The COVID-19 pandemic kept many Wisconsin residents off the roads in 2020 as they telecommuted and bypassed travel plans, taking a considerable toll on the state's transportation fund revenue, according to a new report.
The top two revenue sources for the state's transportation fund — fuel taxes and vehicle registration fees — fell short of projections by more than $116 million combined in Fiscal Year 2020, which ended June 30, the nonpartisan Wisconsin Policy Forum reported Friday, Feb. 12. The transportation fund is Wisconsin's primary source for road and infrastructure projects.
The revenue shortfall is expected to continue into the current fiscal year, though the pending infusion of transportation dollars included in a federal relief package passed in December, which the American Association of State Highway and Transportation Officials estimates will provide Wisconsin with about $188 million in transportation funding, could erase much of the gap.
"Taken together these developments, while consequential, are not catastrophic for a fund that took in more than $2.1 billion in revenue in the last fiscal year, while beginning the two-year budget cycle with an unappropriated balance of about $97 million," the report stated.
"But the future remains murky," the report continued. "Even if the virus is in retreat by late 2021, it remains unclear if more widespread adoption of remote work or online shopping may cause longer-term changes in travel patterns after July 1, the start of the next two-year budget cycle."
While increased deployment of COVID-19 vaccines could help residents return to a more normal lifestyle, including increased travel, state officials expect the trend of reduced driving habits to continue into the 2022 fiscal year. Late last year, the Wisconsin Department of Transportation projected fuel tax revenues would remain below 2020 levels for next two years and total revenues in 2022 are expected to be the lowest since 2013.
Even before the pandemic hit, Wisconsin's transportation finances were experiencing a change, with revenue from vehicle registration fees increasing from about $700 million in 2019 to almost $840 million in fiscal year 2020. At the same time, fuel tax revenue dropped for the first time since 2013, falling from $1.07 billion in 2019 to $1.02 billion last year. Figures do not include local wheel taxes, which have been passed in at least a dozen Wisconsin counties and two dozen cities, including Madison.
"On one hand, a heightened reliance on vehicle fees would appear to strengthen the financial position of the transportation fund in a future dominated by fuel efficient and electric vehicles," according to WPF. "Conversely, some say fuel taxes are a more equitable way to pay for transportation programs because the amount paid by a taxpayer is linked, through fuel consumption, to the amount of miles driven and choice of vehicle."
Environmental groups also typically advocate for increased fuel taxes as a means to incentivize better fuel efficiency and reduce carbon emissions.
Another potential revenue stream could be through state tollways, which the state Legislature directed the Wisconsin DOT to study in 2016, but ultimately never pursued.
Gov. Tony Evers proposed in his 2019-2021 budget a nearly 10-cent fuel tax increase over a two-year span, but the GOP-led Legislature ultimately scrapped the idea, choosing instead to increase vehicle registration fees to generate roughly the same $500 million in new transportation funds that the governor had sought to do with a fuel tax.
Evers plans to unveil his 2021-2023 budget on Tuesday, though it remains to be seen if he will try again to pass a fuel tax increase.
American Society of Civil Engineers Fellow Martin Hanson took part in a 2013 transportation, finance and policy initiative commissioned by the Legislature and governor that proposed multiple ideas aimed at modifying the state's gas tax revenue.
"None of that was ever really considered," Hanson said. "It's been a long time since we've taken any action on changing how we collect funds to fund transportation infrastructure and it has caught up to us by now."
The society's 2020 infrastructure report card grades Wisconsin's roads as poor and at risk based on measurements like capacity, condition, funding, future needs, operation and maintenance, safety, resiliency and innovation.
The report also recommends a continued study, and potential pilot program, of mileage-based user fees and toll roads to address stagnant fuel tax revenue.
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