DEPARTMENT OF TRANSPORTATION

Highway Maintenance

                        (Dollars in Thousands)

    Although the total amount of money allocated for highway and bridge maintenance in this year=s budget is $1.042 Billion, the total amount of money allocated to the counties via the maintenance formula revised by Act 3 of 1997 is $912.5 million. During the current year an estimated $905.822 million will be allocated through the formula.

    The difference between total maintenance expenditures and what will be allocated to counties through the formula is two programs. The first program is new and is entitled APreventive Maintenance@. This line item in this year=s budget is worth $50 million. This money will be driven out according to the lane miles in each of the 67 counties.

    The second program, Highway Betterment (R), is a restricted account that was created from Act 3 of 1997. The money from this program is distributed by the Department at the discretion of the Governor=s office for those projects they feel are most in need of improvement and reconstruction. Last year this appropriation was $106.3 million. This budget year it has been reduced to $79.7 million.

Highway and Bridge Construction

                (Dollars in Thousands)

    The budget would commit $541,673 million in total state funds for highway and bridge construction projects during the 1998-99 fiscal year. This is an 8% increase over the current year. The Governor plans to construct 45 new highway miles with this money and re-construct 62 miles on the interstate. The Governor plans to replace or repair 405 bridges with the money. This is a decrease from last fiscal year when 440 bridges underwent repairs. This is mostly due to the larger bridges that are to be constructed, and the extensive excavations that takes place prior to construction that may lasts for years.

    Given the uncertainty in Washington over the re-authorization of a new transportation spending bill, estimates of next year=s projected federal spending is anyone=s guess. The proposed budget anticipates a $34 million increase in federal funds for highway construction and bridge projects. Total federal transportation subsidies to Pennsylvania for the next fiscal year could vary by $200 million or more depending upon who prevails in the current fight over revisions to federal subsidy allocation formulas and spending of current Highway Trust Fund reserves.

    The official revenue estimate from May 1997 projected total 1997-98 fiscal year Motor License Fund revenue would total $1.808 billion. The Governor=s budget again appears to underestimate this projected revenue. Adjustments by the Governor for the current year would project a $19.431 million deficit. In fact, current revenues are nearly $10 million above estimate suggesting an end of the year revenue surplus of at least $25 million.

    Even the Governor=s conservative projections now forecast an ending fund balance in the 1997-98 fiscal year of $101.117 million. This would follow last year=s $114 million Motor License Fund budget surplus. Assuming the Governor=s projected $39 million in prior year lapses, and an estimated $38.685 million in lapses for the current fiscal year, the final 1997-98 surplus may reach $150 million.

    The excess revenue from the current year, combined with similar conservative estimates for revenue growth during the 1998-99 fiscal year will likely produce another unexpended surplus of more than $100 million in the Motor License Fund by the end of the next fiscal year.

    The additional Oil Franchise Tax Revenue collected from last year=s gas tax increase, enacted in Act 3 A of 1997, is placed in a restricted revenue line item and not shown with other Motor License Fund revenue. According to the Governor=s budget last year=s 3.5 cent tax increase will provide $210 million for highway maintenance and construction in the 1998-99 fiscal year. The 50 percent registration fee increases enacted will raise an estimated $212 million in the 1998-99 fiscal year. On the expenditure side, the Motor License Fund shows expenditures for this budget year of $1.927 billion or a 5% increase.

Transit

(Dollars in Thousands)

    The budget provides no new increase in the basic subsidy for mass transit. However, mass transit agencies will receive a $35 million increase in projected Public Transportation Assistance Fund (PTAF) support. Annual PTAF revenue was reduced during the current year by an estimated $18 million due to a drafting error in the Electric Utility Deregulation Legislation enacted last year. This funding will now be restored next year.

    Mass transit agencies will also be supported with the additional $150 million annual commitment of capital and operating support provided as part of the gas tax deal last Spring. The chart above shows the executive authorizations for the urban and rural transit grants from the new $75 million dedicated sales tax revenue. The balance of the $150 million commitment includes $50 million in state capital funds and $25 million in Aflexed@ federal funds.

    The budget provides $8.5 million for Rail Freight Assistance. The increase above the 1996-97 funding level was also part of last year=s gas tax deal.