Higher Than Expected MoDOT Revenues Mean No Loss in Federal Matching Funds

As we’ve written about many times before, MoDOT is facing serious financial difficulty. Soon, the department may not have the money it needs to maintain, much less improve, the state highway system. Until recently, it was assumed that MoDOT would be unable to match federal dollars in the next fiscal year, meaning the state would lose more than $160 million federal dollars, compounding its problems.

              But it appears now that MoDOT has had a reprieve. Revenue dedicated to the state highway system rose 4.5% in FY 2015, much higher than expected. That gives MoDOT an additional $47 million in state funding and saves $160 million in federal matching dollars that otherwise would have been lost.

This increase is mainly the result of the improvement in the economy and lower fuel prices. People are buying cars at a faster rate, increasing MoDOT’s motor vehicle sales tax and license revenue. Lower fuel prices, along with a resurgent economy, mean people drive more, increasing gas tax receipts. This is yet more evidence that long-term demand for personal vehicle use, and with it demand for state highways, is not in anything approaching decline.

Unfortunately, MoDOT’s revenues will need to continue to climb at this pace for the next few years to ensure that Missouri will match all federal dollars. This is unrealistic, as motor vehicle sales could easily stagnate and fuel tax revenue will likely fall as cars become more fuel efficient. Even worse, assuming MoDOT’s revenue does grow fast enough to match federal funds, the department will still not have the money to implement expensive, but necessary, improvement projects (like the reconstruction of I-70).

But just as the last few years were not a good time to panic, the recent news does not mean now is a good time for complacency. MoDOT’s user funding base is broken, and will only become more broken if left unreformed. With the reprieve MoDOT just received, policy makers have more breathing room to implement sensible reforms on the principle of user pay, user benefit. They should take the opportunity.