Abigail Allen, Shawn Arrajj July 16, 2014
This November, Texas voters will decide whether money from oil and gas production tax revenue can be used to help fund the state’s transportation projects.
Those revenues flow into the state’s Economic Stabilization Fund, otherwise known as the rainy day fund. That helps the state in unforeseen situations, said Alan Clark, the director of transportation planning for the Houston-Galveston Area Council. The legislation proposing the constitutional amendment includes a way to protect the fund from running dry.
“The rainy day fund will have to be above a certain minimum determined by the Texas Legislature, and then funding will go to the projects or activities that were approved as part of that drought relief program,” Clark said. “And only after those two things
Last year, Texas voters approved Proposition 6, which allows the state to redirect money from oil and gas production tax collections to fund water projects statewide.
“Those have first priority,” Clark said.
Recent increases in oil and gas hydraulic fracturing have led to more money going into the rainy day fund.
“I just know that the more oil and gas [those companies] pump out of the ground, the more they are required to pay this revenue into the state fund,” Clark said. “And because this goes up and down, it’s part of the reason why it’s in this, what we call, rainy day fund.”
Because the money comes from existing tax collections already paid by the oil and gas companies, the change would not result in increased taxes or fees. If the amendment passes, it would also not require the state to borrow money or increase the state’s debt, Clark said.
Estimates say that if voters approve the Texas Transportation Funding Amendment, it could provide about $1.4 billion for transportation in its first year, Clark said.
Some opponents to the amendment have expressed concern about putting transportation funding decisions in the hands of the voters. The voters would be allowing for another funding resource to be explored, Clark said, but they would not be selecting a fixed budget amount for the state highway fund.
Other opponents have pointed to the volatile nature of oil and gas production tax revenues and have said the rainy day fund is not a long-term solution for the budget shortfalls transportation has seen in Texas in recent years. Clark said the state would need to use multiple funding sources to fix its transportation funding problems.
Jeff Collins, a board member with Transportation Advocacy Group in Houston, said he supports Prop 1, but acknowledges that it is only the first step, and the lack of funding would need to be revisited again in the 2015 legislative session.
“The big key is we need to remind ourselves and our elected officials that it’s only getting us part of the way—maybe 20–25 percent—we need to go for funding,” he said. “It gets us $1.4 billion per year, and we need to get an additional $5 billion per year. That’s really just to keep [up with] current congestion levels, which is a little scary.”
Part of the reason for the budget dilemma is vehicles have been getting increasingly better gas mileage while gas tax rates have stayed about the same since the early ’90s. Collins said the traditional source of transportation funding cannot keep up with the growing need.
“We need to look at user fees,” he said. “There are a lot of ways we can get there. Not every road can be a toll road, so it makes a lot of sense to maybe look at a gas tax increase and registration fees.”
Keith Vrana, chairman of the Cy-Fair Houston Chamber of Commerce’s transportation committee, said keeping up with mobility infrastructure is crucial given job growth and company relocation trends in the Cy-Fair area.
“The cost of doing nothing will absolutely put the brakes on success,” he said. “We support Prop. 1 and continue to discuss how we can shore up funding to meet our infrastructural needs, so the state will be able to handle future growth.”
In addition to specifying that the Legislature must set the minimum amount for the rainy day fund, the state highway fund legislation includes a sunset deadline of 2024 by which the Legislature has to renew, alter or allow the amendment to lapse.
“If it doesn’t work right, they’re not going to renew it,” Clark said.