Blue Ribbon Commission on Transportation Funding Report

We reproduce here the interim report of the Blue Ribbon Commission on Transportation Funding, revealing how little thought has been given to transportation issues in the first five years of the present state administration:
to the
Governor and Maryland General Assembly
by the
Blue Ribbon Commission on Transportation Funding
February 18, 2011
The Maryland Department of Transportation
February 18, 2011
The Honorable Martin O’Malley
Governor of Maryland
State House
Annapolis MD 21401-1991
The Honorable Thomas V. “Mike” Miller, Jr. The Honorable Michael E. Busch
President of the Senate H-101 Speaker of the House
H-107 State House State House
Annapolis MD 21401-1991 Annapolis MD 21401-1991
Dear Governor O’Malley, President Miller and Speaker Busch:
Respectfully submitted for your and the General Assembly’s consideration is the enclosed Report by the Blue
Ribbon Commission on Transportation Funding. The Report speaks for itself, but I wish to highlight its core
concerns and recommendations.
Maryland’s highly-regarded transportation network is the lifeblood of the State, directly affecting every citizen
and the essential viability of our economy. Yet the State’s transportation system finds itself on the verge of
financial collapse unless action is taken now to change course for a new, more secure, heading.
We must put the trust back in the Transportation Trust Fund. And we must replenish the depleted coffers of
the Trust Fund. We cannot accomplish the latter without also accomplishing the former. They are
inextricably linked — without re-establishing public trust in the inviolability of the Trust Fund, there will be
little faith by the public that raising revenues for its transportation needs will correspondingly address those
needs as promised.
The Blue Ribbon Commission is confident that residents, businesses, and localities would support
transportation-related rate hikes if they are assured the monies will be spent for transportation purposes. One
thing is clear — should Maryland dither in this contested arena, other jurisdictions assuredly will not. In the
highly competitive economic environment that we inhabit, other States and regions will not stand still.
Accordingly, maintaining the Trust Fund’s status quo is simply not an acceptable option, either short-term or
The Blue Ribbon Commission on Transportation Funding understands that is why you saw clearly the need to
establish this Commission with the charge given it. We trust you will find our Report and recommendations,
reached through consensus by a disparate group of voices, useful.
We thank the able staff of the Department of Transportation for their assistance and professionalism. We
thank you for your service at this hard time.
Gus Bauman
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I. Background
The 2010 legislature of the Maryland General Assembly adopted, and Governor O’Malley signed into
law, SB 229/HB 710, Chapters 525 and 526, 2010 Laws of Maryland, which establishes a Blue Ribbon
Commission on Transportation Funding (see Attachment 1 for a list of Commission members).
Specifically, this law requires that the Commission review, evaluate, and make recommendations
1. The current State funding sources and structure of the Maryland Transportation Trust Fund;
2. Short– and long–term transit construction and maintenance funding needs;
3. Short– and long–term highway construction and maintenance funding needs;
4. Short– and long–term pedestrian and bicycle facility construction and maintenance funding
5. Options for public–private partnerships, including partnerships with local governments, to meet
transportation funding needs;
6. The structure of regional transportation authorities and the ability of these authorities to meet
transportation needs in various regions of the State;
7. The impact of economic development and smart growth on transportation funding; and
8. Options for sustainable, long–term revenue sources for transportation.
The law took effect July 1, 2010 and is in effect for a period of two years, through June 30, 2012. The
Commission has held seven meetings to date, chaired by Gus Bauman, beginning with the inaugural
meeting on September 27, 2010. As of the submittal of this Report, the Commission has been active for
just under five months. The enabling law requires an Interim Report to the Governor and General
Assembly, which was submitted by the January 1, 2011 due date, and a Final Report of the Commission’s
findings and recommendations to be submitted to the Governor and General Assembly on or before
November 1, 2011. All meeting details and other information regarding the Blue Ribbon Commission,
including the Interim Report, are posted on the Maryland Department of Transportation (MDOT) web
site (
II. Introduction
Through its deliberations to date and presentations from State and local representatives as well as
national experts, the Commission has formed a consensus opinion that the State’s transportation system
is facing a fiscal crisis. This condition is occurring at the same time the federal government is grappling
with hard choices at the national level, and the future is unclear.
The Commission’s challenge, as described by its Chairman, is to address the hard fact that over recent
years the Transportation Trust Fund has been effectively depleted. In order to maintain the State’s
economic viability and business competitiveness, it is essential that the Trust Fund be replenished and
protected if Maryland is to have a first‐rate highway, road, and transit system for its people and for its
economy to grow.
Maryland has a robust transportation planning and prioritization process that incorporates direct
involvement of local and State elected officials on an annual basis. Transportation system preservation,
services and opportunities throughout the State are evaluated based on the goals and objectives of the
Maryland Transportation Plan (MTP) and added to the Consolidated Transportation Program (CTP).
The State’s transportation network serves multiple purposes. It gets employees to work; provides
access to recreation, shopping, and services; and expedites the movement of goods and services. The
State’s transportation network forms the backbone for the State’s economy, allowing Maryland to be
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more competitive in domestic and global markets. Transportation is about access to home, jobs, health
care, education, and recreation, which lead to a high quality of life.
III. Purpose of this Report
As required by the law, the Commission submitted its Interim Report to the Governor and General
Assembly on January 1, 2011. This Report provides recommendations to the Governor and General
Assembly that the Commission requests be considered in the current legislative session. At this juncture
in the Commission’s tenure, its recommendations focus on necessary near‐term fixes to transportation
funding in Maryland. These recommendations aim to protect the Transportation Trust Fund by
preventing further transfers from the Transportation Trust Fund for non‐transportation purposes and
to replenish funding to levels that can meet core transportation needs.
The Commission will continue to address longer term transportation funding challenges throughout the
remainder of its deliberations during the balance of this year. Section V of this Report highlights some
of the issues the Commission will study further. This includes reviewing opportunities for cost savings,
direct transportation user fees (tolls, pricing), public‐private partnerships (P3), value capture
mechanisms, improved cost performance, and project prioritization. At a minimum, the Commission will
issue one additional report, serving as the Final Report of the Commission’s findings and
recommendations, to the Governor and General Assembly on or before November 1, 2011. Additional
reports may be submitted as the Commission determines appropriate.
IV. Recommendations
The Commission’s recommendations concern both the structure of transportation funding in Maryland
and the pressing need to infuse additional resources into the Transportation Trust Fund to meet nearterm
critical transportation system obligations. The two core recommendations are linked –
without the first, there will be little faith by the public in the second. For each recommendation,
background context for the recommendation is provided followed by specific recommended actions.
RECOMMENDATION 1: Put the Trust Back in the Transportation Trust Fund
Context: Overview of the Transportation Trust Fund and Transportation Funding in Maryland
MDOT is structured as a special funded agency. Transportation funding in Maryland occurs through the
Transportation Trust Fund and the Transportation Authority Fund. The Transportation Trust Fund
receives funding from the motor fuel tax, motor vehicle titling tax, corporate income tax, rental vehicle
sales tax, sales and use tax, operating revenues from transit, port, and aviation fares and fees, federal
funds, and various other income sources. All MDOT expenditures are made through the Transportation
Trust Fund, including debt service, operating costs, the capital program, and support to local
governments. The Transportation Authority Fund is funded primarily with toll revenues.
Maryland’s citizens, residents and businesses alike, expect that taxes and fees assessed for using the
transportation system will be used to maintain and expand that system. The portions of Maryland’s
sales and use tax and corporate income tax dedicated to transportation serve as the means for
businesses and other indirect beneficiaries of transportation to support the infrastructure. Despite the
intent to dedicate these revenues to transportation uses, large transfers from the Transportation Trust
Fund to the General Fund have occurred over the years. While the majority of these transfers have been
repaid, a significant amount, especially from the local government portion, approximately $997 million,
has not been replenished (see Attachment 2 for a summary of these transfers).
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MDOT’s structure as a special funded agency provides the flexibility to actively manage its budget and
financial resources. It is essential that this flexibility, along with dedicated and secure revenue sources,
be maintained and protected from use for non‐transportation purposes.
Recommended Actions:
The Commission recommends the following actions with regard to the underlying structure of the
Transportation Trust Fund and the importance of its restoration and continuation.
(1) Protect the Transportation Trust Fund by:
a. Amending the Maryland Constitution to prohibit transfers out of the Transportation Trust
Fund for nontransportation
b. Enacting a statute that requires the Governor and the General Assembly to declare a fiscal
emergency and to obtain approval of each house of the General Assembly, along with a
repayment plan, before making a transfer of money from the Transportation Trust Fund
to the General Fund for nontransportation
While amending the Constitution would provide the best protection and is the preferred option, the
Commission understands that this would take longer to accomplish than enacting a statute. The
Commission recognizes that emergency circumstances may occur during which it could be
necessary for the State’s General Fund to borrow from the Transportation Trust Fund. However,
this should only occur in very limited circumstances and under strict repayment terms before any
transfer might occur. The Commission proposes that a framework for such critical emergencies be
outlined that requires, for example, a clear demonstration of the emergency. Additionally, the
Commission proposes that if this occurs, a specific repayment plan to the Transportation Trust Fund
be created at the time of the borrowing. The Commission proposes that this require a vote of each
house of the General Assembly; and
(2) Retain the existing portion of sales tax and corporate income tax revenue that is dedicated to
transportation in the Transportation Trust Fund. The Commission recommends that the portion
of the sales tax (currently 5.3% of the sales tax revenue or $275 million/year) and corporate income
tax (currently 20.4% of the tax revenue or $175 million/year) revenue that is already dedicated to
transportation be retained in the Transportation Trust Fund and expended on transportation uses
as originally intended by House Bill 5, Chapter 6, 2007 Special Session, Laws of Maryland (Please
refer to Attachment 3a); and
(3) Restore Highway User Revenues to the local governments. The Commission recommends that
the funds historically utilized to provide annual allocations of Highway User Revenues (HUR) be
restored to the local governments, which includes counties, municipalities, and Baltimore City. A
portion of these funds, averaging $350 million annually, has been diverted to the State’s General
Fund. (Please refer to Attachment 3a.) This recommended action will have a $350 million impact to
the State’s General Fund.
RECOMMENDATION 2: Shore Up and Expand Core Transportation Funding
Context: Overview of Funding Challenges
The Maryland Department of Transportation has traditionally had reliable sources of funding to support
its programs. Reliable revenues to the Transportation Trust Fund enable MDOT to forecast, plan and
program with greater predictability and efficiency. The revenue sources for the Transportation Trust
Fund, however, have not kept pace with inflation nor are they sufficient to meet system expansion
obligations and needs. Several factors exacerbate this problem:
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