Paying for road building and maintenance has been a perennial problem for the state of Wisconsin, and at least once a decade since the 1980s, policymakers have embarked on major studies seeking to help solve it. Early studies commissioned by Governors Lee Sherman Dreyfus and Tommy Thompson identified a gap of 22% (in 1982) and 15% (in 1996) between transportation system needs and available revenue. More recent studies by the Wisconsin Policy Research Institute (now the Badger Institute) in 2011 and a legislatively-created Transportation Finance and Policy Commission in 2013 estimated the gap at approximately 35%, or in the neighborhood at that time of three-quarters of a billion dollars in annual revenue in each of the following 10 years.
Each report highlighted the importance of the state’s transportation system to our economy, the faltering growth in revenues from traditional sources, and the growing costs associated with upgrading Wisconsin’s aging infrastructure. Yet the state’s transportation and transit budgets are still being squeezed on both sides. First, the Legislature and Gov. Jim Doyle ended the practice of adjusting the state’s motor fuel tax for inflation in 2006, curtailing its growth. At the same time, the state started to rebuild some of the most important and expensive assets in its highway system, resulting in 30% growth of the state’s investment in highways between 2004 and 2016.
We are not the first to point out these pressures, yet there is still a fresh need to examine them. First, though the basic problem is longstanding, it has yet to be addressed. In addition, state leaders face some new complications and realities, including the eye-popping rise in inflation, the threat to gas tax revenues from the modest but growing adoption of electric vehicles, and the state’s increasing use of income and sales tax dollars to fund transportation needs.
The Wisconsin Policy Forum has independently studied these issues with support from the Transportation Development Association of Wisconsin, the Metropolitan Milwaukee Association of Commerce, the Wisconsin Economic Development Institute, and the Commercial Association of Realtors Wisconsin. Our research questions include:
- Should Wisconsin keep relying on increasing amounts of general fund revenue and the transfer of spending programs like transit to the general fund to fund transportation, or should the state return to more traditional revenue sources to fund roads and transit?
- If there is a desire to restore that traditional approach, what are the options to increase transportation user fee revenues – or lower costs – in a way that will provide sufficient revenues to meet the state’s projected transportation needs?
- How have other states addressed similar challenges linked to their reliance on motor vehicle fuel taxes and do they have potential relevance for Wisconsin?
This report does not present any easy answers, nor does it put forward any new and unproven strategies. Instead, we seek to inform policymakers by laying out a series of potential investment levels with a range of revenue options to cover those scenarios. In the years to come, state leaders will have to balance the needs of the transportation and transit systems with the impact of taxes, fees, and spending on both state taxpayers and other priorities such as education and health care. We hope this report provides them with points to consider as they seek that compromise.