Donald Fry: How the state lost its way on transportation funding

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By Donald C. Fry

Earlier this week a statewide coalition of advocates, including the Greater Baltimore Committee, the Maryland Chamber of Commerce, the Greater Washington Board of Trade and 29 other organizations and businesses, was formed to protect and strengthen Maryland’s funding for transportation infrastructure.

The new coalition, named START, for State Transportation Alliance to Restore the Trust, has simple, straightforward objectives. We seek to convince Governor Martin O’Malley and state lawmakers to:

• First, enact a constitutional amendment or equally enforceable legal protection to stop the raids on the state’s Transportation Trust Fund for non-transportation uses;
• Second, find a way to increase revenue to the transportation fund to address a more than $40 billion backlog of state highway, transit, port and airport projects that are planned but not funded for construction, and restore highway user revenue to local jurisdictions.

An online news story on the new coalition’s formation prompted one reader to comment on the story by raising a compelling question: When did raiding transportation funding for ready cash first start?

“Surely, this has been going on far longer than Mr. O’Malley has ever been alive,” the online reader commented. “But not doing so is still a good idea.”

The state’s Transportation Trust Fund is 40 years old this year, so it’s younger than Governor O’Malley. But the reader is right about one thing – the fund has been regularly raided by lawmakers for most of its existence.

The trust fund’s history is the story of how a government that is widely considered to be financially well-managed lost its fiscal discipline over the last four decades relating to a public resource – the state’s transportation infrastructure – that is critical to maintaining a superior business climate and quality of life.

Maryland’s Transportation Trust Fund was created in 1971 to establish an integrated, dedicated fund to support the Maryland Department of Transportation (MDOT). “The use of this integrated trust fund approach allows Maryland tremendous flexibility to meet varying transportation service and infrastructure needs,” MDOT’s web site states.

Current revenue sources for the trust fund include gas taxes, vehicle titling taxes, vehicle license, registration and other fees, 24 percent of corporate income taxes, 5.3 percent of sales taxes, and federal aid.

Despite the original intention that the Transportation Trust Fund be a dedicated source for transportation uses only, lawmakers have consistently “borrowed” from it though the years, mostly for budget-related transfers to the state’s general operating fund.

Between 1984 and 2004, state legislators approved ten transfers totaling $571 million from the Transportation Trust Fund to the general fund for non-transportation related purposes, of which $127 million has yet to be repaid.

Since then, state lawmakers have abandoned the concept of “borrowing” and have rationalized reasons for simply making money disappear from the revenue stream to the transportation fund. A current example of this is the estimated $250 million in revenue over five years that lawmakers voted in 2008 to temporarily divert from the transportation fund to the general fund.

Also, to help balance the budget during the last two sessions, lawmakers diverted to the general fund approximately $500 million each year from transportation fund proceeds that had previously gone to local governments. Consequently, in two years, highway user revenues distributed to counties has been cut by 96 percent – money that counties depend on to keep their roads in good shape and to fill potholes. Those cuts would continue under the governor’s proposed FY 2012 budget.

Legislative leaders have ready rationalizations for their raiding practices. When lawmakers “borrow” money from the Transportation Trust Fund for non-transportation purposes, it eventually gets paid back, they point out. Almost always, I say, except for that $127 million or so that has yet to be paid back from the “borrowing” that occurred between 1984 and 2004.

The $250 million in diversions to the general fund over five years was to compensate for anticipated revenue lost by repealing the ill-advised computer services tax, lawmakers rationalize.

And finally, the $1 billion in highway user funding that was taken away from local jurisdictions isn’t money that would have been available for non-local transportation projects anyway, so that doesn’t count as a “raid” of the Transportation Trust Fund, they contend.

Maybe these rationalizations seem legitimate to some in Annapolis.

But even so, they beg a more legitimate question: does Maryland’s transportation “dedicated” revenue really go into a trust fund?

To transportation advocates, it’s pretty clear that we must do something to restore the “trust” in the state’s Transportation Trust Fund.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Previous Center Maryland columns by Donald C. Fry:

Budget proposal will be first big 2011 defining moment for lawmakers

GBC to lawmakers: ‘Make job creation and business growth top session priority’

Helping city’s new prosecutor implement a vision

A culture of ‘giving back’ lives in Maryland’s business community

Budget challenges will test government’s capacity for strategic planning

Facing the disconnect over the concept of ‘business climate’

Tax commission delivers refreshing change of pace

‘Reform’ commission to mull tax increase for Maryland corporations

No tsunami in Maryland, but voters deliver ripple of transition

Why isn’t transportation infrastructure crisis on lawmakers’ radar?

Market expert tells a pre-Halloween scary story

Entrepreneurs provide inspiration in a recession

Military is driving Maryland’s anticipated biggest economic spurt in 60 years

MedImmune CEO frames bright future for bioscience

Making transportation a top-tier priority

Primary voters in a mood for transition

Reading Maryland's fiscal tea leaves

Getting beyond sound bites and bumper stickers

Biotech tax credit more popular than ever, but the ‘rock-concert’ lines are gone

Bad timing for upcoming business tax report

For economic indicators, the ‘whipsaw’ effect continues

Do census data foretell a Baltimore city population rebound?

Remember the value of business after the election

New report ranks Baltimore among stronger regions to weather the recession

New living wage proposal: wrong idea, wrong time for Baltimore

Northeast needs more attention from federal rail planners

New national report has familiar ring for Maryland bioscience advocates

New report underscores Maryland’s work force development challenges

State’s health initiative: a ‘win-win’ for employers and their workforces

As Baltimore hikes taxes, are state’s counties next?

After the ‘fiber from heaven’ scramble, what’s next?

BRAC growth no longer a future event – it’s happening now

Economic development is a contact sport

Despite the recession, bioscience growth still percolates in Baltimore

State stumbles in enacting new education collective bargaining process

Wind power has potential in Maryland, but solar emerges as early renewable option

It's not good to be clueless in cyberspace

Amid fiscal shuffle, Maryland lawmakers pass measures to spur business growth

Thankfully, Baltimore leads with substance over style in luring Google

Leave damaging transportation provisions out of the budget

Amended budget continues recession-induced fund shifts and stimulus rescue

General Assembly setting stage for combined reporting push in 2011

Wrong timing for proposal to change Baltimore City school board

Baltimore City isn’t alone in facing pension funding challenges

A government investment program that delivers

Proposed transportation fund raid -- a bad habit continues

Where's the outrage over crime?

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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.


Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.


Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.


Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.


Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.