Good morning.

Our message is simple: It is unnecessary to raise taxes for transportation. I say this realizing that, after decades of being government’s lowest priority, transportation probably needs a significant funding increase. The speakers following me will address minimizing that increase.

That transportation is a low priority is evident from inequitable funding of transportation compared to social programs. Social programs, meaning education, welfare, and courts and prisons, are paid for from the state’s General Fund, which is financed primarily from income and sales taxes. Transportation is paid for from the state’s Non-General Fund and is financed in large part from gasoline taxes.

Since income and sales taxes are a percent of income and a percent of purchase price, they increase with inflation and economic growth. Hence General Fund revenues grow with inflation and the economy. One of Virginia’s best-kept secrets is that not a penny of income taxes is spent on transportation. Also 95 percent of sales taxes is off-limits to transportation. However, combined state and federal gasoline taxes are 35.9 cents per gallon and therefore do not increase with inflation. Rather, higher gas prices leading to the purchase of more fuel-efficient cars can depress fuel tax revenues.

The result is that public education and welfare are funded from the fastest growing revenues — income and sales taxes — while transportation relies on a stagnant revenue source — gasoline taxes.

The contrast is dramatic. I refer you to the top two graphs in the handout. The graph on the left compares the percent increase in Virginia’s population with the percent increase in Virginia’s inflation-adjusted transportation budget. For most of 25 years, Virginia transportation funding has trailed population growth. It is interesting that the funding spike for 2005 and 2006 was done without a tax hike.

The graph on the right shows that Virginia’s inflation adjusted spending on public schools has been increasing ten times faster than enrollment. Virginia’s public school staff has been increasing seven times faster than enrollment.

What is the result of this massive, and unpublicized, increase in public school spending? According to the National Assessment of Education Progress, 65 percent of Virginia fourth and eighth graders score below grade level.

Because they have monopolized the fast-growing General Fund revenues, social spending programs have not received adequate scrutiny while our transportation infrastructure has languished. We should tear down the inequitable and arbitrary barrier between income taxes and transportation. The transportation solution is to let transportation compete against social spending for income taxes and all sales taxes. This would mean more scrutiny for social spending and an inflation-indexed revenue source for transportation.

Thank you.

Updated March 29, 2006