Funding for road repairs not easy to find

February 18, 2019
Senate Bill 522 would shift 2 percent of severance tax collections to a new state Road Repairs Fund, which would also receive a one-time $200 million cash infusion from the state's Rainy Day emergency reserve fund.

CHARLESTON — Finding additional funding to repair crumbling secondary roads around the state is proving challenging, as members of the Senate Transportation Committee learned Friday.

The committee advanced Senate Bill 522 which would shift 2 percent of severance tax collections to a new state Road Repairs Fund, a fund that would also receive a onetime $200 million cash infusion from the state’s Rainy Day emergency reserve fund.

However, Deputy Revenue Secretary Mark Muchow warned that draining $200 million from the Rainy Day fund would likely hurt the state’s bond ratings, resulting in higher interest rates when the state sells bonds, including the remaining $800 million of road bonds to be sold under Gov. Jim Justice’s Roads to Prosperity program.

“They’re pretty sensitive to significant draw-downs,” Muchow said of bond rating agencies. The proposed legislation would drop the Rainy Day fund down to a balance of about $88 million, he noted.

He said the state needs to maintain a sizable Rainy Day fund to offset concerns bond rating agencies have about the state economy.

“The volatility of our economy, and structure of our economy, greatly worries the ratings folks,” Muchow said. “The strong (Rainy Day) fund is a current positive for the state.”

The bill would also direct 2 percent of state severance fund collections, currently about $9.5 million to $10 million a year, to the Road Repairs Fund.

Committee members rejected an amendment by Sen. Chandler Swope, R-Mercer, to increase that percentage to 40 percent, or about $190 million a year.

Muchow noted that, since $20 million a year of severance tax collections are committed to pay off infrastructure bonds, and another $40 million to $50 million a year goes to local governments, the proposal would cut the amount of severance tax revenue going into the state General Revenue Fund in half.

“This is a complicated tax revenue stream that you’re trying to tap into to provide revenue for roads,” he said.

Muchow also stressed that while severance tax collections, and the state economy in general, are enjoying what he called an “abnormal high,” it would be unrealistic to expect the upturn to continue indefinitely.

“I like good abnormal, but don’t expect to stay the course at that level,” he said.

Sen. Robert Plymale, D-Wayne, questioned the value of dedicating a relatively small revenue source to road repair, given the immense backlog of road maintenance needs. He suggested instead using a significant portion of the current $200 million-plus state budget surplus.

“I think we’ve got to do this with onetime money,” he said. “Right now, we’ve got such a significant backlog, we’ve got to come up with a significant amount of money to fix our roads.”

Earlier in the session, Transportation Secretary Tom Smith told legislators that while increases in gas taxes, DMV fees and vehicle privilege taxes under Roads to Prosperity have allowed Highways to increase its road maintenance budget from about $60 million a year to more than $200 million, the Blue Ribbon Commission on Highways concluded in 2013 that the state needs an additional $750 million a year of revenue in order to bring roads up to a state of good repair statewide.

Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220 or follow @PhilKabler on Twitter.