Schaefer looks at borrowing for highways While presenting proposal, he also suggests gas tax rise

December 11, 1991|By Peter Jensen | Peter Jensen,Sun Staff Correspondent

ANNAPOLIS -- Amid the gloom of state budget woes, Gov. William Donald Schaefer yesterday proposed an economic jump-start of sorts, unveiling a plan to speed up highway construction projects by borrowing money from the federal government.

But the governor cautioned that a 5-cent increase in the state's 18.5-cent-per-gallon gasoline tax is needed to meet Maryland's transportation needs -- although he stopped short of formally proposing the tax increase himself.

Instead, Governor Schaefer said a nickel-a-gallon tax increase phased in over three years -- 1 cent this first year and 2 cents in the following two years -- is "merely a suggestion" to the General Assembly, which rejected his proposed 5 percent sales tax on gasoline early in 1991.

"I know what the headline will be, but this is a suggestion," Mr. Schaefer said. "We'll think about it."

The $151 billion federal transportation bill approved by Congress last month gives Maryland the authority to borrow from the U.S. Department of Transportation. The money can only be used to finance the state share of highway construction projects -- normally about 20 percent of any project's cost -- for the next two years if state officials can demonstrate they don't have the money themselves.

Governor Schaefer said he would like to take advantage of that program to help the state's ailing economy as long as it doesn't jeopardize highway projects in future years. "I am not interested in placing a great burden on the next governor by running up a transportation bill," he said.

Maryland Transportation Secretary O. James Lighthizer said the legislation will allow Maryland to pursue $40 million to $50 million more in highway construction in the first quarter of next year.

That translates into "several hundred" more jobs provided by about 30 accelerated construction projects, he said. Ultimately, the state could squeeze 2 1/2 years of highway construction amounting to about $600 million into the next 21 months, Mr. Lighthizer said.

"We're going to try to get as much money into the economy as we can," Mr. Lighthizer said. "The bill has provided us with a substantial amount of flexibility."

The federal transportation bill, which President Bush is expected to sign into law next week, provides Maryland with $2.7 billion for highway and transit projects over the next six years.

But state transportation officials warned that Maryland may eventually lose out on about $1.2 billion. That's because the state does not have enough revenue coming into the Transportation Trust Fund to meet the obligation to match the federal money.

The ability to borrow the money for the next two years has merely delayed the day of reckoning. The gas tax, along with motor vehicle titling, registration and licensing fees, are the trust fund's primary sources of revenue.

Sen. Laurence Levitan, D-Montgomery, chairman of the Senate Budget and Taxation Committee, criticized Mr. Schaefer yesterday for only demonstrating a passive interest in the gasoline tax.

Instead of leaving the future of the gas tax solely to the legislature, the governor ought to be meeting with legislative leaders and formulating a strategy to get the tax passed, Mr. Levitan said.

"We need some executive leadership," Senator Levitan said. "It's going to be very difficult to pass a gas tax unless we get a cooperative effort between the governor and the legislature."

Yesterday's announcement may actually have been counter-productive for efforts to pass a gasoline tax in the next legislative session. Borrowing from the federal government provides legislators with an excuse to forestall consideration of a gas tax next year since no highway projects will be in immediate jeopardy.

Nevertheless, as legislators seek ways to balance the state budget, they may find a gasoline tax a great deal more palatable than other forms of tax increases.

If the gas tax were increased, for instance, the state might divert the $81 million the Transportation Trust Fund receives each year from the state's corporate income tax and use it to help reduce the deficit.

"I think most legislators realize we can't complete this four-year term without a transportation revenue increase," said Delegate Timothy F. Maloney, D-Prince George's. "It's just a matter of timing."

One group pleased by yesterday's announcement were state highway contractors who claim the recession has reduced their payrolls 25 to 40 percent. They, too, would like to see a gas tax increase, but were happy to hear that new construction was on the way.

"We need the work, there's no doubt about that," said Robert E. Latham, executive director of the Maryland Highway Contractors Association. "The construction industry drives the economy, and one way to get out of the recession is to build roads and bridges."

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