Highways, bridges and mass transit: Does Illinois need a tax increase?

This is a big year for excise taxes in Illinois and elsewhere. Gov. James R. Thompson has proposed an increase in the cigarette tax; Secy. of Transportation Gregory Baise has promised a gasoline tax hike proposal. The proposed and the promised taxes mirror those elsewhere. Many other states have cigarette tax increases under consideration, and by the end of March gasoline taxes had been increased in West Virginia, a proposal had been sent to voters in Louisiana and gasoline tax increase bills had been introduced in at least a dozen other states. More are expected.

If Baise's promised proposal is not unique, neither is it new. In 1987 Gov. Thompson proposed a gasoline tax hike package that would have boosted the motor fuel tax from 13 to 22.5 cents per gallon over five years. It died with the rest of Thompson's tax hikes. Last year Baise tried with no more success to push a 5-cent-a-gallon gasoline tax hike.

Like many states Illinois pays much of the cost of building and maintaining roads with gasoline taxes. It has a lot of roads to maintain. The 137,000 miles of public highways in Illinois surpass all states except Texas and California. And it has a lot of traffic on those roads. Illinois' 71 billion annual vehicle miles of travel is exceeded only, in order, by California, Texas, New York, Florida, Ohio and Pennsylvania. Less than 15 percent of the roads in Illinois are the state's responsibility, but the state shares a portion of the gasoline tax revenues with cities, villages, counties and townships to spend on their roads.

Overseeing roads and divvying up gasoline taxes and federal aid is the Illinois Department of Transportation, whose $3.9 billion appropriation is the largest in state government this year. The transportation department's 7,582 employees were exceeded only by those in the three departments, Corrections, Mental Health and Developmental Disabilities, and Public Aid. "Our road program is high compared to other states. We don't apologize," says Dale A. Janik, chief of the Department of Transportation's bureau of statewide program planning.

Paying for highways with gasoline taxes presents a problem because the new cars that people are buying are more fuel efficient than the ones that they are trading in. That means fewer trips to the gasoline pump, fewer gallons of gasoline sold and less paid in motor fuel taxes. One solution to the dilemma would be to raise gasoline tax rates. Illinois' gasoline taxes are low. As of the beginning of February only 12 states had lower gasoline tax rates than Illinois, one of them neighboring Missouri.

It is not that simple. Illinois is one of 10 states that also imposes a sales tax on gasoline. That means that state taxes add to the price of a 75-cent gallon of gasoline 16.8 cents (13 cents and motor fuel tax and 3.8 cents and sales tax). Of neighboring states only Indiana and Michigan also impose the state sales tax on gasoline, at 5 and 4 percent respectively. And then there are local sales taxes and local motor fuel taxes. When all are taken into account, the current tax on a 75-cent (pre-Exxon Valdez spill) gallon of gas ranges from 28.7 cents in Chicago to 17.4 cents in downstate non-home-rule communities. The Chicago per gallon state and local tax is among the highest in the country.

Other sources of highway funds are motor vehicle and driver's license fees. The state population is stable and families are not buying second and third cars as they were 15 to 20 years ago. That means that fewer license plates are sold. And the state's fees for license plates are already among the highest in the country.

In short, state gasoline taxes are low, and both the total state

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and local taxes on gasoline and the charges for license plates are high. But the absence of a state personal property tax, a tax on the value of autos, offers Illinois' motorists a break that their neighbors in Indiana, for example, do not get. And when you add together all taxes on ownership and operation of a vehicle, the annual state taxes paid in Illinois are $147.30 per vehicle. That is less than in all but 17 states, including neighboring Wisconsin, where taxes are $146.43 per year.

Another source that Illinois and all states use for highways is federal aid. The Illinois Department of Transportation received an average of $536 million per year in federal funds for fiscal years 1984 through 1989. For fiscal years 1990 through 1994 the department projects those receipts to drop to $415 million.

Illinois has also sold bonds to finance highway work. Over the last 10 years the state has spent an average of $103.2 million per year in Transportation "A" (highway) bond funds. All of the $1.7 billion in authorized highway bonds have been sold and committed to specific projects, and the department cannot issue more without legislative authority. Nor will the department seek that authority without new revenues to retire the bonds.

Build Illinois bond funds have paid for nearly half a billion dollars in highway improvements. The state committed $355 million to build I-39/US 51 from LaSalle-Peru to Bloomington and the Central Illinois Expressway from Jacksonville to Quincy. Another $69 million was allocated to begin the extension of Thorndale Avenue to ease traffic congestion around O'Hare Airport. And $40 million went to make access improvements that attracted economic development, the largest being the $25 million spent to provide access to Interstates 55 and 74 for the Diamond Star Motors plant in Bloomington-Normal. The Build Illinois money, too, is committed.

The take from the gasoline tax and license fees is flat. The bond funds have been committed or spent. And federal deficits force reductions in federal spending. To that bleak picture you can add the specter of inflation. A dollar in 1984 was worth 84 cents in 1989 and is projected to be worth 66 cents in 1994. As a result a highway spending program would have to grow by half between 1984 and 1994 to offset inflation.

Nearly all state money that the Department of Transportation spends comes from user fees, be they gasoline taxes or motor vehicle and driver's license fees. In fiscal year 1988 only $28 million of the $1.9 billion spent by the department came from the state's general funds. And that spending was for waterways and aeronautics and public transportation — not roads.

Some of those user fees pay road-related non-Department of Transporation costs. The secretary of state's office pays the costs of its motor vehicle and drivers' licensing operations from those fees; that spending totalled $96 million in the 1988 fiscal year. A portion of the Department of State Police highway patrol costs, totaling $42 million in 1988, was paid by these user fees. Such "diversions" from Road Funds are targeted by opponents of a gasoline tax increase. The petroleum industry also claims that too much Road Fund money is spent for administration of the Department of Transportation. The Highway Users Federation for Safety and Mobility studied the protection that state constitutions and statutes provide for motor fuel taxes and motor vehicle registration fees. The study says that money spent to build highways, acquire rights-of-way and plow roads is legitimate; money for mass transit would not be.

Illinois was one of nine states judged to have no constitutional protection and little statutory protection for highway funds. Illinois' standing was somewhat better than eight other states that have laws that provide for diversion of money, but worse than 33 other states. Among the weaknesses in protection cited in the report were Illinois laws allowing counties and municipalities to use motor fuel tax money for mass transit and off-street parking and Cook County to pay court costs with it.

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Secy. of Transportation Baise Baise At the ripe old age of 37, Secy. of Transportation Gregory W. Baise should know state government and politics as well as anyone. A graduate of Illinois College and once the youngest alderman on the Jacksonville City Council, Baise has spent 12 years as a Thompson aide. With time out to run Thompson's reelection campaign, he has overseen the transportation department and its $3.8 billion budget since 1984. He is exploring the possibility of a statewide campaign himself. Baise says that this is the year to raise gasoline taxes. Without more money state highways and bridges will deteriorate over the next five years, and 1989 presents the best opportunity to convince lawmakers to approve the increase. Legislators will be cautious about tax increases in 1990, a year that he expects to be dominated by gubernatorial election politics and the battle for control of the General Assembly that will draw the legislative district maps for the 1990s. Lawmakers will be similarly tentative in 1992, anticipating their first runs in new districts, Baise says. "We are literally looking to 1993 before this subject can be addressed again," he claims. Baise acknowledges that highways are not in as bad shape as they were before the 1983 gasoline tax hikes, but says they will be before taxes can be hiked again: "This is the year. If we don't act, we'll be in much worse shape when we reach crisis proportions." And he acknowledges that selling gasoline taxes is getting tougher because the highway system has for the most part been built, and there will be no new stretches of concrete laid and opened with political fanfare. "That's going to make this proposal more difficult to sell," Baise says. In early April Baise was awaiting Gov. Thompson's return from Moscow to present the specifics of a tax hike package for Thompson's approval. Baise expects the plan that emerges to be more persuasive than the one presented to lawmakers in 1987. "The numbers ate there that show what's going to happen to our system over the next five years.'' He says that the proposal will be project specific, avoiding a criticism of the 1987 package. Baise says that he will not repeat the errors of 1987: "I think we made a mistake in '87. We took the political mandate of '86. We laid out this huge package that sort of took everybody's breath away." Baise has formed a committee to begin to explore the possibility of a campaign for statewide office himself. Which office will depend on whether Thompson runs again and, if he does not, who emerges from the Republican pack to seek which offices. Baise claims not to fear an electoral backlash from his tax increase efforts: "If this hurts me politically, so be it." He says that he has grown up politically under Thompson and watched the governor take unpopular stands. The governor did not propose a gasoline tax increase as part of his budget, saying he feared that legislators would be charged with putting concrete ahead of people. The income tax increase needed to boost human service spending is not yet dead; neither is it particularly lively. Can the General Assembly be convinced to raise gasoline taxes and not the income tax? "That's the $64,000 question," Baise replies. Michael D. Klemens

Randy Vereen, the Department of Transportation's deputy director for finance, disputes the contention that gasoline tax money should go only for road building. He claims that plowing, putting up signs and designing roads — items that come from operations costs — are every bit as important. "If these are not appropriate things for user fees to pay for, then I've missed the whole point over what we're about," Vereen says.

Besides arguments over what it is appropriate to spend gasoline taxes for, there is dispute over how much needs to be spent and how efficiently present money is being spent. A major criticism of the failed 1987 tax hike package was the lack of specifics for use of the new money. This spring the Department of Transportation has produced a projection of its needs for the years 1990 through 1994, "Lifelines to the Economy, the Illinois Surface Transportation Network."

"Lifelines" begins with a pitch for investment in infrastructure and tries to tie that spending to increased productivity. It contains all the needs that the transportation department can justify, and more than it expects to be funded. The report identifies $19.97 billion in needs over the half decade period, for which current funding will support spending of $5.4 billion. Highlights include:

• Interstate system: The 1,940 miles of highway that account for 24 percent of all state highway travel and 64 percent of truck travel. The system saw 13.9 billion vehicle miles of travel in 1982 and 18.2 billion miles of travel in 1987, an increase of 31 percent. The interstate system is overloaded in the metropolitan Chicago region. And the system is old. It was designed to handle traffic for 20 years. Forty-one percent is now 21 years or more old, and 68 percent will be 21 years old or older by 1994.
• Major arterials: The 9,240 miles of highway that carry US or Illinois route designations include 715 miles of narrow and 1,050 miles of deteriorated pavement. The system has 645 bridges that need to be refurbished or widened. Major bridges must be replaced at Alton, Gulfport, Hannibal and East Cape Girardeau. Backlogs on the system that were reduced between 1983 and 1989 will begin to grow again.
• Unmarked state highways: Nearly half the 2,190 miles of this classification of roads are narrow. There are 185 miles that need to be resurfaced now, and in five years that total will grow to 465 miles. There are now 185 deficient bridges, and there will be another 145 by 1994.
• County and township system: Of the 90,000 miles of highways 35 percent are rated fair, requiring speeds below legal limits; 19 percent are poor, requiring substantial reductions; and 5 percent are in critical condition or closed. Of bridges on the system 24 percent are in fair condition, 17 in poor and 5 percent are critical.

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• Rural public transportation: The 24 rural systems that operate buses in 29 counties and Freeport, Quincy and Galesburg face a $1 million operating shortfall and $10 million in unmet capital needs.
• Urban public transportation: The Regional Transportation Authority (RTA) system provides 750 million rides per year in metropolitan Chicago. Fares, a local sales tax and state assistance meet operating costs. But the system needs $1.8 billion to refurbish rails and bridges and aging rail cars and buses. Another $626 million is needed to expand the system. Down-state urban systems that operate in 11 cities and Madison, Monroe and St. Clair counties face a similar shortage of capital funding at a time when former RTA chairman and now U.S. Secy. of Transportation Sam Skinner says that state and local governments will have to provide more of the money.
• Urban highways: The system includes 3,875 miles of state roads and 27,715 of municipal roads that together comprise 23 percent of state highways but carry 69 percent of the traffic volume. On the state system there are 820 miles of state roads that need to be resurfaced, and another 890 will be added over the next five years. Current funding will repave only 235 miles. Without new money there will be 215 deficient bridges in the system by 1994. Major bridge projects include the Michigan Avenue bridge over the Chicago River. And the biggest urban cost is to add capacity to 460 miles of roads that are too congested. Total cost is estimated at $2.4 billion, of which $1.9 billion must still be found. In the municipal system 10,600 miles of roads and 680 bridges need rehabilitation, a $3.1 billion cost item.
• Highways for economic development: The state has identified 15 projects, only two of which (Central Illinois Expressway from the Illinois River to Quincy and I-39/US 51 from LaSalle-Peru to Bloomington) will be completed without new money. The largest need is $321 million to take US 51 from Decatur to I-64. The smallest is $5 million to complete Illinois 13/127 north of Murphysboro.
• Rail freight needs: The department expects 1,200 miles of rail lines to be abandoned over the next five years. An estimated $45 million is needed for track improvements and service retention. Only $8 million is available.
• Intercity rail passenger: The state subsidizes Amtrak service between Chicago and Springfield, Champaign, and Quincy. Deteriorated track has slowed trains and decreased ridership, forcing up the state subsidy. There are also equipment problems. For the last six months there has been an average of two locomotive power failures per week in the St.Louis/Chicago corridor. New equipment would encourage more riders and reduce operating subsidies. There is a $68 million shortfall in capital funding.

The department acknowledges that it does not expect to get full funding for the $14.5 billion total shortfall pointed to in the "Lifelines" report. Officials insist the needs are legitimate. They get no argument from Rep. Alfred G. Ronan (D-12, Chicago), chairman of the Transportation & Motor Vehicles Committee. Ronan says that hearings he held last year convinced him that there are needs in highway and bridge funding and in capital money for mass transit. Ronan tried unsuccessfully to find support for a gasoline tax increase last year and blames its nonconsideration on the politics of the General Assembly versus the governor.

The department will get an argument from gasoline station owners. William Deutsch, executive vice-president of the Illinois Petroleum Marketers' Association, says his members suffer from competition with neighboring states when gasoline taxes are increased. Deutsch claims that his station owners are just now seeing business pick up as neighboring states have caught up to Illinois' gasoline taxes. "We just think that they ought to sit tight for at least a year. If they get out in front again, we'll be right back where we were."

Also counseling delay is Douglas L. Whitley, president of the Taxpayers' Federation of Illinois, who says the day that gasoline taxes must be hiked is coming but is not yet here. Whitley says that the unstated policy of spending $1 billion a year on roads can be maintained until 1990 or 1991 without higher taxes: "The Department of Transportation tends to ask for too much, too soon." And Whitley would like to see the formula under which motor fuel tax money is distributed to counties, cities, villages and townships simplified. There are presently two formulas in effect: one for the taxes in place before the 1983 increase and another for the new taxes imposed in 1983. In 1987 the Department of Transporation proposal would have created a third formula. "We think that simplicity and accountability are pretty key factors," Whitley says.

The Department of Transportation may not yet be pressed to maintain roads, but some townships are. Jim Ping of Effingham, president of the East Central Illinois Highway Commissioners' Association, says that townships were hurt by the loss of federal revenue sharing. Then farmland assessment freezes caused property assessments to drop as much as 50 percent, Ping says. That put heavy pressure on rural townships that depend on farmland for their budgets. And Ping says that townships got hurt by the 1983 revisions in the motor fuel tax distribution formula that reduced townships' share of the total pie; the pie got bigger but their share got smaller.

Meanwhile, DuPage and other counties have sought authority to raise their gasoline taxes by up to 4 cents to provide money for county roads. Rep. Ronan says he admires DuPage County's recognition of its problems and willingness to raise taxes to deal with them. But a multiplicity of local taxes works against a statewide policy and makes the state tax harder to pass, Ronan says.

Gasoline tax increases will be considered in Illinois and in many other states this spring. Proponents can argue that the current per gallon tax means a declining revenue source when inflation is taken into account. They can also point to work that needs to be done on roads and bridges. Opponents will demand more accountability from the Department of Transportation. Randy Vereen, the department's deputy director for finance, says that is fine with him: "Taxes should be a political problem." They will be.

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