicted on 137 counts of conspiracy and fraud, frequently used the PTC to spend “other people’s money”. Giving the PTC another sweetheart deal is simply a recipe for disaster.

Letting private companies competitively bid on the rights to manage tolling is a safe and cost-efficient solution.

Lessons from the Failed PA Turnpike Lease

The Pew Center on the States has a new report out offering lessons to Pennsylvania and other states on the proposed deal to lease the Pennsylvania Turnpike (full report here), noting that private funding for roads remains a likely, and necessary, scenario for future infrastructure needs.

They point out the lack of communication between the executive branch and the legislature, and "rosy scenarios" for investment returns.  Hence, they recommend that state legislatures take the lead in development parameters for a lease deal (which I feel like I said over and over again) and using more realistic financial assumptions.

If only there was an organization who had said these things before the fact.

Bailouts and Bull

John Stossel's latest 20/20 special on bailouts and bull debunks numerous big-government myths, including the bailout mentality.  Stosell also tackles toll road privatization, universal Pre-K, medical marijuana, the border fence, and other issues.  It is good television.




Stossel also talked with Reason TV on defending the market from within the liberal media click here for a transcript of that interview or go here for video/podcast.

Rendell administration: Commonwealth Foundation is right about government spending

A Capitolwire (subscription) headline reads "DCED acting secretary says little state can do to create jobs," after a hearing in which Secretary Cornelius notes that "economic development" programs have little effect on job growth, something we have discussed repeatedly.

In the Pittsburgh Tribune Review, Governor Rendell admits the $553 million spent on the North Shore Connector was a waste of money, as the funds could have been used elsewhere. Again, we have also noted that the problem in transportation infrastructure isn't a lack of funding, but misspending of that money, as have others.

So now that the Rendell adminstration is on the same page, will they start following our policy recommendations and cut corporate welfare and reform transporation spending?  Will Governor Rendell reject the federal stimulus funds, like some governors are considering, as it won't help the economy and will only stimulate more government waste?

States Don't Need a Bailout

Steven Malanga of the Manhattan Institute has an excellent editorial in the Wall Street Journal covering all the major topics of why states overspend - creating or expanding costly programs in good times, failing to deal with state pension and benefit liabilities, failing to seek innovative solutions to problems, and the like.

States of course argue today, as they have countless times in the past, that they need federal aid to avoid cutting essential programs that hurt their most vulnerable citizens. But the blunt fact is that the money will only encourage them to keep doing business the same old way rather than seek innovative solutions.

For instance, many state officials want the federal government to boost infrastructure aid as part of a federal spending package, so that states can build more roads, bridges and mass transit. This is typically unimaginative: Around the world sits hundreds of billions of dollars of private capital looking to go to work financing infrastructure, which our states are largely ignoring.

Countries as different as France, Spain, China and Russia have tapped this money. In the U.S., only a few governments have even tried. Indiana Gov. Mitch Daniels privatized the state's major toll road for an upfront payment of $3.8 billion in 2006. He put the money in the state's transportation trust fund and increased investments in infrastructure. Other governors, like Mr. Rendell in Pennsylvania, have tried similar maneuvers. But they've been blocked by state legislators who want to keep these assets -- and the public-sector jobs that usually are dedicated to running them -- in government hands.

The Tax Foundation made similar comments a few days ago, noting a USA Today article on how state and local governments increased spending and payrolls over the past year.

Where has all the money for bridges gone?

A Heritage Foundation analysis finds that the federal government has given more money to state for bridge repair than states are actually using, with a special mention of Pennsylvania:

Using data from a recent report by the Congressional Research Service, Heritage’s Ron Utt calculates that between FY 2002 and FY 2007, the gap between what the federal government made available to the states for bridge repair and the amount of that money the states actually spent on bridge repair is $9.29 billion. That represents about a third of the total federal funding for bridge repair over that time period.   What happened? Much of the gap, says Utt, remains a mystery, but at least $2.1 billion was diverted by the states to other transportation priorities, such as building new bridges and funding transit projects. Pennsylvania, notes Utt, was one of the leading states at diverting money from bridge repair to other purposes. Pennsylvania also leads the nation in percentage of bridges deemed structurally deficient: 25 percent.

So it may be time for Governor Rendell to stop whining about needing more money from the federal government/taxpayers.

No immediate fiscal crisis?

The Pittsburgh Tribune-Review reports on the drop in transportation funding due to the rejection of the Turnpike Commission's I-80 tolling plan.

Under Act 44, the Turnpike Commission will borrow billions to pay PennDOT hundreds of millions each year. Had the I-80 plan been accepted, the Turnpike Commission would have paid $500 million for highways and bridges and $400 million for mass transit systems after fiscal year 2010. But with the rejection of the I-80 tolling plan, those payment drop to $200 million for highways and $250 million for transit.

Some in Harrisburg think they've got time to deal with this problem.

"There's no immediate urgency," said state Rep. Joe Markosek, a Monroeville Democrat who chairs the House Transportation Committee.

and

"There is no immediate fiscal crisis, so there is no reason to jump into the sale of the turnpike at this time," said Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi, R-Delaware County.

However, all of this time is borrowed time and borrowed money by the Turnpike Commission. Can they pay it off with toll increases of 25% in January 2009 and 3% increases thereafter? Time will tell. If they can't, tolls will have to go up even further to generate even less money than the $12.8 billion lease.

Bailout Bandwagon - The Rendell Plan

As hope for the proposed Turnpike Lease dwindles, Pennsylvania Governor Ed Rendell is asking Congress to add $100 billion in transportation money to the $700 billion bailout deal.

The Democrat said his infrastructure initiative would help recharge the American economy by improving public facilities and creating nearly 5 million good-paying jobs.

The Heritage Foundation strongly disagrees:

Ronald Utt points out, “the vast majority of independent academic and federal government studies on the relationship between infrastructure spending and economic activity have found that the impact is very modest and long in coming.” Highway spending simply transfers jobs from one part of the economy to the other. This plan hardly stimulates the economy.

When will they learn that governments redistribute wealth but private business actually create wealth. For more on why governments should partner with private businesses click here.

Nate Benefield adds:

Members of Congress might want to note that tacking on a laundry list of other proposals to "must-pass" legislation (e.g. the state budget), is Rendell's go to play.  It also explains why the state budget has never passed on time under Rendell's tenure.  That is to say, it's a dumb idea.

$12.8B lease opportunity is all but lost

The opportunity to plug a massive transportation funding gap will be lost because of legislative inaction. Although Gov. Rendell plans to try to revive the turnpike lease in 2009, one has to wonder if both the capital and transportation companies will be there to deal with Pennsylvania policymakers again. (We sure would understand why they would take their business elsewhere.)

Here are stories in the Pittsburgh Tribune-Review and Harrisburg Patriot-News on this lost opportunity.

Turnpike Lease Bid expiring - what now?

With the Turnpike lease bid expiring - and indications are there will be no extension of the $12.8 billion bid - both Governor Rendell and some lawmakers have indicated the intent on rebidding a lease deal in early 2009.  To go forward, legislators should:

1. Legislators must take the initiative:
   a.   For such a bid to be taken seriously, legislative action will have to precede the bid process; it cannot be driven solely by the Governor.  Legislators should lay out precisely what the terms will be on aspects of toll limits, retaining current employees, maintenance requirements, bid process, and other aspects.
   b.   Constitutional limitations on the lease money—limiting it solely to transportation infrastructure—should be passed in advance of a lease deal.
2. Repeal Act 44 and stop the Turnpike Commission’s’ borrowing.  As we have mentioned, the Turnpike Commission will continue to borrow to pay their Act 44 requirements.  This new debt obligation will likely force them to raise tolls at a rate faster than the 3% annually they are promising (which follow a 25% increase in January).
3. Require competitive bidding on all bond work and pass Turnpike Commission reforms and/or fold the Commission into PennDOT.  Reforms dealing with hiring practices for Turnpike Commission jobs to eliminate patronage and nepotism, along with requiring competitive bidding on all bond contracts should be passed immediately.  Eliminating the Turnpike Commission and moving Turnpike operations under the fold of PennDOT would be a positive step.
4. Embrace Public-Private Partnerships on new transportation projects.  Bills such as HB 555 (Rep. Geist) and SB 1158 (Sen. Madigan) would allow PennDOT and local governments to engage with the private sector on new projects (new roads, bridges, express lanes, etc.).  These projects will bring the efficiency of the private sector and help fund our transportation infrastructure.  The Turnpike Commission already has the authority to engage is these arrangements, and is taking bids to complete the Mon-Fayette expressway.

Legislators should do their jobs

The Altoona Mirror takes legislative leaders to task for failing to do their jobs:

Senate Republican leaders - President Pro Tem Joe Scarnati and Majority Leader Dominic Pileggi - are among the latest to come down with the ailment of do-nothing-itis.

The Senate's top two said Friday that a proposal to lease the turnpike to a private consortium will not be approved this year. Pileggi was quoted as saying there wasn't support for taking up the matter, ''And we should not rush into such a major policy decision under some sort of artificial deadline.''

Rush? A firm offer of $12.8 billion to lease the turnpike for 75 years has been on the table since May 19 with virtually nothing happening in the Legislature. A dead snail probably could have made more progress than the well-compensated officials who are supposed to be taking care of the people's business.

And in case there's any confusion on the part of legislators: Worrying about how to pay for transportation needs is the people's business.

Things aren't much better in the House. Transportation Committee Chairman Joe Markosek and Majority White Keith McCall have whistled the lease plan dead, and Majority Leader Bill DeWeese suggests waiting until next year and trying again to get permission to toll I-80.

Talk about "leadership inaction."

Since these legislators think waiting on a potential lease deal is no big deal, it's a shame we can't wait to issue their next paychecks until next year. Perhaps then they might consider the matter a little more pressing.

While people may disagree about whether leasing the turnpike is a good idea, it's an idea that deserves thorough debate and a vote - especially when there is an offer on the table and the current transportation funding plan has been nixed by the feds.

Transportation funding options

The Derrick in Clarion provides a good synopsis of Matt Brouillette's presentation on Pennsylvania's transportation funding situation.

What isn't covered in the article was the discussion about the other options on the table for lawmakers to fill the $1B funding gap: 1) Reprioritize current spending; 2) Increase gas taxes by 15 cents or more per gallon (a penny raises ~ $63-65M); and/or 3) Increase vehicle fees -- all of which are unlikely to be done in Harrisburg any time soon.

The "Disability Epidemic" Among Union Employees

If you don't want to get angry after reading these first couple of paragraphs of this New York Times story, then don't click through here:

To understand what it’s like to work on the railroad — the Long
Island Rail Road — a good place to start is the Sunken Meadow golf course, a
rolling stretch of state-owned land on Long Island Sound.

During the workweek, it is not uncommon to find retired L.I.R.R.
employees, sometimes dozens of them, golfing there. A few even walk the course.
Yet this is not your typical retiree outing.

These golfers are considered disabled. At an age when most people
still work, they get a pension and tens of thousands of dollars in annual
disability payments — a sum roughly equal to the base salary of their old jobs.
Even the golf is free, courtesy of New York State taxpayers.

With incentives like these, occupational disabilities at the L.I.R.R.
have become a full-blown epidemic.

For more on the "epidemic" read on...

"Leasing Turnpike Jeopardizes Safety"

... so said a commentary distributed by the Susquehanna Valley Center (see below). Either they didn't bother to read the lease agreement or they are intentionally trying to mislead the public with unfounded fears. We wonder which one, particularly since the head of the SVC is a professor at public university who we would hope is teaching students about accuracy and intellectual integrity.

Here's the relevant section from the lease agreement...

Section 3.18 Police, Fire, Emergency and Public Safety Access Rights. Notwithstanding any other provision of this Agreement, at all times during the Term and without notice or compensation to the Concessionaire, any police, fire and emergency services and any other security or emergency personnel, including the armed forces, and any Governmental Authority with jurisdiction over the Turnpike, shall have access to the Turnpike as necessary for emergency management and homeland security purposes, including the prevention of, practice drills for, or response to, a public safety emergency. The Concessionaire shall cooperate with police, fire and emergency services and any other security or emergency personnel, including the armed forces, in respect of such emergency management and homeland security purposes. Further, in connection with the declaration of a state of emergency by the Governor pursuant to the Emergency Management Services Code (35 Pa. C.S.A. § 7101 et seq.), the Commonwealth may designate the Turnpike a toll-free public highway to facilitate evacuations or for any other emergency purpose. The length and scope of any such emergency declaration shall be governed by 35 Pa. C.S.A. § 7301(c); provided that the Commonwealth, notwithstanding anything contained herein or in 35 Pa. C.S.A. § 7301(c), shall use its reasonable efforts to minimize (i) the duration and scope of any such declaration and (ii) the adverse impact that any such declaration may have on the Turnpike Operations.

---

From: susvalley [mailto:susvalley@susvalleypolicy.org]
Sent: Mon 9/22/2008 3:12 PM
To: Matthew Brouillette
Subject: Leasing Turnpike Jeopardizes Safety

SUSQUEHANNA VALLEY CENTER POLICY BRIEF
www.susvalleypolicy.org
www.voiceofpa.net

LEASING TURNPIKE JEOPARDIZES SAFETY

By Carolyn Welsh

When disaster strikes, emergency responders often need to quickly travel great distances to assist the injured, contain the damage and investigate the cause. In many counties throughout Pennsylvania, emergency responders rely on the Pennsylvania Turnpike to connect them with people in need. That is why emergency service providers across the Commonwealth are opposed to any proposal to lease, sell or privatize the Pennsylvania Turnpike to a private contractor.

The turnpike is a Pennsylvania asset that we just cannot lose. The office of sheriff is a full partner in law enforcement in Pennsylvania, responding to all types of emergency situations, including accidents, natural disasters and criminal activities. Our deputies receive extensive law enforcement and first responder training. Sheriffs' offices often rely on the Pennsylvania Turnpike to respond to emergencies, as well as transport prisoners and serve warrants. Each year, 150 million vehicles use the Pennsylvania Turnpike. Emergency service providers respond to life-and-death calls along the 514 miles of the Pennsylvania Turnpike. In return, the turnpike compensates the emergency service providers through agreements between the organizations. Many of these associations rely on this revenue to fully serve the public safety needs of their communities.

State lawmakers need to consider these critical points as they review any proposal to privatize this Pennsylvania asset. First, there is no guarantee that a private operator will honor the commitments with emergency service providers. A private operator would have an incentive to drop the service commitments in an effort to create as much profit as possible for shareholders. As a public safety official, I am concerned about how we effectively respond to emergencies or disasters. In the event of a natural disaster, environmental accident or a terrorist attack, it may be necessary to move large numbers of people from one region of the state to another. The turnpike, as a limited-access highway, can become a one-way evacuation route by closing the ramps and forcing traffic to go east or west, north or south. The rest stops can be turned into emergency areas where food, water and medicines are dispensed.

Again, the turnpike is a Pennsylvania asset we cannot lose. The turnpike is also taking advantage of new technology to make the highway safer. The turnpike is using a cutting-edge video and data system to provide instant information to emergency responders, as well as signboard and radio alerts to drivers. The more information first responders have when they arrive on an emergency scene, the better they can help the injured and protect themselves in dangerous situations.

The turnpike's investment in technology shows its commitment to the public. There is no guarantee that a private company, which must first consider the profits for its shareholders, would make this type of investment in safety technology.

As a publicly owned and publicly managed asset, the Pennsylvania Turnpike has proven its commitment to public safety by investing in technology and reaching agreements with emergency service providers across the state. Emergency responders have no expectation that a private, overseas-based operator would share the same commitment.

We need to keep the Pennsylvania Turnpike a public asset dedicated to public safety. Let's not risk our ability to save and protect lives by handing over this major transportation asset to a private company.

(Chester County Sheriff Carolyn Welsh is the first vice president of the Pennsylvania Sheriffs' Association. She was recently awarded the 2008 Crime Prevention Award presented by the Pennsylvania Commission on Crime and Delinquency.)

Indiana Toll Road private operator eliminates tolls to help in flood

Despite not being required to by the lease agreement, the private operator of the Indiana Toll Road -- an "evil foreign" consortium of Spanish and Australian companies -- suspended the collection of tolls to help with traffic being diverted off of flooded state-operated highways.

Read more at TollRoadsNews.

Gas tax increase coming instead of Turnpike lease?

Pittsburgh Tribune-Review says Rendell is looking at a gas tax increase in light of the refusal of legislative leaders to consider the lease.

"To make up the shortfall, we're looking at a gas tax increase," said
Rendell spokesman Chuck Ardo. "Where else are we going to find the money for the
shortfall in transportation funding?"

While we know there are lots of places to make up some of the shortfall -- such as repealing prevailing wage and using competitive contracting in mass transit -- the gap between needs and potential cost savings is too great. Of course, if the General Assembly and Governor were willing to cut spending elsewhere -- which we've also recommended time and time again -- then we could reprioritize state spending. And what do you think the chances are of all those things happening?

Well, we obviously think higher gas taxes, more bonded debt, and the preservation of the Turnpike Commission are most likely to be the outcome if the lease doesn't go through. And it is why we believe the lease makes the most economic and public policy sense.

Scarnati's "Save the Turnpike Commission" Plan

In an obvious attempt to divert attention from his vote and support of tolling Interstate-80, Senate President Pro Tempore Joe Scarnati writes today in a Courier Express commentary that

"I, like many of you who opposed the tolling of I-80, was pleased with the decision and felt it was the appropriate decision for the citizens of the Commonwealth. It really speaks volumes to the success that can be experienced when state and local leaders work together for what is in the best interest of our communities."

But his flip-flop on supporting the Save-the-Turnpike-Commission Act 44 -- and then taking credit for getting the I-80 toll plan rejected -- fails to offer any real solutions to our transportation funding crisis. Indeed, Scarnati's plan is just rhetoric that merely serves the Senate's primary interest of saving their patronage playground at the Turnpike Commission.

Like a few folks in the House, he suggests that the General Assembly and Gov. Rendell "rein in spending, make infrastructure a priority and find much of the revenues for our road and bridge problem in the current state budget."

We agree that there is plenty of wasteful spending that could be cut -- we've identified billions. But what cuts does Joe propose? Which revenues is he going to shift? None. As the leader of the Senate at the bargaining table with Rendell for the last two years, he's had the opportunity to cut spending and shift spending priorities -- and he hasn't.

The fact is that the Turnpike lease makes good economic and public policy sense, and is the only viable means to help pay for our paving without tax increases or more bonded debt. But we should also be cutting wasteful spending AND re-prioritizing the spending in Harrisburg.

Turnpike Lease Back On The Table

The Philadelphia Bulletin has an article on the Turnpike lease facing real consideration now; the Daily Collegian and the Daily Item have similar pieces (HT GrassrootsPA).

In the Bulletin piece, Eric Arneson (spokesman for Senator Pileggi) repeats the inane idea that "there is plenty of time" to take most of the next two months off to campaign and not debate the Turnpike lease, because the Turnpike Commission will continue to borrow money, based on future revenue they won't have, to pay PennDOT, and that the state could "rebid" the lease.

Len Gilroy from Reason explains just how stupid (his words) that idea is. Peter Samuel has additional thoughts on the flaws of the "rebid" idea.

Another ill-conceived idea is the proposal floated by Dave Argall and Keith McCall to "fund road and bridge repairs without new taxes or tolls". Their plan is to move state police from the Motor License Fund to the General Fund. There is nothing inately wrong with this plan, but readers will realize that that it doesn't increase revenue. We will simply have to pay $500 million more, with no source of new revenue, and Pennsylvania is already behind in revenue collections.

Clearly, there is plenty of funding that could be found by cutting wasteful spending - and we have identified billions that could be cut. But which of these do Argall and McCall propose cutting?

The fact remains that the Turnpike lease is good public policy, as is cutting wasteful spending. We should do both. The Argall-Mcall bill (and the Scarnati plan, along similar lines), are just efforts to preserve the patronage mill of the Turnpike Commission.

The Reemerging Paradigm: Public-Private Partnerships

Government officials continue to decry the terrible condition of the state's roads, but this time real solutions like public-private partnerships are receiving some support. On Monday, the House Transportation Committee met in Philadelphia to discuss two pieces of legislation allowing private companies to bid on transportation projects including Schuylkill Expressway and I-95. The Philadelphia Inquirer has the story, one by David Spett and another by Paul Nussbaum.

Unfortunately, legislators are making a meaningless, "distinction between selling off or leasing entire state assets, such as the turnpike, and allowing corporations to add capacity to packed highways that the state cannot afford to expand". First of all, what good is a public asset if it's controlled by a group of political insiders whose poor management could cost taxpayers $37.4 billion if the FHWA refuses to toll I-80? Secondly, if a highway is packed doesn't that signify that many people consider it an asset? Their "distinction" is purely political but I've digressed--

P3s allow private companies to bid for the construction and maintenance of Express Toll Lanes and High Occupancy Toll lanes that have successfully lightened the taxpayer's burden and aided congestion, Virginia is a pivotal example. It's about time Pennsylvania invests in something that has a track record of success.

The FHWA agrees, "We at the [federal Department of Transportation] believe that it is time to take advantage of the private sector's flexibility, innovation, creativity, expertise, and access to capital while maintaining public oversight, accountability to taxpayers, and long-term strategic planning." Alleluia.

Public-private partnerships are a win-win, they allow the state to collect needed revenue for repairs and upkeep while offering more options to PA drivers and bolstering the economy by providing jobs for private firms.

Read Matt's testimony on The Benefits of Public-Private Partnerships in Transportation here.