In Pennsylvania, roughly one-third of all road miles are owned and operated by the state Department of Transportation, but three out of four miles traveled within Pennsylvania are on state-owned roadways.

(October 2006) Statewide, Pennsylvanians take more than 400 million passenger trips per year on all types of public transit systems, and more than half of the operating funds for public transit come from state coffers. It’s clear from these numbers that state government is an important player when it comes to Pennsylvania’s transportation systems.

Just how big is the state’s financial commitment to transportation?

Funding for roads and bridges is strongly segmented from funding for public transit. However, it’s useful to look at the total state transportation package to get a sense of the big picture. State revenues for transportation now total over $5.5 billion annually, versus $3.4 billion in Fiscal Year 1996-97. The state uses this revenue for all types of transportation, including roads and bridges, public transit, and railroads. The revenue sources are varied and include special transportation-related taxes and fees such as vehicle registration, motor fuels taxes, and tire disposal fees, as well as broad-based tax sources such as the state sales and use tax and other state General Fund sources.

The State Constitution requires that “All proceeds from gasoline and other motor fuel excise taxes, motor registration fees and license taxes, operators’ fees and other excise taxes imposed on products used in motor transportation after providing therefrom for (a) cost of administration and collection, (b) payment of obligations incurred in the construction and reconstruction of public highways and bridges shall be appropriated by the General Assembly to agencies of the state or political subdivisions thereof, and used solely for construction, reconstruction, maintenance and repair of and safety of public highways and bridges….”

To accommodate this mandate, the legislature created the Motor License Fund (MLF) as the recipient of a significant portion of Pennsylvania’s state generated transportation dollars, such as motor fuels taxes, and the sole source of state generated funds for highways and bridges. Therefore, the ability to fund highways and bridges is tied to the success of those sources only, unlike many other programs run by the state that have access to several broad-based sources of revenue such as the personal income tax and the sales and use tax.

The MLF is the largest single pot of money for transportation and generates about 41% of the money spent on transportation. Restricted revenues provide about 18%. Most restricted revenues consist of special taxes dedicated to a particular purpose. For example, portions of the Oil Company Franchise Tax (OCFT) are restricted to highway maintenance and construction spending, and a portion of the state sales and use tax can only be used to fund public transit activities. The federal government supplies another 28%, while the General Fund kicks in 6% as part of its overall budget. A portion of proceeds from the State Lottery are used to pay public transit for older Pennsylvanians.

How have transportation revenues grown?

The pace of transportation revenue growth trails the growth in revenues for the General Fund over the last 10 years (62.4% vs. 69.0%) and particularly trails recent growth in operations, materials and maintenance costs in transportation industries, which have been as high as 9-17% annually in recent years.

The primary reason is the slow growth of many of the state imposed taxes and license fees in the MLF which is reserved for bridges and highways and the state contributions to public transit from the General Fund and Public Transit Assistance Fund. Growth in funding from the State Lottery has lagged as well. Partially making up for those lower growth rates is the significantly higher contribution of the federal government to state transportation programs and restricted revenues. The chart below illustrates the changes in each of the major revenue sources for transportation:

As a result of the varying growth rates in each major source of revenue, the relative dependence on each differs now from 10 years earlier. The chart illustrates how those proportions have changed.

The chart shows that the portion of funding from the MLF and the General Fund has declined. Their share has been made up by increases in federal funding and restricted receipts.

So what does this mean?

These transportation revenue trends have a long-term impact on Pennsylvania’s ability to compete for jobs and people. Understanding the historical trends is only the first step. Changing them is a far more difficult task.