The revenue outlook for the West Virginia State Road Fund is not very promising, according to a study issued today (Dec. 2) by the West Virginia University Bureau of Business and Economic Research.
While the actual revenues going into the fund increased from fiscal year 1970 to the present, the study indicates that the funds value, after adjusting for inflation, peaked in fiscal year 1994. Since that time, the real value has fallen and is projected to continue to fall through fiscal year 2008.
Taxes for the State Road Fund come from three sources: taxes on new and used vehicles (called a privilege tax), registration and title fees, and taxes on the sale of gasoline and other fuels.
The funding growth has been due to sizable increases in privilege tax revenue in recent years,said Tom Witt, project director.But, one finds that traditional revenue sources such as gasoline taxes and registration and title fees are not keeping up with inflation.
Furthermore, continued high fuel prices and low economic growth means potential slowdowns or reductions in fuel consumption in the future,he added.With the development of more fuel-efficient vehicles, further reductions in gasoline tax revenues are likely.
As a result, Witt said, West Virginians will need to make some hard choices regarding additional revenue sources to continue the development and maintenance of the state highway system.
Fred VanKirk, secretary of the Department of Transportation and commissioner of the Division of Highways, said the study helps define revenue issues for the state.
This study is a pivotal study for our state highway system in that it clearly demonstrates that resources are not keeping up with West Virginiansdemands for a good highway system,he said.The study outlines the facts and policy options for the future improvement and maintenance of our state highway system.
The study is the first comprehensive study of the State Road Fund since the 1984 West Virginia Tax Study Commission report. West Virginias highways are primarily financed and administered at the state level. The report includes comparisons with surrounding states as well as North Carolina and Delaware, which also concentrate highway financing and administration at the state level.
Besides documenting the reductions in the real value of the State Road Fund, the study also identifies other restrictions that limit the available resources in support of highway and bridge construction and maintenance.
First, recent changes in state law have mandated that funds from the State Road Fund be used to pay for otherhighway-relatedactivities of the Tax Department and the Department of Public Safety. These activities were previously covered by the states general fund.
Second, the DOH routinely receives requests from various governmental entities to construct Specialized Infrastructure Projects, most of which are to provide access to newly developed facilities. Although these projects, which are not generally eligible
for federal funding and must be constructed with all state funds, are beneficial, they reduce the State Road Fund dollars available for general highway and bridge construction and maintenance activities.
Third, recent initiatives, such as the West Virginia Courtesy Patrol, Home Access Road Program, and creation of highway authorities and the Industrial Access Road Fund, while having merit, combine with increased health insurance costs to place additional burdens on the State Road Fund.
The report provides forecasts of the major revenue sources available in the State Road Fund and examines additional revenue associated with a variety of policy options.
Several important considerations emerge from the report. One obvious conclusion is that an increase in one or more State Road Fund revenue sources is necessary for West Virginia to maintain its present highway system properly.
A second conclusion is that if increases in taxes and fees are implemented, these increases can be made more politically palatable if increases are phased in, as Ohio recently demonstrated when increasing fuel taxes.
A third conclusion calls for indexing fuel taxes for inflation to ensure the real value of revenues keeps up with the increasing costs associated with highway and bridge construction and maintenance.
The final conclusion is that serious attention must be given to the rapidly increasing cost of the Division of Motor Vehicles operation by reducing expenditure growth or substantially increasing license and registration fees.
The BBER study was commissioned by the West Virginia Department of
Transportation and Division of Highways. Its authors were Patrick C. Mann, BBER research associate and professor of economics; Mehmet S. Tosun, BBER research assistant professor; and Witt, BBER director and professor of economics. BBER
graduate research assistant Jawad Salimi assisted with the study.
The BBER is one of the research and outreach divisions of WVU s College of Business and Economics.
A summary of the report will be published in a forthcoming issue of the West Virginia Business and Economic Review. Copies of the report will be available on the BBER Web site (www.bber.wvu.edu) or by contacting twitt@wvu.edu