Florida Poaches From Trust Fund, Though It May Not Be a Trend

Florida has dipped into its transportation trust fund for money to keep other programs going - an action other states may be forced to take if revenues continue to decline, market participants said.

"It's a shame to have to do it, but it's a rational approach to very difficult fiscal times," said Scott Pattison, executive director of the National Association of State Budget Officers. "I wouldn't be surprised if it increased [in frequency]. Not immediately, but if state revenues continue to be in such dire conditions .... It's going to have to be on the table."

However, Pattison added that if states' fiscal fourth quarters show even a small uptick in revenue, transportation dollars will "probably not" be diverted to help cover budget shortfalls. And market participants said that in many states firewalls that protect the funds, as well as pressing infrastructure needs, are likely to keep the trust funds safe.

At least 36 states have some form of highway or transportation trust fund, according to the American Association of State Highway and Transportation Officials. So far, Florida is the only state known to have dipped into its trust fund during the recession. Maryland has done so in the past, but state officials said they know of no plans for another such transfer.

Like many other states, Florida been hit with plummeting real estate sales and sales and use tax revenues during the recession. The Florida Legislature earlier this year tapped the trust funds of various state agencies, including the Department of Transportation. Marsha Johnson, director of the DOT's office of financial development that oversees the agency's $6.55 billion budget for fiscal 2010, said lawmakers drew $120.2 million from the State Transportation Trust Fund.

The amount taken was equivalent to 1% of the $5 billion to $6 billion in revenue the DOT receives annually, according to finance and revenue manager Gary Drzewiecki.

Florida's transportation trust fund is the department's largest funding source, supported by motor fuel sales taxes, motor vehicle license fees, and documentary stamp taxes collected on real estate transactions, among other things.

The Legislature also took $40 million from the Toll Facilities Revolving Trust Fund, leaving a balance of only $10 million. However, the small fund will be replenished to a certain degree when loans to agencies around the state are repaid, officials said.

It was not the first time the Legislature had swept funds away from transportation. In 2004, lawmakers took $200 million from the fund to make ends meet as Florida emerged from the difficult years following the terrorist attacks in 2001.

Maryland's transportation trust fund was tapped in 2003 by former Republican governor Robert Ehrlich Jr., but those funds have been repaid "for the most part," according to Jack Cahalan, spokesman for the Maryland DOT. There are no proposals or bills currently in the state legislature to tap the trust fund, he said, although the Gazette, a Maryland newspaper, reported recently that lawmakers were considering it.

Other market participants said it is unlikely states will raid transportation funds in the near future, thanks to firewalls preventing transportation dollars from being diverted to other uses.

"I sense that it was a bit more common [to divert transportation funds] during the early '90s recession, but that may be why you have the firewalls," Pattison said.

The federal highway trust fund is protected by a firewall that prevents it from being subject to the annual appropriations process.

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