Behind the Highway Trust Fund sound bite

Behind the Highway Trust Fund sound bite

- in Fitzsimon File

Speculation continues to grow that Governor Mike Easley will call a special legislative session to address the state’s transportation crisis, most likely after appointing a commission to develop recommendations about how to raise revenue to reduce the massive highway construction backlog.

The debate has already begun in the media and policy circles and much of it includes a misleading assumption that threatens not only a meaningful discussion about transportation, but the stability of the state budget and funding for public schools, human services and other important state programs.

The assumption is that state lawmakers and Governor Mike Easley are raiding the Highway Trust Fund every year to pay for other programs, though stealing is the verb that many commentators and pundits are increasingly using.

It is true that the budget sends $170 million from the Highway Trust Fund to the General Fund every year, money that could be used to build roads or pay off bonds issued for expensive projects.

But left out of virtually every rant about the transfer is that it was part of the legislation that created the Highway Trust Fund in 1989. The General Assembly set up the Trust Fund with an increase in the gas tax and a highway use tax, in effect a sales tax on cars.

At the time, the tax on car sales raised $170 million, which went to the General Fund that pays for schools, human services, prisons and other core functions of state government. There was a broad bipartisan consensus in 1989 to hold the General Fund harmless, to make sure schools and human services didn’t face budget cuts to build roads.

Lawmakers included a provision in the law to transfer $170 million back to the General Fund every year. The newly created Highway Trust Fund would receive the rest of the revenue from the sales tax on cars, which was projected to grow well beyond the $170 million it raised in 1989.

Governor Easley did take additional money from the Trust Fund in the first years of his Administration to balance the budget as the state faced huge shortfalls. But in most years since 1989, $170 million has been transferred.

That is the much ballyhooed raid, a provision in the law when it was created, based on a decision that roads were not more important than schools or prisons or health care for people with disabilities.

But it hasn’t stopped the rants. Columnist Sharon Valentine said in the Fayetteville Observer recently that this year’s General Assembly didn’t stop the "constant raid" on the Trust Fund.  Republican radio commentator Ballard Everett said lawmakers "raided all the money from the Highway Trust Fund."  

Republican gubernatorial candidate Bill Graham has based his campaign on capping the state’s gas tax, the primary source of revenue for highway construction, then complains about the delay in road projects.

Graham also makes all sorts of wild claims about the Trust Fund, at one point saying that legislators were using it for pork barrel spending instead of transportation projects.

The market fundamentalists have jumped on the bandwagon too, using misleading rhetoric about the $170 million transfer to say that lawmakers don’t need to raise any new revenue for transportation and to reinforce their attacks on government.

One economist affiliated with one of the anti-government think tanks recently included on his list of solutions to the transportation funding crisis cutting the General Fund budget by five percent a year, roughly a billion dollars.  

It is a suggestion cynical politicians love, until they have to make the cuts. There were no amendments offered during this year’s budget debate to reduce the budget by any significant amount, much less a billion dollars.

Lawmakers could have chosen not to give teachers and state employees a raise, but that wouldn’t even get them halfway there. Expenses directly tied to the state’s exploding growth, like enrollment increases, rising health care costs and other noncontroversial items add up to roughly a billion dollars a year in new costs.

Cutting a billion dollars is absurd, which is why no politician ever includes the specifics of the cuts in their demands. But it is a succinct sound bite that allows people to use the transportation crisis to attack government and the vital services it provides.

This year’s budget included a provision saying that it is the General Assembly’s intent to end the transfer from the Highway Trust Fund. And if lawmakers can find the money without reducing vital investments, it may be a good idea.

But nobody has been raiding or stealing anything. They are simply following the intent of the law that created the Highway Trust Fund. And if we are going to address the transportation crisis in any meaningful way, lawmakers will need to raise new revenue. Misleading complaints about the Trust Fund aren’t enough.

About the author

Chris Fitzsimon, Founder and Executive Director of N.C. Policy Watch, writes the Fitzsimon File, delivers a radio commentary broadcast on WRAL-FM and hosts "News and Views," a weekly radio news magazine that airs on multiple stations across North Carolina.