Highway and bridge projects have been shortchanged because the state continues to use money in the Dedicated Highway and Bridge Trust Fund (DHBTF) to pay down debt from past projects and cover the operating costs for state agencies, according to a report by New York State Comptroller Thomas P. DiNapoli.
Similar concerns were raised by DiNapoli in reports in 2009 and in 2014, and this updated analysis shows the problems have gotten worse. DHBTF spending for capital projects declined between state fiscal year (SFY) 2012-13 and SFY 2020-21 from $665 million to $594 million, a decrease of nearly 11%. In SFY 2020-21, only 17 cents of every dollar spent from DHBTF supported a new capital investment.
“New York is at a crossroads. Far too little of the money set aside to build or repair roads and bridges is being used for new capital projects by the state,” DiNapoli said. “It is time for New York to change direction and use the money in the Dedicated Highway and Bridge Trust Fund for critical repairs and to increase pay-as-you-go projects as the fund was created to do. Our state’s financial position has improved, and we are expecting billions of dollars from the Infrastructure Investment and Jobs Act. We cannot afford to squander this historic opportunity. Policymakers need to act now to shore up the trust fund.”
The 1991 law that created DHBTF was narrowly focused to ensure a dedicated funding stream would be available to alleviate the need to borrow funds for transportation capital projects. Over the years, the scope of eligible expenditures was expanded so the trust fund no longer serves its original purpose of directly paying for road and bridge projects. Transfers to pay for debt surpassed capital projects spending both in absolute dollars and as a percentage of total disbursements by SFY 2001-02.
DHBTF spending in SFY 2020-21 totaled $3.46 billion. Of this total, just 17.2% was used for capital construction, while state operations and debt service costs consumed 43% and 40%, respectively. Capital projects spending declined 10.8% between SFYs 2012-13 and 2020-21, while disbursements to pay operational costs increased from 40.8% to 42.8% and debt service payments remained roughly level.
In total, $5.3 billion has been spent on transportation capital projects since SFY 2012-13, while $12.3 billion was spent on debt service from past borrowings and $13.6 billion on operational costs.
There are four major sources of revenue in the DHBTF: taxes and fees, bond proceeds, transfers from other funds and miscellaneous revenue. To offset shortfalls from the dedicated taxes and fees, in SFY 2004-05, a General Fund transfer of $4.6 million was made to help cover trust fund expenses. By SFY 2020-21, that amount had risen to $786 million. Compared to SFY 2012-13, receipts from taxes and fees were down 15.1% in 2020-21, and General Fund transfers were up 51.4%. This reliance on the General Fund puts highway and bridge projects at risk because these transfers are made on an annual basis and can be unpredictable based on changing budget circumstances.
DiNapoli recommended the state:
- Maximize the share of trust fund revenue used for new capital projects by developing a multi-year plan to reduce state operations and debt service costs paid for by the DHBTF;
- Increase the share of transportation capital projects funded on a pay-as-you-go basis to reduce debt service costs; and
- Reduce the trust fund’s reliance on annual General Fund transfers and consider augmenting the fund’s dedicated revenue streams.
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