Transportation Funding: Is Indiana a Model for Maryland?

As Maryland struggles with the proper means to fund its local roads and bridges, Indiana has developed a new plan to live up to taxpayers expectations, and use additional statewide transportation revenues as a primary funding source for local projects and maintenance.

The Indiana Approach

Indiana recently updated its state transportation funding model to provide additional support to its county governments.  H. 1001, the state’s omnibus budget legislation approved May 8, 2013, (read the full fiscal estimate of the legislation online) increased the State’s overall amount of transportation funding while maintaining a commitment to fund county, city, and town roads.  Revenues from Indiana’s gas tax, supplemented with funds redirected from state agencies, and one percent of the state’s sales tax, created an over thirty-percent increase – approximately $68.1 million each year – in state support for county roads, and approximately $50 million additional for cities and towns.

Indiana’s transportation funding formula is based on the number of miles maintained by counties, and the number of drivers in each county.  The formula equates to a 32% distribution to county governments, and 15% to cities and towns.  The amount set aside for the counties is allocated monthly upon the following basis:

  • Five percent (5%) of the amount allocated to the counties to be divided equally among the ninety-two (92) counties.
  • Sixty-five percent (65%) of the amount allocated to the counties to be divided on the basis of the ratio of the actual miles, now traveled and in use, of county roads in each county to the total mileage of county roads in the state, which shall be annually determined, accurately, by the department.
  • Thirty percent (30%) of the amount allocated to the counties to be divided on the basis of the ratio of the motor vehicle registrations of each county to the total motor vehicle registration of the state.

Read the full fiscal estimate of the legislation online.

The money distributed to counties constitutes a special road fund for each of the respective counties and is under the exclusive supervision and direction of the board of county commissioners within such county for the construction, reconstruction, maintenance, or repair of the county roadways or bridges.  However, money in the fund may not be used for any toll road or toll bridge projects.

Indiana is committed to maintaining revenue from its gas tax.  Its fuel tax was recently expanded to include Certified Natural Gas (CNG) and the State is now studying how to tax electric vehicles.

In essence, Indiana decided that statewide transportation revenues – notably taxes on motor fuels – represent the most understandable and appropriate means to support local transportation projects and maintenance.

The Maryland Crossroads

For decades, Maryland used its consolidated Transportation Trust Fund as the workhorse funding source for all modes and levels of transportation. Revenues from motor fuel taxes and vehicle excise taxes were sent to an account shared with local governments — 30% of those funds were distributed as “Highway User Revenues” (HUR) to county and municipal governments. Incidentally, this longstanding practice is very similar to the approach just expanded by Indiana, including the apportionment of most revenues according to the location of vehicle registrations and road miles.

The recent “great recession” necessitated cutbacks, including a dramatic redirection of Highway User Revenues — initially to support the state’s General Fund, and then to support underfunded state transportation projects. The ongoing shift has denied local transportation roughly $350 million in annual funding since FY 2010. Now most counties’ roads and bridges are supported at less than 10% of their prior funding levels.

During the 2013 legislative session, the General Assembly passed HB 1515, the Transportation Infrastructure Investment Act of 2013, to reinvigorate the state transportation revenue structure with several new phased-in components, but did not include any restoration of local funding in that initial package. The bill did create a Task Force to evaluate local funding issues left unresolved.

See a comprehensive analysis of local transportation funding, presented by the Maryland Department of Transportation, online. This item was among the foundation topics for the current Local and Regional Transportation Funding Task Force, a group amidst its own debate on the future means to support local transportation.

MACo has targeted “Transportation Funding Restoration” as its top budget priority for the upcoming session and is hopeful that a task force, the Local and Regional Transportation Funding Task Force, will recommend a reasonable restoration of HUR.  Local governments used to rely substantially on HUR to maintain local roads and bridges – where more than 80% of the state’s road miles are a local responsibility.

MACo urges state policymakers to evaluate highway funding and the effects of these drastic local reductions to Maryland’s roadways — and to take necessary steps to restore HUR and properly prioritize local roadway infrastructure.

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