The state deficit caused by excessive spending

Legislative Republicans are debating between themselves whether or not to raise the state gas tax and vehicle registration fees, opposed by Gov. Scott Walker, to fund new road construction.

Before they decide to do that, they may want to read Jerry Bader:

While Republicans in the Wisconsin Legislature argue over whether a gas tax increase is needed to pay for road repair, one GOP lawmaker is making the case that millions of dollars can be saved at the State Department of Transportation. DOT secretary Mark Gottlieb was grilled by lawmakers on the Assembly Transportation committee on December 6 over Governor Scott Walker’s plan not to raise gas taxes or vehicle fees. Walker has instead proposed closing a two-year, one-billion-dollar budget gap through borrowing and project delays, a plan Gottlieb defended. But West Allis Republican State Representative Joe Sanfelippo said in an interview this week that tens of millions can be saved from DOT spending and that lawmakers should look there first before raising any taxes or fees.

Sanfelippo’s questions to Gottlieb on agency spending received sparse coverage in the media. But Sanfelippo has been examining DOT practices for years and he says cutting wasteful spending could save tens of millions of dollars. Sanfelippo says lawmakers don’t even know how much money they would need to raise in taxes and fees because no one is looking at the money the department has now and what they’re spending. He gives several examples:

  • Sanfelippo says in two major projects in the Milwaukee area, the Zoo Interchange reconstruction and the Hoan Bridge, the DOT chose to use stainless steel rebar in the concrete, as opposed to the epoxy coated iron rebar that is commonly used. Sanfelippo says the stainless-steel rebar costs 250% more than the iron rebar. Sanfelippo says Gottlieb told him the intent was to have the bridge deck last as long as the bridge structure. But Sanfelippo says the stainless steel will long outlive the concrete structures. He says between those two projects the difference was $28 million for an item Sanfelippo argues was unnecessary. Sanfelippo says he’s continuing to investigate to determine how many times the stainless-steel rebar has been used in projects around the state.
  • New traffic signals that the DOT claims are safer but Sanfelippo is dubious. He says the DOT is replacing the long-used “trombone arm” style traffic lights with large, costlier “monotubes.” Sanfelippo says the DOT spent $57.5 million more in the past five years on 1,100 of the monotube units than would have been needed for the traditional traffic lights. Sanfelippo says the DOT’s claims that the new design is safer go no further than claiming “studies show…” Sanfelippo says he’s asked to see those studies but has never been provided specifics.
  • Purchasing cards: Sanfelippo says hundreds of DOT employees have access to “purchasing cards,” which he describes as essentially being credit cards. Sanfelippo says employees can use the cards to make purchases that don’t go through the normal procurement process. Sanfelippo says tens of millions of dollars are being spent by employees using these cards with “no checks and balances. “There are individuals on this list spending three hundred thousand, four hundred thousand, five hundred thousand dollars annually on these purchasing cards.” Sanfelippo says when the cards were developed in the 1990’s they were intended for “small purchases.” He asks: “how can you have $500,000 a year, in small purchases, for just one year. Sanfelippo stresses that he is not alleging wrongdoing. But he wonders what auditing procedures are in place to “watch all this money going out the door” and to make sure it’s being used properly.

Sanfelippo says that the DOT, in effect, is spending money on top of the line items and then “at the same time they’re telling us they’re broke and they can’t afford to continue their road construction projects that we need done, it just doesn’t make sense.” Further, he believes the DOT needs to account for the money spent on the purchasing cards before any revue increases are approved by lawmakers. And Sanfelippo says these items are the tip of the iceberg, while already totaling well into the tens of millions of dollars.

And Sanfelippo says these examples are just the tip of the iceberg. “We’re not talking nickels and dimes here. Every one of these items are millions and millions of dollars.” Sanfelippo says he has binders full of other examples. And Sanfelippo says the legislature needs to examine those costs before starting any discussion on revenue increases.

You would think $86 million (the total in Sanfelippo’s three examples) would have been better used on road projects.

And speaking of WisDOT employees, Owen Robinson adds:

I wrote about this fact last May when this issue flared up again and it has not changed. A look at the Reason Foundation’s most recent 21st annual highway report shows Wisconsin is spending way more than comparable states.

For example, Wisconsin and Minnesota have almost the same number of highway miles at 11,766 and 11,833, respectively. They also have almost the same number of lane miles. They are both cold-weather states with a major metropolitan area. In terms of total spending on roads, Minnesota spends just over $132,000 per state-controlled mile. Wisconsin spends 72 percent more for a total of almost $227,000 per mile.

Breaking down the numbers is even more interesting. Wisconsin spends 25 percent more on administrative costs, but actually spends 38 percent less on maintenance. The big difference comes with construction. Wisconsin is spending 75 percent more than Minnesota for every new mile of road. In summary, Wisconsin spends a lot more money on administration and construction, but less on maintenance than Minnesota. That is a difference in priorities.

To think of it another way, if Wisconsin just lowered its spending to the same amount per mile as Minnesota and prioritized maintenance over construction, it would save Wisconsin $1.1 billion per year and solve the transportation budget problem overnight while leaving a surplus to return to the taxpayers.

Sanfelippo is not new to this subject. M.D. Kittle reports:

Before Republicans join Democrats in selling motorists tax and fee hikes for the privilege of driving on Wisconsin roads, one conservative lawmaker wants to detour the taxing conversation.

State Rep. Joe Sanfelippo, R-New Berlin, said not every Republican is jumping on board the revenue-hike train to “fix” a transportation budget shortfall nearing $1 billion. He and other conservatives are calling for a thorough review of how the Badger State builds and pays for its transportation projects.

“There are so many things we can enact in transportation, from how we fund projects to how we finance them to how we build them,” the lawmaker said, insisting there are significant cost savings to be had. “This isn’t pie in the sky stuff. All we have to do is look at other states.”

Sanfelippo’s office has put together a white paper on alternative building and financing ideas, including telling the federal government what it can do with its strings-attached shared transportation funds. …

In his white paper, Sanfelippo proposes the state research the savings of a design-build-finance method in which the design-builder assumes responsibility for the brunt of the design work, all construction tasks, short-term financing and the risk of providing the suite of services for a fixed fee.

“The model takes advantage of the efficiencies of design-build and also allows the project sponsor to completely or partially defer financing during the construction phase,” the white paper states.

As of January, more than 40 states – including California and Texas – had “authorized broad use of design-build as a cost-savings technique,” according to the Albany, N.Y., Times Union.

The savings in New York through design-build have been remarkable, despite limited use to date.

“The Tappan Zee Bridge project has saved taxpayers $1.1 billion compared to the cost under the traditional design-bid-build model, according to the newspaper. ”The bridge will also be completed 18 months early, relieving taxpayers of the annual $100 million maintenance cost of the old bridge sooner.”

Sanfelippo’s white paper also recommends the Legislature explore keeping the federal fuel tax revenue marked for the federal highway account of the Highway Trust Fund. Wisconsin gets back just over a dollar on every dollar it sends to Washington, D.C., but the myriad strings attached to the “free money” drive up the cost of road projects, Sanfelippo said.

“Screw you, federal government. We’re not sending you that federal gas tax money. We’ll keep it here, fund our own projects and therefore we don’t have to jump through all of these stupid hoops,” the lawmaker said.

Waukesha County recently rebuilt County Highway L (Janesville Road) in the city of Muskego. Local funds paid for the first 1.2 miles of the project; the second 1.2 miles with 80 percent federal dollars.

Phase 1 cost $352,000 for construction management, and $5,928,000 for construction. Phase 2, completed with federal funding, cost $719,600 for construction management services, and the construction bill was $7,196,139. That’s a cost difference of more than $1.9 million.

Sen. Duey Stroebel, R-Saukville, and Rep. Rob Brooks, also a Saukville Republican, are sponsoring legislation that would “swap” federal money currently in appropriation accounts for specified highway programs with state money. Not surprisingly, Waukesha County heartily supports the concept of the legislation.

“The states sold our souls to the devil a long time ago when we started taking this federal money,” Sanfelippo said. “Now we are addicted to it.”

“We’re not getting a gift from the federal government. It’s our own money.”

One of the federal strings attached is the requirement under the federal Davis–Bacon Act to use prevailing (that is, union) wages on projects funded with federal money. The state prevailing-wage law was repealed, but the federal law, as you can imagine, has much more impact. Perhaps Congress can be led by Wisconsin’s representatives in a repeal of Davis–Bacon.

 

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