Governor Dannel Malloy has warned that the solvency of the state's Special Transportation Fund is in jeopardy, threatening to cancel or defer projects in cities and towns across Connecticut.

Malloy's warning followed the release of a report from the state budget office and the Department of Transportation showing that without "corrective action," the fund will be insolvent by fiscal 2020.

Connecticut's shrinking Special Transportation Fund balance
Connecticut's Special Transportation Fund faces insolvency by fiscal 2020.

"Corrective action must be taken soon or the fund will be depleted, necessitating the delay or deferral of many planned projects," Malloy's office said in a release.

These cuts could cause "a significant reduction in highway, rail, and bus service to the public."

Malloy said the fund's current balance cannot support the planned level of capital investments and normal DOT operations, including highway maintenance and bus and rail operations.

Connecticut's transportation infrastructure needs costly repairs and the sources of funding for maintenance have become increasingly unreliable.

Solvency Issues

The Special Transportation Fund was created in 1984 to provide dedicated funding to finance the state's transportation system, the DOT, and the services it provides.

The fund's primary revenue sources are the motor fuels tax, motor vehicle tax receipts, license, permit, and fees, federal grants, interest income, oil company taxes, vehicle sales taxes, and general fund transfers.

The fund finished the 2017 fiscal year in deficit and is expected to finish in deficit again this year.

There's concern these deficits could make Connecticut ineligible for tens of millions of dollars in federal transportation grants.

A number of factors contributed to the fund's solvency issues, including legislative raids for non-transportation operations.
Malloy said a number of factors contributed to the fund's solvency issues, including the 1997 cut in the gas tax, the drop in gas prices over the last two years, the growth of fuel efficient vehicles, and legislative raids on the fund for non-transportation operations.

State lawmakers could not help themselves from raiding the fund over the years to balance the budget.

In fiscal 2017, lawmakers moved $37.5 million from the fund. That resulted in hikes in bus and rail fares, reduced highway maintenance, and led to personnel cuts at the DOT.

State lawmakers this year approved a statewide referendum on a constitutional lockbox to protect transportation funds, which is scheduled to go to voters in November 2018.

'Crossroads'

"Today we are at a crossroads and a decision must be made: We will cancel important projects and let our roads and bridges deteriorate," Malloy said, "Or we will endeavor to face these problems head on and find new ways to support our transportation system."

In 2015, Malloy's Transportation Finance Panel warned that declining revenues and increasing costs would leave the fund depleted by 2020 if nothing happened.

Malloy reiterated that warning.

"My position remains clear: transportation is critical to our economic success and simply cutting our way out of this would be catastrophic for our state," he said.

Malloy vowed to take up the matter with other leaders in state government "to ensure that action is taken, and taken soon."

"Leaders in the state government must reckon with the new reality facing our STF, and take the necessary steps to shore up our existing roads and bridges, invest in new and important projects, and ultimately grow our state economy," he said.

"Connecticut families and businesses deserve nothing less."

Funding Options

Malloy's warning came as Connecticut is preparing for a January bond sale to fund a number of transportation projects.

The governor's transportation finance panel made a number of recommendations in 2016, including an annual two cent gas tax hike over seven years, reintroducing tolls, and increasing rail and bus fares.

Connecticut motorists now pay a fuel excise tax of 25 cents a gallon.

Wholesalers also pay an 8.1% gross receipts tax, which is passed on to retailers and then motorists.

And less than a majority in the state legislature favor bringing back tolls to generate additional revenue.


For more information, contact CBIA's Eric Gjede (860.480.1784) | @egjede