The Right Recipe: Invest in Both Transportation and Education

By Carol Hedges, Colorado Fiscal Institute

The 2018 Legislative session is flavored with a unique set of ingredients. Close majorities, elections in November, and term limits looming for some make for a special combination of seasoning. And this year’s big increase in state revenue adds some additional spice.   

As Colorado’s economy expands and federal tax changes potentially result in more state tax revenue, the General Assembly has some flexibility in its budget with over a $1 billion in new revenue available for allocation to important priorities. So, what to do with it? The sad truth is that our Legislature doesn’t have much experience spending new money, and the challenge of what to do with the revenue is pitting important public investment priorities against one another. 

What needs money more desperately: education or transportation?  There’s not a clear right answer. Because it’s the wrong question.

We’ve been down this road before.

During the last extended period of economic expansion, the Legislature chose tax cuts over TABOR rebates, which led to disastrous consequences. In the two recessions in the decade that followed, state support for both transportation and education plummeted, and and we’re still digging ourselves out of that hole.

If the tax rates of 1999 were still in place, the General Fund would have $683 million more for roads and schools this year.

But instead, transportation faces a $1 billion funding shortage on an annual basis. Schools are still catching up funding reductions, and half of Colorado school districts have 4-day school weeks.

We can’t afford to keep pitting roads against schools.

While spending on both schools and roads has increased over the last 20 years, neither has kept up with state needs. Transportation funding, not including one-time General Fund expenditures, has increased 98 percent since 1996.  School funding has increased by 160 percent. But funding in these vital areas has not kept pace with rising costs nor with demand fueled by population growth, which has increased 42 percent (more than 1.5  million people) over the last two decades.

Because of Colorado’s unique constitutional tax policy, much of the increase in state spending on schools – nearly 20 percent – merely makes up for mandated decreases in local property tax revenue.  In addition, the number of students in our K-12 education system has increased by 37 percent. Since K-12 funding is largely driven by how many kids are in school, new kids mean more costs. More state tax dollars are going to local schools today than 20 years ago. However, kids aren’t seeing enhancements and teachers aren’t seeing pay increases because the total amount of money invested in our kids since 2000 has not even kept up with inflation. Nor has Colorado’s investment kept up with that of our peer states – right now we spend $2,147 less per student than the national average.

Transportation funding has increased too. In addition to its dedicated revenue sources of fuel tax collections and vehicle registration fees, transportation often receives transfers from the General Fund – meaning that when it comes to roads, user fees and user-based taxes don’t pay for themselves.  In the last 20 years, General Fund dollars supplemented cash fund revenue 11 times by at least $50 million, resulting in General Fund transfers of $2.7 billion. In fact, during expansionary periods in the last twenty years, transportation often received more discretionary General Fund dollars than education.  Of course, those expenditures have not been enough to offset the reduction in purchasing power of the gas tax (which has remain unchanged since 1991) or the impact of more cars and more vehicle miles travelled on our roads. 

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The Legislature is grappling with the challenges of investing in competing and already underfunded priorities. One approach, embodied in SB 1, would commit $250 million from the General Fund each year to transportation infrastructure. The would either force reductions in spending for schools – as well as health care, housing, and every other state priority – in future economic downturns, or mean that transportation infrastructure investments would stop and start with every economic cycle.

Adding new obligations, like interest and loan repayment, to our current revenue stream is like buying a bigger house based on a bonus check. You wouldn’t put your family in that position, nor should the Legislature put 5.6 million Coloradans in that position.

Another approach would be to increase the amount of money collected from taxes to make interest payments on transportation bonds. This would guarantee continuous commitments to transportation infrastructure improvements without jeopardizing school funding and other critical state priorities during the inevitable next recession.

We have to stop digging ourselves into a hole and start investing for what’s to come.

It is time to stop pitting one priority against another. In this year of expanding resources, the General Assembly passed a budget that commits half a billion dollars from the General Fund to transportation needs. This is a substantial commitment that is consistent with a prudent use of potentially, “one-time” dollars. Because if estimates of increased revenue from federal tax changes don’t materialize or if economic growth is stymied by global circumstances, next year’s legislature retains the ability to make the best decisions based on the current circumstances at that time. 

It is time to expand our commitment to making our transportation system work for all of us.  And the harsh reality is that the only way we can expand the capacity of our schools and our transportation system is to tax ourselves a bit more. Put more simply, it’s time to pay for ourselves. 

The question is not whether we should fund transportation or schools.

The question is how best can and should we do both? Because right now, the status quo is failing our kids, our families, and our communities. That much is evident every additional minute a Front Range commuter sits in traffic, and every time another school district goes to a 4-day school week or freezes teacher pay.

So instead of repeating the same mistakes of the past, and neglecting the same key priorities that help communities, let’s make the smart choice and the fiscally responsible choice. And let’s cook up a solution to actually pay for ourselves and invest in our future, instead of relying on the same old ingredients that starve our economy and leave families with unmet needs.

Scott Downes