Treasurer: CT saves big by not stashing transportation funds
Despite an aging infrastructure badly in need of repair,
Connecticut’s transportation program sat atop nearly $1 billion in unspent
funds last summer, a stockpile generated largely in just three years.
And while officials approved a one-time release of those
funds last spring, state Treasurer Erick Russell wants to make sure stashing at
that level never happens again.
Russell will ask legislators when the 2025 General Assembly
session starts Wednesday to cap the Special Transportation Fund’s emergency
reserve so that once that safety net account tops 18% of the STF — nearly $412 million based on current spending — the
state would have to put that money to work, paying down long-term debt.
“This is a win-win outcome that relieves the burden of debt
on taxpayers and frees up funding to invest in future transportation
initiatives,” said Russell, who his entering his third year as treasurer.
The plan centers on the transportation fund, which
represents about 9% of this fiscal year’s $26 billion overall state budget. Besides covering
operating expenses for transit programs and for the Departments of
Transportation and Motor Vehicles, the fund also pays the debt service —
principal and interest — on the hundreds of millions of dollars Connecticut
borrows annually for highway, bridge and rail construction projects.
The STF gets most of its funding from sales and fuel tax
receipts, and the former has grown considerably in recent years, driven in part
by inflation.
But while revenues have been robust, critics say the DOT has
not ramped up construction work at a commensurate pace. Connecticut borrowed
$875 million by selling bonds to Wall Street investors in the 2020-21 fiscal
year to support transportation work. It issued the same amount last fiscal
year, according to records from Russell’s office.
DOT Commissioner Garrett Eucalitto, who took over the agency
two years ago, has prioritized hiring and retaining more engineers and
planners, a challenge that’s become more difficult over the past 15 years.
Three concessions deals with state employee unions have scaled back the
retirement benefits that once made state service particularly attractive.
Meanwhile, the transportation fund finished with surpluses
approaching or surpassing 10% in each of
the past three fiscal years, including a $277 million, a 15% windfall, in
2022-23 that occurred despite a gasoline tax holiday that cost the STF hundreds
of millions of dollars in fuel tax receipts.
The STF reserve, which holds annual surpluses from the fund,
rose over the past three years from $241 million to almost $972 million,
according to the state
comptroller’s annual reports. That cushion account was slightly larger than
45% of last year’s entire transportation fund.
Gasoline station owners, fuel distributors and others began
to press state officials to cut gasoline taxes or provide some other relief
given the huge
unused revenues.
Russell and Gov. Ned Lamont challenged legislators last year
to cap the STF reserve at 18% and use the rest of the fiscal cushion to retire
debt.
Legislators agreed last May to reduce the reserve and shift
the funds into debt payments — once. But they balked at committing to an 18%
cap on an ongoing annual basis.
But Russell is optimistic that once legislators see the
benefits of scaling back those reserves, they will accept a permanent cap.
About $394 million in transportation bonds were paid off
early in late 2024, and another $140 million will be retired in the coming
months.
And while that means the transportation fund’s reserves are
down more than $500 million, it also means Connecticut will save $45.1 million
in interest charges this fiscal year and about $63.5 million annually after
that. By 2035, the cumulative savings should exceed $680 million, Russell said.
“These savings will allow our state to continue to fund
critical transportation work that directly supports jobs in construction,
engineering and the trades, while strengthening our local economy,” the
treasurer added.
And Lamont’s budget office is projecting the fund will close
this fiscal year on June 30 with $158 million or 11% left over.
Still, the
administration recently indicated it plans to increase borrowing for
transportation projects significantly in the next few years.
Connecticut is expected to issue $1 billion in
transportation bonds this fiscal year, reach $1.3 billion in 2025-26,
and $1.4 billion the year after that, according to projections Lamont’s budget
office sent to lawmakers in November.
Russell noted his plan only would target surplus dollars and
would not reduce the revenues already dedicated to the STF. In other words, it
would not interfere with administration efforts to ramp up Connecticut’s
transportation rebuild.
Lamont’s budget spokesman, Chris Collibee, said last week
the governor remains supportive of capping reserves, calling it “a
commonsense approach to making smart investments in our critical infrastructure
networks, while controlling debt levels.”
Rep. Maria Horn, co-chairwoman of the Finance, Revenue and
Bonding Committee, has expressed repeated concerns about growing transportation
reserves.
And while the full legislature didn’t accept an ongoing cap
last spring, Horn said it deserves a second look.
“I think we should have that conversation,” she said. “It’s
a constructive idea.”
Horn also echoed Russell’s point that capping reserves
wouldn’t interfere with DOT efforts to launch more construction projects,
adding she believes most legislators want to see that expansion happen.
Rep. Joe Polletta of Watertown, the new ranking House
Republican on the tax-writing Finance, Revenue and Bonding Committee, said he
supports capping reserves.
And while he likes paying down debt early, Polletta says his
caucus has a better plan: simply cut the taxes that fuel the transportation
fund.
House Republicans particularly favor repealing the highway
mileage tax on most large commercial trucks, which launched in January 2023 and
generates about
$60 million in annual revenue.
Even without those dollars, the STF still would be on pace
this fiscal year for a surplus of roughly $100 million or 4.5%.
Polletta said eliminating the tax and controlling shipping
expenses could help combat increasing grocery and department store prices.
“We’re all for paying down debt,” he said. But “I think now
is the time honestly to consider that [tax cut] if we have all of this extra
money.”
Lamont and his fellow Democrats in the legislative majority
approved that highway tax after the governor failed to convince legislators in
2019 and 2020 to establish electronic tolling on Connecticut highways.
The administration has noted that heavy trucks do
significant damage to the state’s highways and this fee enables Connecticut to
force businesses based out-of-state to contribute toward infrastructure repair
costs.