State Net Capitol Journal – July 14, 2014; Federal Highway Funding Bottleneck Forces States To Hit Brakes On Road Projects

Budget & Taxes

FEDERAL HIGHWAY FUNDING BOTTLENECK FORCES STATES TO HIT BRAKES ON ROAD PROJECTS: With the specter of an empty federal Highway Trust Fund looming, states — which count on that fund for 15 to nearly 60 percent of their transportation budgets (see Bird's eye view) — have been putting off or canceling critical road, bridge and transit projects.

Arkansas, which derived 45 percent of its transportation budget from the federal government in fiscal 2011, has had to postpone 10 transportation projects, including two bridge replacements.

"We've probably got up to $120 million in projects in Arkansas that we could have gone to bid with that we can't go to bid with now because there's no guarantee that we'll be reimbursed," said state Rep. Jonathan Barnett (R), who chairs the House transportation committee.

Missouri, which received 47 percent of its transportation funding from the federal government in 2011, opted back in January not to add any projects to its five-year transportation improvement program this year in anticipation of the Highway Trust Fund's insolvency. The state is now considering adding 25 projects. But ordinarily, it adds between 300 and 500 projects a year.

"It's serious because typically transportation projects take a long time to develop, to be designed and constructed," said Bob Brendel, a spokesman for the state's Department of Transportation. "Instead of being able to make strategic decisions, sometimes we're forced to make reactive decisions and that's not the best way to build infrastructure that lasts for decades."

Rhode Island, which receives about $200 million a year in federal transportation funds, has temporarily stopped virtually all new highway construction in the state to make sure there's enough funding for projects already in progress, including the Providence Viaduct taking I-95 through the capital city. With roughly 60 percent of its roads rated fair or worse and 20 percent of its bridges in poor condition, the state could be in real trouble in the long term if a fix for the Highway Fund falls through.

"It cannot be overstated that [Highway Trust Fund] insolvency would be crippling for Rhode Island," Michael P. Lewis, director of Rhode Island's Department of Transportation wrote to the U.S. Senate Committee on Environment and Public Works in March. (STATELINE.ORG, FISCAL TIMES)

LIQUOR PRIVATIZATION IMPROVES SOME THINGS IN WA: Many in Washington thought Initiative 1183, the ballot measure approved by voters in 2011 forcing the state to release its Prohibition-era grip on liquor sales, would make spirits cheaper and more readily available. They were half right.

With the expansion of liquor sales from 329 stores owned or contracted by the state to more than 1,400 privately-owned outlets, including warehouse clubs, grocery stores and pharmacies, spirits are certainly easier to find. But the average price per liter, after tax, is about 11 percent higher than it was before privatization, as a result of fees — including a 10 percent charge on distributors and a 17 percent levy on retailers — created by I-1183 to compensate the state for the loss of its monopoly.

"It's a disappointment. Prices have gone up for all spirits," said George Alberts, a 64-year-old Washington retiree who voted in favor of I-1183.

But there have been pros from privatization in addition to increased availability. For one thing, a nearly $1 billion business has been transferred to private hands. And the state received a short-term revenue windfall. According to the state's Office of Financial Management, revenue from liquor sales reached $521 million in the fiscal year that ended in June 2013, which is about $73 million more than the same period two years ago, although that figure includes a one-time $105 million fee that was paid by distributors.

And Alberts, for one, doesn't regret voting in favor of I-1183.

"I'd do it again," he said. (SEATTLE TIMES)

STATES STEPPING INTO CITY FINANCIAL CRISES: Nineteen states have laws on their books that permit them to intervene in a municipality's fiscal crisis, according to the Pew Charitable Trusts. But as a result of recent highly-publicized bankruptcies like Detroit's, more states are looking to monitor municipalities' fiscal health more closely so they can take action before problems become serious.

California Gov. Jerry Brown (D) signed legislation late last year expanding the state comptroller's oversight of city finances. Controller John Chiang (D) praised that action.

"Recent audits produced by my office demonstrate how weak internal controls can set-up local governments for failure, in such forms as bankruptcy, default, and corruption," he said.

Some in Illinois are pushing for the creation of a program to assist cities in financial trouble there. Jim Spiotto of the Pension Committee of the non-partisan Civic Federation suggested participation in the program could be made mandatory if a city failed to hit certain targets.

Alan Mallach, senior fellow at the liberal-leaning Center for Community Progress, said that "it's in states' interests to have strong healthy cities."

"States gave cities lots of [fiscal] room — some used it wisely and some not. But the states can't simply point the finger and say to cities 'You misbehaved, it's your problem.' It is the state's problem." (STATELINE.ORG)

BUDGETS IN BRIEF: Before adjourning for the year, DELAWARE lawmakers passed a measure allocating $9.9 million to bail out the state's struggling casinos (DELAWAREONLINE.COM). • LOUISIANA will provide at least $6.2 million in government subsidies to the A&E show "Duck Dynasty" (NOLA.COM). • MASSACHUSETTS approved a $36.5 billion state budget that relies on about $75 million in revenue from three new casinos and a slot parlor that may not exist after a November referendum on the law authorizing them. A recent UMass-Dartmouth poll showed voters split 46-41 in favor of keeping the law but with a 4.9 percent margin of error (BOSTON GLOBE). • ALASKA tapped $3 billion from its rainy day fund to reduce its $12 billion pension deficit (BLOOMBERG).

- Compiled by KOREY CLARK

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