Tuesday, August 25, 2009

Local Aid Cuts Focus Heavily on Transportation

The O'Malley administration just announced $454 million in new cuts, of which $210 million consisted of cuts in local aid. The aid cuts stripped $20.1 million from local health programs, $20.6 million from police departments, $10.5 million from community colleges and a whopping $159.5 million from highway user distributions, or local transportation aid. The transportation cuts amount to one-third of the savings.

Highway user revenues are the primary source of transportation aid distributed by the state to its 24 local jurisdictions. We explained the program in a prior blog post:

Highway user revenues (HUR) are composed of gas taxes, vehicle titling taxes, vehicle registration fees, short-term vehicle rental taxes and a small portion of corporate income taxes. Currently, 70% of HUR is dedicated to the state’s Transportation Trust Fund (TTF) and the remaining 30% is distributed to counties and municipalities. Baltimore City, which does not have state highways inside its borders, is guaranteed at least 11.5% of the local distribution. The remaining local distribution is divided among the jurisdictions according to a formula which relies on county shares of road miles and county shares of registered vehicles. Below is the planned distribution of HUR by county from the Governor’s original FY 2010 budget proposal:
Below is the distribution of the local aid cuts proposed by the Governor:

Baltimore City's reduction is the greatest because it receives more HUR than any other jurisdiction, and 76% of the local aid cuts are comprised of HUR.

Counties primarily spend transportation funds on system preservation, which former MDOT Secretary John Porcari said was the best way to use infrastructure spending for stimulus. The General Assembly already diverted more than $200 million in HUR to deficit reduction in March. By cutting HUR again (this time by half), the state will exert a depressing effect on the economy if the counties cut their own transportation spending, thereby at least partially offsetting federal transportation grants.

If this is the beginning of a strategy to balance the budget by cutting transportation, how can we afford to pay our share of the Red Line, the Purple Line and the CCT, especially if more than one of them goes ahead?