Ohio lawmakers and the incoming DeWine Administration will start off the new year staring down a huge transportation budget problem: The state has run out of money for major new road construction projects.
State road and bridge construction money is trending in the wrong direction, and the prospect of significant delays in major projects around the state has prompted the formation of a new coalition that will push policymakers to find new transportation money, particularly through a state gas tax increase.
The status quo means no money for capacity-building projects currently awaiting funding.
The Ohio Department of Transportation’s total construction contracts, which includes funding for potholes, paving, snow plowing and bridge maintenance, is set to go from $2.4 billion in 2014 down to $1.5 billion in 2020. Local officials also have been warned about a 14 percent cut in state discretionary funding for 2021.
A new Fix Our Roads Ohio (FOR Ohio) coalition has formed to stress to lawmakers and the public the urgency of the problem, while pushing potential solutions, including a gas tax increase. The group includes local governments, local chambers of commerce, contractors, county engineers, truckers and others.
The root of the problem, coalition leaders say, is twofold: Ohio’s 28-cent gas tax has not increased since 2005, and $1.5 billion in turnpike bond funding that was approved in 2013 has run out.
Dean Ringle, executive director of the County Engineers Association, said some officials have wanted to wait for Washington to come up with a transportation solution, “but that’s not very realistic at this point.”
“Just about every state surrounding Ohio has taken matters into their own hands,” he said. “Ohio, just to be competitive, needs to do that.”
“If some things aren’t done, and done relatively soon, Ohio’s going to be facing a real problem here,” said Curt Steiner, a senior adviser to the coalition. As a former chief of staff for Gov. George V. Voinovich, he understands the political difficulties that come with asking elected officials to increase taxes and fees.
“The biggest consequence is that while some maintenance will continue to happen, many of the projects that are planned for new construction are just not going to be started,” he said, arguing that will add congestion and reduce construction employment.
The last time the state faced a transportation budget shortfall — a $1.6 billion hole that threatened to push back by decades some of the state’s largest transportation projects — Gov. John Kasich announced in December 2012 a $1.5 billion plan to issue bonds against future turnpike toll revenue.
That infusion of money meant funding for major new road projects averaged $555 million per year from 2014-2017.
But that bonding money is gone. And without new revenue, the Ohio Department of Transportation expects major project funding of $20 million in 2020 and $15 million by 2021 — enough to cover potential cost overruns on current projects, but nothing else. That is on top of concerns that the state also will not keep up with maintenance costs.
“Our transportation system doesn’t degrade like turning off a light switch. You need to stay on top of it," said Christopher Runyan, president of the Ohio Contractors Association.
Gov.-elect Mike DeWine is aware of the problem, and lawmakers certainly shouldn't be surprised.
In the two-year transportation budget passed in 2013, GOP legislative leaders included a joint legislative task force to study transportation funding. Two years later, when Republican Rep. Terry Boose of Norwalk called the turnpike bonding a “Band-Aid,” lawmakers again used the transportation budget to create a joint legislative task force to study transportation funding.
The second task force issued an underwhelming nine-page report in December 2016 — one year past its deadline — listing suggestions from a number of groups and urging that ideas be discussed in future budgets.
The future is here. DeWine will introduce a transportation budget in February.
But first, another study is likely. In July, DeWine told the Ohio Association of Regional Councils that he plans to appoint a blue-ribbon commission to “come back with a quick assessment about where we are on infrastructure and come back with recommendations” on how to fund a fix.
“We’ll then open discussion with the people of Ohio,” he told the group.
While the current coalition is interested in seeing DeWine’s ideas, members say the obvious and most likely answer, especially in the short term, is already well known: a gas tax hike.
The coalition is pushing for an as-yet-unspecified increase in Ohio’s 28-cent per gallon gas tax, which last increased by 2 cents in 2005. Nearly 10 cents of that tax goes to local governments.
A number of states have increased their gas taxes since that time. Pennsylvania in 2013 linked its tax to gasoline prices, nearly doubling its tax per gallon.
Ohio’s 28-cent rate is about 6 cents lower than the national average, and lower than four of five surrounding states: Michigan (44 cents), Indiana (43), West Virginia (36), and Pennsylvania (59). Kentucky’s rate is 26 cents.
A one-cent gas tax hike raises about $70 million. As lower gas prices encourage people to drive more miles, the gas tax is expected to collect $1.2 billion in 2021, a roughly 10-percent increase over 2014.
But industry experts say the 28-cent rate today has 35 percent less value than it did in 2005, because of inflation — a reduction masked by the short-term turnpike bonding.
Keary McCarthy, executive director of the Ohio Mayor’s Alliance, said nearly half of Ohio's largest cities already have backlogs in their paving programs, which started with the Great Recession.
“If we don’t do anything going forward, it’s going to be a major setback for the next generation and going to create huge setbacks in the growth curve we’ve seen in a lot of cities across the state,” McCarthy said.
Outgoing state Budget Director Tim Keen said that counting state and federal money, plus more than $300 million annually from vehicle registrations, local jurisdictions have had substantial road revenue, about $1.5 billion in recent years. “That is often lost in this whole discussion,” he said.
“Clearly, the turnpike bonding has provided for the ability to fund a lot of projects over the last six years that we might not have been able to do,” Keen said. That option likely won’t be available for DeWine, unless he raises turnpike tolls.