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Sean Gorman
By Sean Gorman May 2, 2016

McAuliffe sees no need to act

While running for governor, Terry McAuliffe said the state's transportation money needs to be shut in a lockbox that legislators and governors can't raid to fund other programs.

On May 6, 2013, he released a campaign platform that hailed a transportation funding compromise signed three days earlier by then-Gov. Bob McDonnell that scrapped a flat 17.5-cent gasoline tax that long had anchored the state's transportation budget.

The compromise created a new funding formula that boosted transportation revenues by about $6 billion over five years through a new wholesale tax on gasoline; various sales tax increases; and expanding the power of Northern Virginia and Hampton Roads - the state's two most congested areas - to raise regional taxes for roads.

While lauding the program in his platform, McAuliffe added that more needed to be done on transportation policy.

"We need to build on that success by protecting the current transportation revenues and ensuring that Virginia's transportation system supports the ongoing economic recovery in Virginia," McAuliffe said.

The first goal he listed under that statement: "A transportation lockbox. Funds that support our transportation system - and by extension, our economy - must be protected."

Safeguarding of transportation funds is a delicate issue to lawmakers and governors. Revenues raised for roads, rail and public transportation are segregated in the state budget from the general fund, which holds money from other sources to pay for schools, health programs and public safety. But sometimes, when the state is in a pinch, politicians will dip into transportation money to cover shortfalls in paying for general programs.

The diversion of money has created credibility problems for Virginia politicians over the years as they tried - usually unsuccessfully - to raise taxes ostensibly for roads.

McAuliffe's action

So what steps has McAuliffe taken to build that lockbox?

None at all.

Brian Coy, the governor's chief of communications, told us McAuliffe didn't need to take action because the lockbox was created in the 2013 transportation package signed by McDonnell. In other words, Coy said the problem was solved eight months before McAuliffe took office.

Coy pointed to a part of the law that says any new revenue streams created by the act would be eliminated at the end of a calendar year if they were used for non-transportation purposes. Coy said McAuliffe has steered clear of activating this so-called "kill switch."

"Since we've been in office, we have not used transportation funding for any other purpose than transportation," Coy said. "The governor made a promise not to do that."

But again, it should be noted that this lockbox already was approved when McAuliffe released his platform. His comments that "we need to build on that success" suggests he planned to take additional action as governor. We asked if McAuliffe is planning any more steps to secure  transportation funding.

"In our view, the lockboxes in current law are adequate to prohibit the transfer of transportation funding out of the trust fund," Coy said.

We wondered what percentage of the state's transportation dollars are considered to be under a lockbox.

Virginia spends about $5.2 billion a year on transportation. About $900 million of it comes from Uncle Sam, and another $375 million comes from bond money. All of that roughly $1.3 billion sum has to be spent on transportation, said Jason Powell, a legislative analyst for the Senate Finance Committee.

That leaves $3.9 billion raised largely through taxes and fees. Of that sum, about $3.3 billion is raised by the state, and $600 million is generated regionally in Northern Virginia and Hampton Roads.

Ric Brown, Virginia's secretary of finance, told us that of the $3.9 billion state and regional total, about $2 billion - or 51 percent - is under some type of lockbox, and the rest is not.

Is a bigger lockbox needed?

In June 2014, slightly more than a year after the partial lockbox was created, lawmakers balanced the budget by temporarily using $110 million in transportation money to pay for other programs. McAuliffe signed the budget.

That November, during a special General Assembly session, lawmakers backed off diverting the transportation money after receiving a letter from Del. Chris Jones, R-Suffolk, chairman of the House Appropriations Committee.

Jones wrote that the state's bond lawyers were concerned the transfer "could be interpreted in a way that would jeopardize the status of Virginia's transportation funding streams. The concern was that the bill could be interpreted as activating the 'kill switch' included in the 2013 transportation plan."

Nick Donohue, Virginia's deputy secretary of transportation, told us that although the letter of the law puts just over half of state and regional transportation revenues in a lockbox, as a practical matter, all of the money is protected. That's because no one wants to do anything that even remotely would challenge the kill switch, he said.

"It would have such a detrimental impact to lose 51 percent of our revenue that I don't believe it's an action any governor or General Assembly could take in the future," Donohue said.

Our ruling                   

McAuliffe, during his campaign, said he'd build a lockbox to ensure transportation funds are not used for other programs. His administration now says such an effort is unnecessary - that a lockbox provision signed into law by his predecessor fills the need.

That provision protects almost half of the $3.9 billion in transportation money raised statewide and regionally. It activates a kill switch that abolishes the revenue stream for any road money in that $2 billion portion that's used for other purposes.

State bond lawyers have voiced concern that diverting money from the supposedly unprotected $1.9 billion portion still could be interpreted as activating the kill switch and toxic to the state's ability to borrow money for roads. That was enough to convince lawmakers to ditch a 2014 plan to use $110 million of transportation money for other programs.

For now, the state seems to have a makeshift lockbox for all of its transportation funds, but its durability is suspect. The governor, without acting, has settled into a middle ground that neither advances his campaign commitment nor breaks it. So we rate McAuliffe's lack of action on his pledge a "Compromise."

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