Dollars & Nonsense, Part 1

WRITTEN BY: Jim Erkel, MCEA Land Use & Transportation Director

The legislature is back in session, and it will revisit funding for transportation following its chaotic fail at the end of last session. The means by which we fund transportation are complicated, and sometimes difficult to understand. In fact, it is complicated enough that legislators on the transportation committees are starting the session with tutorials on funding mechanisms from the staff at MNDOT and the Metropolitan Council.

The black-box character of how transportation is funded lends itself to a number of talking points that push the discussion, but some of them are either not true, stretch the truth, or need a substantial amount of context to be properly understood. 

This is the first post in my blog series called "Dollars & Nonsense." Each post will take a transportation funding issue, or talking point, and I will walk through the policies behind it, look at the numbers, and provide background to better grasp the complexities of transportation policy in Minnesota.

We will start small with a look at how Minnesota's main user fees -- the state's gas tax and Metro Transit's fares -- have kept up with the cost of maintaining and operating roads and transit systems. We will work our way up to big ones, like 'roads pay for themselves; transit is heavily subsidized' and 'the road needs of Greater Minnesota has been neglected.'

Transit critics point out that farebox recovery only covers between 25%-30% of the cost of Metro Transit's operations (note that Metro Transit has not increased fares since 2008) and argue that fares should be raised to reflect the increased costs of operation. As a rule, it is reasonable to expect that user fees will be periodically adjusted to reflect changes in the costs of operation. However, what is good for the goose is also good for the gander. The state's gas tax was last increased in 2008. 

In the graphic below, we compare how the user fees have changed since 1988, the last time the state's gas tax was raised before 2008. You will see that the gas tax has been raised only once, while transit fares have been adjusted 10 times. Compared to several measures, transit fares have more than kept up with inflation, and it is the state's gas tax that has failed to keep up with increased costs of operation.

If the gas tax had increased at the same rate as Metro Transit's base fare, we would be paying 40.1 cents per gallon, not 28.5 cents per gallon. Using the rule of thumb that one cent of Minnesota's gas tax raises $30 million per year, the difference of 11.6 cents translates into roughly $348 million per year. That's more than the statutory dedication of sales tax on auto parts and repair to roads proposed by House Republicans last session.

​Rather than raiding the general fund and re-directing monies that support issues such as health care and education, road interests should commit to the principle articulated by transit critics, and raise their user fee to reflect the higher costs of operations. Transit already has.