Gov. Walz’s team points to future needs with gas-tax plans

April 06--Gov. Tim Walz often cites Minnesota’s “crumbling roads and bridges” to persuade a divided Legislature to increase the gas tax 20 cents per gallon to pay for billions in new road improvements. Drivers blowing out tires on the jagged edges of basketball-sized potholes this spring have only strengthened his plea.

The Democratic governor has wielded that argument against Republican lawmakers intent on blocking his gas tax hike, leveraging a national narrative of decrepit infrastructure.

But the data show a far murkier picture of the condition of Minnesota roads and bridges.

After the I-35 bridge collapse in 2007, Minnesota spent $2.5 billion shoring up its bridges, and the number of spans in poor condition has dropped dramatically. Road conditions in Minnesota have held steady during the past decade and even improved marginally, often comparing favorably to Wisconsin and Iowa, according to federal data. Commute times for metro residents are lower than in similarly sized urban areas.

None of this should be very surprising given budget increases for the state Department of Transportation -- up more than one-third just since 2012 -- far outpacing inflation and population growth.

“We’re adding more money every year,” said state Sen. David Osmek, R-Mound, who sits on the Senate transportation committee that rejected the Walz gas tax proposal last week. Republican lawmakers argue that amid budget surpluses there is no need to raise taxes, and that any gas tax increase would hit the poor hardest.

The Walz administration counters that their proposal is about the future -- and a grim one for Minnesota drivers if something isn’t done.

“The status quo runs us over the funding cliff,” said Margaret Anderson Kelliher, commissioner of the Minnesota Department of Transportation. With an additional 700,000 residents in the metro region expected over the next 20 years, Walz contends his plan would pave the way to continued economic growth, convenience and safety. It also would create at least 46,000 construction jobs, many of them for members of building trade unions that are longtime Walz allies.

Walz, a Mankato Democrat who won a commanding election victory in 2018, has much riding on the gas tax debate. It is one of a handful of signature issues -- the others being school funding and health care -- that will help define his first legislative session as governor.

Senate Republicans determined to thwart Walz’s gas tax increase also have much at stake. Suburban voters overwhelmingly broke for Democrats in the 2018 election, although the Minnesota Senate didn’t feel the DFL wave because senators were not on the ballot. Facing the voters in 2020, Republican senators from suburban districts could experience a reckoning. Their constituents tend to drive a lot. While they could be hard hit by a gas tax increase, shoddy roads damage vehicles and lengthen commutes.

The gas tax debate -- both in Minnesota and nationally -- is part of a larger ideological fight over the size, shape and reach of government.

In Minnesota, the 2017 Republican-led Legislature shifted $300 million from the general fund -- which pays for schools, social programs, parks and other services -- and put the money toward road infrastructure, which has been funded separately. Democrats want that money back in the general fund, and they want to protect it in the future.

“You’re taking from schools,” Walz said in an interview last week, referring to Republicans’ use of some sales taxes to pay for roads. The $300 million in new spending that Republicans committed, Walz said, “was enough to fix the Blatnik Bridge” -- a reference to a bridge replacement project in Duluth. “And that’s it. It’s gone,” Walz added. “And what are you going to do when you have a downturn? Where’s the planning?”

State Sen. Scott Newman, chairman of the Senate Transportation Committee, defends the use of sales taxes for roads because everyone benefits from transportation -- not just drivers.

But the effect of moving money from other government programs to roads is clear: Curtail the overall growth of government.

Walz’s plan, instead, would grow state government coffers to the tune of more than $10 billion over the next decade, albeit dedicated to transportation.

The 20-cent gas tax would be phased in over two years, which would push the cost from 28.5 cents to 48.5 cents per gallon and raise $6.5 billion over 10 years. The fuel tax would increase with inflation after that. Vehicle registration taxes also would increase from 1.25 percent to 1.5 percent, which would raise another $4 billion. An eighth of a penny sales tax increase in the metro area would be used to improve transit.

Anderson Kelliher, the state transportation commissioner, said the agency is climbing a steeper financial hill with a rapidly emptying gas tank. She was instrumental in passage of the last gas tax increase in 2008 while she was Minnesota House speaker.

She and other Walz administration officials believe the state still has a lot of ground to make up on road funding. Minnesota’s system of roads is the fifth largest in the country. And it is aging -- more than half the system is at least 50 years old, according to MnDOT.

A recent report from the Center for Fiscal Excellence found that the state spends about 15 percent less per vehicle road miles than the national average. Anderson Kelliher said the agency she took over in January is also saddled with too much debt. By 2025, MnDOT will be shelling out $288 million to service the debt.

Like all government agencies, MnDOT’s first priority is protecting assets. With so many road-miles in greater Minnesota, the agency spends 60 percent of its money there. Without new money, Anderson Kelliher said, MnDOT will have to spend 70 percent of its budget in greater Minnesota to take care of those aging assets -- meaning far less for maintenance in the metro.

Waiting too long to fix a road will drive up costs, said David Newcomb, a senior research engineer at the Texas A&M Transportation Institute. He compares it to a patient with a disease waiting too long to see a doctor. And maintaining roads in Minnesota is much more expensive than it is in other states because of the brutal fluctuations in temperature, Newcomb said.

The cost of construction has more than doubled since 2004, according to MnDOT, while inflation in the rest of the economy is closer to 30 percent. Without an increase to account for that rapid inflation, the gas tax delivers less bang for the buck every year. The price of steel, concrete and skilled labor increases every year, while the gas tax stays the same. If the state gas tax had been tied to inflation since 1988, it would now be about 43 cents instead of the current 28.5 cents per gallon.

The federal government is not always a reliable partner. Congress hasn’t raised the 18.4 cents-per-gallon federal excise tax on gasoline since 1993. The federal tax, which is allocated among the states, is not indexed to inflation, which has increased by a total of 73 percent since 1993. Many states -- including Republican-leaning Iowa, Nebraska and Ohio -- have reacted by raising their gas tax in recent years.

In Minnesota, vehicle miles increased 14 percent since 2000, according to TRIP, a transportation research group. The condition of Minnesota roads adds $542 in operating costs for drivers every year in the form of extra maintenance and depreciation, TRIP reports.

Anderson Kelliher also argues that the infusion of money would help ease property taxes, because 40 percent of MnDOT money goes to counties and cities, which are forced to pay a larger and larger share of road fixes. “There’s no way around it: Someone has to pay,” she said.

The Republicans who control the state Senate remain unconvinced. Sen. Paul Gazelka, R-Nisswa, the majority leader, has been touting a bill -- with a half grin -- that actually reduces the gas tax by 20 cents.

His point appears to be that if the two sides met in the middle, the increase would be zero.

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