March 2013

By Joshua Elliott-Traficante

As detailed in an earlier piece on the Highway Fund diversion[1], the Department of Safety receives a sizeable portion of the revenue raised by the state Highway Fund. Historically the Department has received roughly between 24% and 32% of the amount collected, net of block grants to the municipalities.

This diversion, however, is completely constitutional. In 1938, the New Hampshire Constitution was amended, requiring all taxes and fees related to roads, fuel, and motor vehicles be dedicated to highway construction and maintenance. It was passed after attempts were made in the previous session to divert highway taxes to other purposes. While the purpose of the amendment was to “prohibit the use of motor vehicle taxes and gasoline taxes being used for any purpose but for highways,” the language specifically allows funds to be spent for “the supervision of traffic thereon.” That carve out authorizes funds, now segregated in the dedicated Highway Fund, to pay for things such as the state troopers who patrol the highways.

Contrary to popular belief, it does not all go to the State Police, which accounts for just under half of the Highway Fund money spent at the Department. Rather, the diversion funds pay for a number of activities, which can be broken up into three categories: Administrative, Motor Vehicles and the Division of State Police.

Administrative: $21.26 Million

The largest single expense under the Administrative grouping is the transfer to the Department of Information Technology (DOIT). DOIT is unique in that rather than receiving appropriations directly, it is funded nearly entirely through transfers from other state agencies. The Department of Safety transferred $8.79 million in FY13 in Highway Funds to DOIT, which accounted for nearly 87% of the Department of Safety’s total transfer.

There are a number of back office functions performed by the Department of Safety that are paid for by the Highway Fund such as the Road Toll Collection and Audit and the Office of Policy and Planning among nearly a dozen others. Combined they total $7.83 million.

General Personnel Costs account for $4.2 million in Highway Funds, which goes largely to retiree health insurance and pension costs.

Motor Vehicles: $18.89 million

At $16.65 million, the largest piece of this category is the Division of Motor Vehicles itself, which handles automobile titles and registrations as well as driver licensing. Roughly 98% of the DMV’s total budget came from the Highway Fund. The Bureau of Hearings, which hears license suspension cases and appeals accounts for the remaining $2.2 million spent in this category.

State Police: $36.74

At $27.4 million, the vast majority of the Division of State Police’s portion of the Highway Fund revenue goes to pay for the Traffic Bureau which is tasked with policing the state’s highways and roads. An additional $5.11 million pays for Enforcement.

However, not all of the money spent at the Division of State Police pays for troopers on the road. Both the Forensic and Toxicology Labs receive 100% of their funding from the Highway Fund, at a cost of $3.45 million. Rounding out State Police is Administrative Expenses, coming in at $780,000.

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Charlie Arlinghaus

February 27, 2013

As originally published in the New Hampshire Union Leader

The state’s budget laws are often ignored. The general public knows this and so routinely believes that, no matter what they hear, some wool is being pulled over their eyes. This skepticism is strongest in the area of transportation where we presume diversions and shell games are routine. The details often prove the public right. This year’s budget includes a diversion of $28 million of supposedly dedicated highway fund revenue in violation of a law that is only a few years old and already being ignored.

It is commonly accepted wisdom among the public that dedicated highway funds are routinely diverted to non-highway purposes. The constitution was amended in 1938 to provide that taxes and fees related to motor vehicles be used for no purpose other than building and maintaining highways and supervising traffic thereon.

This ironclad dedication exists with no other tax. But for as long as it has existed, people have believed that gas taxes were being diverted like a slush fund to other purposes. It became commonplace to rail against raiding the highway fund (where the dedicated funds are meant to reside). Nonetheless as much as 40% of funds were diverted under vague rationale – if you try hard enough, almost anything can be described as sort of, tangentially related to taking care of roads.

In 2008, however, legislators acted. Republican Rep. Ken Weyler and Democratic Rep. Marjorie Smith, between them chair of the House Finance Committee for six years, sponsored a highway spending cap. A minimum percentage of total gas tax and other highway fees had to be spent within the department of transportation — phased in until the percentage reached 73%. A maximum of 26% could be spent at Safety (on state troopers to supervise traffic in theory) and just 1% could be spent anywhere else.

It was a sensible law which I described as the best piece of legislation of 2008. I was critical of the 2011 budget for suspending the law temporarily even though legislators came close to the target. I worried that suspending the law would send a message that ignoring it is common practice. Ignoring it once makes it easy for legislators to smile at you as if you’re naïve and say “oh that! No one ever does that.”

Sure enough, a tiny diversion becomes a big one. Rep. Lynne Ober, a member of the finance committee had the legislative budget office check on compliance with the law in the governor’s proposed budget. She found that far from reaching the 73% minimum threshold, the budget misses that target by $28 million over the biennium.

In other words, the budget diverts $28 million of dedicated highway taxes and fees to non-highway purposes. Ober is an opponent of the gas tax and contrasted the diversion with the state’s urgent infrastructure needs: “She [Gov. Hassan] should have obeyed state law and put those needed funds into DOT for roads instead of trying to raise the gas tax.”

Ober’s cynicism about the diversion of funds highlights the struggle lawmakers have to earn people’s trust. Gas tax supporters want to raise an additional $120 million each year in dedicated money. But if the $120 million is desperately needed and absolutely, positively won’t be diverted, why is $28 million being diverted with only Rep. Ober raising the alarm?

Gas tax opponents may want the law observed to limit the need for more revenue. But gas tax supporters should also want the law followed to ensure existing revenues are spent as they are supposed to be and thereby create trust.

This diversion may be the tip of the iceberg. The governor’s budget summary includes a line in a spreadsheet indicating the state will raise $29.5 million for its general fund from “dedicated funds/other initiatives.” Which dedicated funds will be undedicated? What other initiatives? We’re not sure yet.

That explanation will wait for the arrival of what’s called HB2, the appropriation language part of the budget. That language required by law by February 15 hasn’t come and is often many weeks late. The law is routinely ignored because other people ignored it first and so we wait for explanation. Similarly, dedicated funds are not supposed to be undedicated but they routinely are so we’re expected to turn a blind eye.

The highway spending protection law is in its infancy. Whether it will have the force of law or become routinely suspended is probably in the hands of the current legislature.

By Charlie Arlinghaus

Originally Published in the New Hampshire Union Leader

Odd as it may sound, in the next big budget battle the state government could learn a lesson from Washington in how to balance our books. In transportation spending, the state government regularly plans on spending much more than it has available. The state should reverse this practice and turn the highway plan from a wish list back into a plan.

The federal government may make significant cutbacks to the gas taxes it sends back to New Hampshire but who can blame them? Last year, like most years, the Highway Trust Fund took in $35 billion of revenue but authorized spending of $50 billion. That tells you just about all you need to know about how Washington works.

Transportation Committee Chairman John Mica has broken with tradition by planning on spending only what the fund collects in user fees (largely gas taxes) to balance this one corner of the federal budget. It’s a novel idea in Washington but one that we ought to import into New Hampshire.

New Hampshire currently plans its transportation spending under the old Washington model. Every two years, we authorize a new “Ten-Year Transportation Plan.” In this process, we have a long term plan for the infrastructure projects we can fund.

The difficulty with the so-called plan is that it is and has generally been a fiction. Over the years, the Ten Year Plan has morphed from an actual plan into a public relations document that bears little or no relation to reality. We know going into the plan that under current scenarios we have only so-much capacity. Yet project after project is added to the list to make people feel better even without any hope of paying for it.

It’s a game politicians play. They run around the state holding meetings and making people feel good. They pat selectmen and chambers of commerce on the back and say “we’ve added this important project to the Ten Year Plan.” Everybody feels good. We’re in the plan. He’s looking out for us. But back in Concord they snicker because it’s all a game.

There’s no money. The plan isn’t a real plan. Just a few years ago, the projects had swelled so much that it would have taken 30 years to fund the ten year plan. A former commissioner, Charles O’Leary, was brought in as interim commissioner to dish out the pain. He ruthlessly pared down the list so there were “only” 17 years of projects in the Ten Year Plan.

The Orwellian doublespeak part of the whole process is when people who want to raise user fees talk of a deficit in the plan as if simply planning on spending money you don’t have is a deficit. Because of the way the plan is developed, all we really know is that the wish list costs more than we have.

The problem is the process itself. The starting point should be available revenue under current budget scenarios (which includes the federal government sending $50 million less if they actually stop spending money they don’t have in this one tiny area of federal spending).

Highway spending in New Hampshire is not funded by general taxation. Our highway spending is supported entirely by user fees like the gas tax and turnpike tolls. So, if we’re developing a real plan, let’s start by figuring out how much money those fees will raise over the next ten years.

The second step is to figure out what those specific revenues will support and what they won’t support. The advantage is that we can figure out what gets left out and whether or not we can live with that. It helps put any proposal for new projects or new revenues in context.

As part of that process, we’ll have to make distinctions between new features and maintaining the current features we have. Our current roads require regular repaving so they don’t disintegrate. We have a red list of bridges in need of repair. Setting aside the money for prevention and maintenance should probably take priority over some of the more glamorous projects.

I love open road tolling where I can fly through with an EZ Pass and not be bothered to stop. However, the very large expense of such a new feature comes at the expense of fixing a lot of decrepit bridges. Is my convenience more important than maintaining our current infrastructure?

When the plan matches the revenue, we can evaluate proposals to raise or cut revenues more clearly. This is what we can fund with current revenue. He wants a toll increase to do these four things. That is a much more strategic evaluation than saying we just need some extra so I can tell everyone yes and put them on the wish list.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord, New Hampshire.