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Money in the Dedicated Highway and Bridge Trust Fund continues to be diverted for non-capital purposes, leaving critical highway and bridge projects at increased risk as the state faces fiscal challenges and shrinking debt capacity, according to a report issued today by New York State Comptroller Thomas P. DiNapoli.

"Taxpayers have paid billions in taxes and fees into a fund that was created to keep our roads and bridges in good repair. Now, more than three-quarters of this money is siphoned off to pay for borrowing and operating costs of state agencies, leaving fewer dollars for improving our infrastructure,” DiNapoli said. “While the state is making progress with its capital planning, New York needs a reliable source for investment in its transportation infrastructure and should restore the use of this fund for capital purposes.”

Created in 1991, the fund was initially intended to provide dedicated funding to reconstruct, replace and preserve the state’s highways and bridges. Funding comes from dedicated taxes and fees, including a gas tax, petroleum business tax, vehicle licensing fees and rental car tax. By 2002, debt payments had surpassed capital projects. Just 22.2 percent of its $3.8 billion disbursements were spent on capital construction in state fiscal year (SFY) 2012-13, according to DiNapoli’s report.

State operations costs also consume the greatest share of the fund: nearly $1.6 billion in the last fiscal year, including the costs of snow and ice removal by the Department of Transportation and day-to-day staff expenses at the Department of Motor Vehicles. Typically, staff expenses and snow and ice removal costs are regarded as ongoing costs of state operations and maintenance, not capital expenses.

The proposed Executive Budget for SFY 2014-15 projects capital disbursements to account for 23.5 percent of all trust fund disbursements, a slight increase from the current year. Meanwhile, combined debt service and operations spending is projected to remain at more than three-quarters of all fund spending.

The decline in cash support for New York’s highway and bridge program has continued since the Comptroller’s 2009 report, which found that the fund had shifted from support for the capital highway and bridge program to a broader transportation program.

A useful measure of the health of the fund is called pay-as-you-go, or PAYGO, which gauges the amount of cash in the fund that the state dedicates to pay for capital and operational expenses. PAYGO is an alternative to debt, which must be repaid over time with interest. PAYGO levels have declined steadily over the years, dropping to just over 28 percent in SFY 2012-13 and expected to fall to about 23 percent by SFY 2018-19.

While some debt is appropriate for the state’s capital program, debt becomes a burden when the payment of debt service becomes such a large use of the fund.  When this happens New York’s ability to fund highway and bridge capital projects is constrained, DiNapoli’s report concludes.  He called for a long-term plan to restore the fund to its core mission and increase pay-as-you-go financing for road and bridge capital purposes.

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