HJR 211: Joint Subcommittee to Study
JLARC Recommendations on Aspects of Virginia’s Transportation Programs
June 7, 2002
Transportation Funding History
Staff briefed the joint meeting
on the evolution of the statutory formulas for allocating highway program
maintenance and construction funds. The highly ad hoc method of dedicating
transportation revenues (primarily motor fuel tax proceeds) to specific
projects or clusters of related projects as needs arose changed dramatically
in 1977. Legislation passed by the 1977 Session of the General Assembly
specifically required that (i) funds needed for highway maintenance would
be allocated prior to allocation of funds for highway construction, and
(ii) after allocation of revenues needed for maintenance, 50 percent of
remaining highway revenues would be allocated to primary system construction,
25 percent to urban system construction, and 25 percent to secondary system
This formulation was amended
in 1985, following two years of study by the Joint Legislative Audit and
Review Commission (JLARC) and the review of JLARC’s recommendations by
a General Assembly study commission chaired by Delegate L. Cleaves Manning.
Based on the Manning Commission’s recommendations, the 50/25/25 formula
was changed to a 40/30/30 formula, with a multi-factor suballocation formula
for distribution of constructions funds within each highway system. An
allocation system was also provided for distribution of maintenance funds
with the primary and secondary systems, and for distribution of maintenance
funds to cities, towns, and counties that had withdrawn from the state
secondary system (Henrico and Arlington).
The last substantial changes
to these arrangements were made by a special session of the General Assembly
called for that purpose by Governor Gerald Baliles in 1986. That session
- Restyled the Virginia Highway
Commission the Commonwealth Transportation Board and increased the CTB’s
size to include representatives of port, airport, and mass transit interests;
- Established a Transportation
Trust Fund (TTF) to fund not only highway construction, but also port,
airport, and mass transit programs;
- Created a special Toll Facilities
Revolving Account within the TTF; and
- Provided, through increases
in the state sales and use tax and various transportation user fees,
new revenues to sustain the new TTF.
With the passage of this legislation,
the distinction between highway revenues and other transportation revenues
was superseded by a distinction between various transportation agencies’
trust fund revenues (those derived from taxes and fees imposed by the
1986 Special Session and flowing to them via the Transportation Trust
Fund) and their special fund revenues (those derived from sources other
than the Transportation Trust Fund and allocated to them through other
mechanisms). From a VDOT perspective, the 1986 Special Session had, in
effect, separated highway resources into a maintenance fund and a construction
The major components of these
funding mechanisms and their associated mathematical formulas have remained
largely unchanged since.
House Appropriations Committee
staff built upon the foundation laid by the day’s first briefing to explain
to the members how, due to a number of interrelated factors, in the 15
years since the last major changes to the highway allocation formulas
set out in the Code of Virginia, more and more highway program funding
has gone "around" these statutory formulas, rather than "through" them.
In FY 1988 the total transportation
budget was $1.7 billion, and 93 percent of the highway construction budget
was allocated to interstate, primary, secondary, and urban system projects
according to the formulas. By FY 2003 the total transportation budget
had grown to $2.9 billion, but only 40 percent ($597 million) will be
distributed by formula.
Based on VDOT’s six-year financial
plan, the VDOT annual budget for FY 2008 is expected to grow only to $3.0
billion—marginally higher than it was in FY 2003. Forty-six percent of
this budget will go to maintenance (including city street maintenance
payments) and only 41 percent to construction. Of these construction funds
only about 50 percent (about 20 percent of the total VDOT budget) is projected
to flow through statutory allocation formulas.
Five factors are primarily responsible
for this decline in the share of construction funds being distributed
- Growth in the portion of total
budget going to maintenance;
- Increases in set-asides and
special programs at the state level, such as the Virginia Transportation
Act (VTA) of 2000, bond programs, etc;
- Growth in the share of total
construction funding derived from federal sources;
- Increasing federally mandated
distribution requirements; and
- Increasing allocation of "highway"
funding to nonhighway projects.
The combined impact of these
trends suggest that six issues, in particular, need to be addressed:
- Should maintenance and construction
be funded through separate dedicated revenue sources?
- Has the VTA improved the distribution
of highway and transit funding to key projects?
- What are the consequences
of continuing to rely on debt financing?
- Does Virginia’s classification
of highways (primary, secondary, and urban) still make sense?
- What are the consequences
of increasing dependence on federal funding?
- Should federal funds be included
when considering whether state funds are being equitably distributed?
The meeting concluded with a
presentation on JLARC’s study of the equity and efficiency of highway
construction and transit funding. After a review of the General Assembly’s
charge to JLARC in conducting the study, including study issues that arose
from that charge, and an explanation of the research JLARC had undertaken
to address those issues, the commission’s efforts were summarized in eight
- The current system for allocating
construction funds seems outdated and needs to be revised to ensure
that construction funds are equitably and efficiently allocated.
- The existing administrative
system of highway classification (primary, secondary, and urban) needs
to be replaced with a classification system (statewide, regional, and
local) based on the functional purpose of the roads, and new funding
regions need to be created to allocate regional construction funds.
- A needs-based system should
continue to be used to allocate construction funds, but VDOT should
improve the process and produce a needs assessment that is both accurate
- Highway construction funds
should be allocated proportionally among the statewide, regional, and
local road systems based on need, with more funds targeted to highways
of statewide significance.
- A separate bridge fund should
be established to ensure that funding of needed bridge replacements
is adequately prioritized.
- Based on projected construction
funds and estimated costs of projects identified as legislative priorities,
there will not be sufficient funds to pay for identified projects of
the next 10 years (a shortfall of $6.5 billion).
- The General Assembly’s involvement
in the funding process has had some important benefits in the near term,
but the legislature may wish to reexamine its long-term role in the
process and give itself authority to appoint the five at-large members
of the CTB.
- Public transit alternatives
to highway construction need to be given higher priority in planning
for Virginia’s future transportation system, especially in urbanized
regions of the Commonwealth.
The Hon. Vincent
F. Callahan, Jr.
Alan B. Wambold
Division of Legislative Services
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