In 2007 Pennsylvania lawmakers passed a law called Act 44 which required the Pennsylvania Turnpike to fork over $450 million a year to help fund non-turnpike transportation projects around the state. The act has forced the turnpike to continue borrowing money to help fund roads and bridges throughout Pennsylvania all while paying the increasing costs of maintenance on the turnpike and the increasing debt payments.
Pennsylvania Turnpike Commission debt has gone from $2 Billion in 2002 up to $7 Billion today. And they plan to borrow another $4.3 Billion in the next decade.
Tolls have increased by 48 percent. And the turnpike has been forced to “cut spending on its own long-term projects and capital expenses.”
The year after Act 44 passed, the PA Turnpike reduced its workforce by 70 employees. The current union contract prevents layoffs but doesn’t require that empty positions be filled. The turnpike is currently reducing staff through attrition partially due to the expansion of electronic tolling driven intentionally by an ever-growing gap in pricing between cash and electronic tolls.
PA State Auditor Jack Wagner called the current borrowing and spending policies “flimflam finance” and warned it could bankrupt the turnpike. Using the turnpike to borrow money that is then sent around the state to non-turnpike projects “is the very definition of robbing Peter to pay Paul,” said Wagner.
Rising tolls, increased debt, lower maintenance and staff reductions through attrition to help fund non-turnpike transportation projects around the state?
Here in Ohio, John Kasich plans to force the Ohio Turnpike Commission to take on $1.5 Billion in debt and to send all the money over to ODOT to help fund non-turnpike transportation projects. It’s a windfall for ODOT, while the turnpike will be responsible for paying off that debt out of its own revenue and through toll increases.
The Kasich folks will remind you that 2012 was a record year for turnpike toll revenue. But what happens if toll revenue drops? Which is certainly possible as tolls go up and trucks, the major source of that revenue, leave the turnpike for other roads.
The turnpike will still be forced to pay off the debt, along with their existing half billion in debt, and if they can’t get the money from the scheduled toll increases then they’ll have to find the money somewhere else. Further increases in tolls? More bonds? Maybe. But cutting staff and delaying much-needed turnpike maintenance could also be in the mix.
But hey, at least the trucks will have nice alternative roads to use thanks to the money being sucked away from the turnpike.
The turnpike commission has already laid off incident response workers and announced plans to close maintenance facilities. And while Kasich has said there will be no immediate turnpike layoffs, Dispatch reporter Joe Vardon says “he does mention buyouts after attrition/retirements”. Contracts with the Teamsters, the union representing Ohio Turnpike workers, expire at the end of this year.
Kasich has promised he will use any bond money he raises for construction projects near the turnpike, but he hasn’t promised not to redirect existing ODOT funds to other parts of the state, replacing it with the turnpike money. In a recent interview, ODOT spokesman Steve Faulkner refused to rule out this type of shell game in which extra turnpike money allows ODOT to spend more money around the state by removing existing funding from Northern Ohio.
The PA and Ohio plans have some key differences, one being that the PA Turnpike is forced to pay a set amount to PennDOT each year whereas Kasich’s plan requires two big, upfront payments. But they also have a great deal of obvious similarities that could spell trouble for our turnpike’s future.
Kasich’s own turnpike study identified some other risks:
- The OTC retains comprehensive risks of maintaining, operating, and leveraging Turnpike.
- The OTC is estimated to invest approximately $3.3 billion (2012 dollars) in capital maintenance costs over the 50 year evaluation period.
- The OTC would be required to consistently increase tolls to realize expected value.
- Bond issues beyond the initial financing would be subject to various risks, including market risk, project performance risk, etc.
- Increased debt burden results in reduced operating flexibility.
- The potential exists for forced toll adjustments to maintain coverage ratios and meet capital investment needs.
In this plan, The Turnpike Commission takes all the risk, and Kasich gets all the benefits. It’s a simple way for the Governor to avoid making difficult budget decisions, like actual cuts or increasing taxes, while still increasing spending on publicly popular transportation projects in an election year.
In order to achieve his goals Kasich will have to circumvent state borrowing limits, increasing debt and spending while relying on a short-term boost of one time money: exactly what he campaigned NOT to do.
At the end of the day, Kasich’s plan for the Turnpike might make political sense for the Governor as his reelection campaign kicks off, but its benefits to the state as a whole are dubious and short-term at best.