Bill diverting sales tax revenues to roads projects reduced, advanced

After extended debate, senators invoked cloture April 20 to cease further discussion on a roads funding bill. The proposal was amended to dedicate half the amount of sales taxes to roads projects originally proposed in the bill and was advanced from select file.

LB84, introduced by Valentine Sen. Deb Fischer, originally would have dedicated 0.5 percent of the state’s 5.5 percent sales tax to fund roads projects from fiscal year 2013-14 through FY2032-33. Fischer brought an amendment that reduced the allocation to 0.25 percent, which would provide approximately $63 million in the first year. Provisions to finance the investment with bonded debt also were removed by the amendment.

The amendment, adopted 39-9, would direct 85 percent of these funds to a new State Highway Capital Improvement Fund, 75 percent of which would be dedicated to roads projects prioritized by the state Department of Roads. The remaining 15 percent of the new revenue would go to the Highway Allocation Fund.

The amendment also would change the allocation for the Nebraska Expressway system and federally designated high-priority corridors from $15 million to 25 percent of the funds received from revenues generated by 0.25 cents of the state’s sales tax.

Fischer said her amendment is a reasonable and workable solution for the bill. Without new revenues for roads, she said, Nebraska highways and bridges will fall into disrepair.

Kearney Sen. Galen Hadley supported the bill and Fischer’s amendment. The Legislature made a promise to construct an expressway system 20 years ago, he said, and LB84 could help fulfill that commitment.

Scottsbluff Sen. John Harms said a lack of good roads is a barrier for Nebraska businesses. Extra funding for infrastructure is needed to attract businesses and economic growth to the state, he said.

Lincoln Sen. Danielle Conrad opposed Fischer’s amendment and the underlying bill, saying they amount to an unconstitutional earmark of general funds. The state has a long tradition of funding roads with “user fees,” or a gas tax, she said, and the proposal in LB84 would stray from that.

Omaha Sen. Jeremy Nordquist also opposed the bill, citing slow economic growth that he said will not be sufficient to support a quarter-cent redirection of sales tax revenues. Global Insight, whose data the Legislature uses for economic forecasting, decreased its projection for national gross domestic product growth from 3.2 percent to 2.8 percent in the past month, he said.

“Our economy is still on shaky ground and we are spending and earmarking money into the future that we just don’t have at this point in time,” Nordquist said, adding that the amended bill could result in a budget shortfall of $250 million in FY2013-14.

Speaker Mike Flood designated LB84 as a speaker’s major proposal, meaning the speaker determines the order in which amendments and motions are considered. A number of amendments proposing alternative funding sources and capping the amount of sales tax directed to roads were defeated.

Conrad offered an amendment that would have permitted the Legislature to appropriate up to $65 million to the State Highway Capital Improvement Fund. She said her amendment would offer flexibility to allocate funds to roads when revenues are available. It was defeated on a 13-18 vote.

Ellsworth Sen. LeRoy Louden offered an amendment that would have funded the bill with a 5-cent increase in the gas tax. Roads should continue to be funded by user fees like the gas tax, Louden said, adding that the bill would amount to a subsidization of the transportation industry.

Fischer opposed Louden’s amendment, saying revenues from the gas tax are no longer sufficient, as improvements in fuel efficiency and alternative power sources have resulted in declining gas sales.

Louden’s amendment failed 4-38.

Omaha Sen. Heath Mello offered an amendment that would have eliminated the quarter-cent sales tax allocation and instead made automatic transfers to the cash reserve fund. Under current law, state revenues at the end of a fiscal year that exceed those set by the economic forecasting board are deposited to the state’s cash reserve fund.

Mello’s amendment would have redirected half of these transfers to the State Highway Capital Improvement Fund. Such transfers would have provided an average of $47 million annually since 2001, he said.

Fischer opposed Mello’s amendment on the grounds that it would be an unreliable source of funding.

Lawmakers rejected Mello’s amendment on a 10-33 vote.

Omaha Sen. Brenda Council offered yet another funding source for LB84: the Property Tax Credit Cash Fund, which is currently used to provide a credit for property taxes on real property. Council’s amendment would have transferred $230 million from the Property Tax Credit Cash Fund to the State Highway Capital Improvement Fund.

Council said her amendment would provide funding to maintain roads infrastructure without causing budgetary problems.

“I believe that if we are serious about taking some immediate action to address these issues … [my amendment] provides us with the avenue to address those in an effective, efficient and financially responsible manner,” she said.

Council’s amendment failed on a 5-32 vote.

After another amendment offered by Mello to dedicate the quarter-cent of sales tax to a homestead exemption was ruled not germane, lawmakers considered a motion by Conrad to bracket the bill until Jan. 5, 2012.

Conrad said the bracket motion would provide additional time to determine whether the state’s economic growth will be sufficient to fund Fischer’s proposal.

Fischer said the Legislature has failed to provide adequate funds for road maintenance and construction in the past, so the need for a new funding commitment has become urgent.

Conrad’s motion to bracket the bill was defeated 11-28.

Nordquist offered an amendment that would have capped the bill’s annual allocation of the state sales tax at $10 million per fiscal year. He said the limitation would make the bill more manageable.

After lawmakers invoked cloture to cease debate on a 39-9 vote, Nordquist’s amendment was defeated 10-38. Fischer’s amendment was adopted 39-9 and LB84 advanced from select file 36-12.