State Net Capitol Journal – June 23, 2014; Federal Highway Trust Fund Running On Fumes

Budget & Taxes

FEDERAL HIGHWAY TRUST FUND RUNNING ON FUMES: For quite some time, state and local transportation officials have been anxiously watching the federal highway trust fund shrink and waiting for Congress to do something about it.

"We've seen it coming like a slow-motion train crash," said Randy Peters, director of Nebraska's Department of Roads.

The root of the problem with the trust fund is that it relies primarily on federal gas tax revenues, which have been declining as Americans have traded in their gas guzzlers for more fuel-efficient cars. The fund is down to several billion dollars, and unless federal lawmakers act, its balance will drop to zero later this year.

"That would have huge impacts for all states and local jurisdictions that rely on federal funding as major components of their highway and bridge programs," said Stuart Anderson, an administrator at Iowa's Department of Transportation, which receives half of its annual funding from federal sources.

State transportation officials are making contingency plans. For instance, Iowa's Transportation Commission approved criteria last week for determining which projects the state will put on hold if federal transportation funding dries up.

But some say Congress will almost certainly approve at least some sort of temporary fix before adjourning for its August recess.

"I just see so little chance in an election year that you're going to shut down road construction," said U.S. Sen. Mike Johanns (R-Nebraska). (OMAHA.COM)

SOUTHERN STATES RECEIVE MOST FEDERAL BENEFITS: The five states that receive the most money per person from federal government programs like Social Security and Medicare are all located in the South, according to a study from George Washington University. West Virginia tops that list, with 26.2 percent of its annual income coming from such programs. The other top recipients of federal benefits are Mississippi (24.0 percent), Arkansas (22.8 percent), Kentucky (22.4 percent), and Alabama (21.8 percent).

Two of the five states that receive the least per person in federal benefits are also located in the South: Virginia (12.6 percent) and Maryland (12.4 percent). But the other three are North Dakota (11.8 percent), Wyoming (12.1 percent) and Colorado (12.3 percent).

One reason southern states like West Virginia receive more federal benefits than other states is because they have more older citizens who are eligible for programs like Social Security and Medicare. According to 2010 Census data, West Virginia has the second-highest percentage of residents over the age of 65 in the nation.

But ironically the states that receive the most money from federal government programs are also among the most likely to elect conservative representatives who favor cutting such programs. All five of the top federal beneficiary states favored the Republican candidate in recent presidential elections. (CHARLESTON GAZETTE)

TAX CUTS CONTRIBUTE TO REVENUE DECLINES IN OH, ND AND KS: Ohio, North Dakota and Kansas had the three biggest year-over-year percentage declines in personal income tax collections in the first four months of this year — 31 percent, 28 percent and 24 percent, respectively — according to a report from the Nelson A. Rockefeller Institute of Government.

Kansas Gov. Sam Brownback's (R) administration has insisted that state's revenue plunge was due to inflated revenues in 2012 caused by wealthy taxpayers cashing in their investments before a capital gains increase kicked in last year. And the Rockefeller study, in fact, acknowledged that taxpayer behavior, which it said was reflected in the 7 percent decline in personal income tax collections nationally from January to April compared to the same period last year. But the report also said income tax cuts in Ohio, North Dakota and Kansas contributed at least partly to those states' revenue declines as well. (KANSAS CITY STAR)

BUDGETS IN BRIEF: The CALIFORNIA Legislature passed a $156.4-billion state budget last week that included $7.3 billion more in general fund spending than last year (LOS ANGELES TIMES). • RHODE ISLAND lawmakers approved an $8.7 billion state budget last week that includes a $12.3 million payment to the investors who bought $75 million in state-backed bonds that helped finance former Major League Baseball pitcher Curt Schilling's video-game company, 38 Studios, which went bankrupt in 2012 (PROVIDENCE JOURNAL).

- Compiled by KOREY CLARK

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