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(Drew Hall) MDOT presents The Extra Mile Podcast.

(Paul Katool) Welcome in to another edition of The Extra Mile Podcast presented by the Mississippi Department of Transportation. I'm Paul Katool, and as always, I’m joined by my co-host Will Craft. And uh, big conversation over there across the street at the Capitol. Uh, two bills dealing with the tax structure in Mississippi.

HB 1 dropped earlier this session, really the beginning of the session. And now, the focus is on Senate Bill 3095. and, uh, it's going to get voted on soon. And we have none other than the MDOT Executive Director, Brad White in studio today to help break that down. Brad, Senate Bill 3095. Tell us what you know about this.

(Brad White) Thank you. Well, uh, for the first, the last time the legislature dealt in a major way with MDOT's funding model was 1987. So, it's been almost 40 years since we've seen legislation of the magnitude that we're seeing this session. Um, and that didn't happen by accident. All of us at MDOT, along with our partners in the private sector, have been working hard with our legislative leaders to try to draw focus on our need for a more modern funding model in order to deliver the product to the taxpayers that they expect to get from us.

Uh, Senate Bill 3095 is the Senate's version of, of, of addressing the tax structure of the state. It came out of committee, uh, last week. I'm told it will be coming out of, uh, off the floor this week. The deadline being the end part of this week. So, it could happen as early as today or some point later in the week. Um, for MDOT, the portion of this bill, it does not do a complete elimination of the income tax, but it does reduce it again, another step. It does have a component that deals with the grocery tax, cutting the grocery tax.

But then it increases the fuel tax, which is the largest source of our funding, uh, three cents a gallon per year, three years in a row. Uh, ultimately, we're at nine cents, uh, making the total fuel, uh, tax, uh, for the state of Mississippi would be about 27.4 cents. Uh, we share that revenue with the Office of State Aid, uh, which deals with all 82 counties. Uh, and there's another great partner of ours, but the, the big chunk of that would, would come to us. The Senate bill also allows us to maintain the 80 million from the lottery funds, uh, with a commitment from the Lieutenant Governor to continue dealing with giving us the 40 million a year on the, uh, uh, match that we require for the federal, uh, money that's made available to us.

So, all in all, even though the two bills are different, House Bill 1 and Senate Bill 3095, the revenue each would generate for the Department of Transportation is going to be somewhere in the neighborhood of 250 million to 300 million, uh, when you look at it from a net standpoint. Uh, with that, we would be able to escalate a lot of projects that are in our three-year plan. Uh, we would be better equipped to, to deal with the paving needs around the state. We would not be put in a position at looking at canceling out the capacity construction program, which is all the new construction around the state designed to, to help solve congestion issues and traffic woes. So, I'm really excited, and not enough can be said of the importance that both of these pieces of legislation coming out of the House and the Senate having such a strong component of it that addresses infrastructure funding in a major way.

I can't overemphasize how important that is and how grateful we are to our legislative leaders for seeing that need and for trying to work to come up with uh, avenues by which they could can fill that need with resources and tools that we require. So hopefully we'll, we'll see uh, it pass and uh, the two houses come together and we'll start negotiating over what can be a final product. Uh, the Governor is involved in those discussions as well. We know that he has a key, uh, interest in seeing the complete elimination of the income tax. That's going to be a major factor in these negotiations. Uh, but I'm thrilled that infrastructure funding is such a major part of it. And because it's a part of both bills, I think that shows the priority that both, uh, House and Senate leadership, uh, places on what MDOT does and our ability to better, uh, provide those services to the taxpayer.

(Will Craft) Excellent. Excuse me. And lots of different things in, in both bills that you could argue for or against or what's right or what's wrong. All those things. That's not what we're here to do today, talk about. But one thing I wanted to sort of just the contrast between the two specific for MDOT funding. So, you do have very two different ways, correct, in each one of these. Uh, I. I'll let you answer that. We don't have a preference necessarily, do we?

(Brad) No, I mean, we're not the policy makers. That's the role of the legislature, and we'll leave it in their hands to do what the people elected them to do. Uh, both of these proposals are different from what we at the department have proposed in the past, which was finding our, uh, needed revenue from a more diversified, uh, sources within the state budget. Uh, what we had presented would not require a tax increase, uh, but it probably wouldn't have allowed for a tax decrease either, uh, because we were using extra revenue within the budget to plug the holes of infrastructure, both with State Aid and the Department of Transportation.

The two main differences, uh, in the bill, House Bill 1, uh, applies a 5 percent sales tax on the consumption of fuel. All of which would come to the Department of Transportation. Uh, that's estimated according to the Department of Revenue, to generate close to $400 million a year, uh, in recurring revenue. Uh, the, the House plan takes the 80 million that we've been receiving from, uh, lottery and uses it to shore up the PERS program, which is important to us. All of our employees pay into that.

(Will) Sure.

(Brad) Um. It doesn't have a component that deals with our, our federal match and that, that really been a part of that, uh, conversation. Uh, but that's where MDOT would get their money from the House bill. Uh, in addition to that, it deals with the complete elimination of the, uh, state income tax. It, it cuts, uh, some of the grocery tax. It increases some of the sales tax to help make, um, cities and counties whole and State Aid roads, a portion of funding would come from sales tax generated in non-incorporated areas of the state. So out in the counties where sales tax would be generated, not in the cities would go to them.

The Senate plan is a little more straightforward in that it's a reduction of the income tax, a cut of the grocery tax, and then a raising of the fuel tax, as I mentioned, to, uh, ultimately a nine cent increase, which State Aid will get 23 and a quarter percent of that and the rest would come to Department of Transportation. Um, we would keep the lottery.

So again, when you look at both bills, they both, uh, while they both take different paths to get there, they both keep the general fund from having to, uh, cough up money to pay for infrastructure to subsidize our budget. They both provide recurring revenue, which is what we need in order to fully implement the federal program that we work with, and they both generate the type of money that would make a difference.

The taxpayers would see a difference. Uh, another key part of both bills that I'm thankful for is both bills tie the money generated back to the projects that we outline in the three-year plan. So, the legislators and their constituents can have confidence in all the money that MDOT would be given through that would be spent on actual projects, whether that be a paving project, a safety project, operational improvements, or a capacity construction project. The money would go, pardon the pun, but directly to the road, where the rubber meets the road. So that's a good component. Um, we'll see what happens. I'm sure that whatever they end up with will not look completely like either of the bills, but uh, I do believe if, if negotiators go into this with an open mind and a, and a want to negotiate in good faith and find a comparable ground that ultimately be good for the taxpayers, I think that they can accomplish that and uh, I feel confident that we'd be a major part in that.

(Paul) Excellent. Uh, you've talked about it a good bit before, kind of the consequences of not, you know, increasing this funding. Um, I know you've talked, you know, the capacity program could be on the chopping block once again, if, if we don't get some additional recurring revenue, is that still kind of the line there?

(Brad) Yeah, yeah, I mean, like I said, the last time our funding model has been significantly, uh, addressed was 1987. Uh, the cost of doing business is, is quite different from the way things were in 1987. Um, we, while we are a state agency, we implement a federal program. And while we are a Department of Transportation that wants to invest in rail and airports and water ports and public transit, we want to build new capacity projects that would help move traffic more efficiently.

What we're held accountable for by the Federal Highway Administration is the maintenance and preservation of our existing system, the taxpayer's investment, current investment in the system. And so, every year when we evaluate, uh, the condition of that pavement, uh, when you're putting the same amount of money into addressing those maintenance needs, uh, but the number of projects you're able to do continue to decrease, before long you start seeing the condition of your roadways statewide deteriorate.

And what runs the problem of that is what we faced as a department about 12, maybe 15 years ago now. When the commission had to stop the capacity construction project, uh, program in order to put all of the funds generated for that into maintenance in order to keep our maintenance metrics up and hit our performance targets in a way that wouldn't put the federal money in jeopardy.

Um, if, if our funding model's not addressed in any way, I think over the next year, uh, we'll be looking at what capacity construction projects do we need to stop moving forward because it would make no sense to spend revenue to bring a project to construction, re – construction readiness, if there's no path to build it, have the money to build it.

Um, and obviously our number one goal and requirement is gonna be to pres, preserve the taxpayer's existing investment. So, without adjusting our funding model in some positive way of the manner in which we do business, we'll be looking at some of the same decisions that previous commissions have had to make in the past that had a negative impact. I mean, I, I believe wholeheartedly. That when the commission made this decision or was forced to make that decision to stop capacity construction in order to divert all funds to maintenance back several years ago, that that's primarily the reason that you have traffic on I-55 in Gluckstadt or I-55 in DeSoto County, areas around the coast and other metro areas, is because the program that was designed to keep our system built out in an efficient manner that could handle the traffic, uh, was nonexistent. And so we fell behind in those, those areas and if, if that was to happen to us again, I, I don't know that we would be able to recover as easily as we seem to be trying to now.

But I'm gonna be positive and uh, right now I think the one thing that everybody can agree on that's a part of these two bills and maybe the only thing that everybody can agree on is that we as a state have to do something to determine how we're going to provide for this core function of government. And so as long as we can keep the focus on that need, and as long as we can be transparent enough to show that whatever money they give us to invest will go directly to projects that the taxpayers will see the benefit of, I feel like we'll be a part of that in, in product, whatever that may be.

(Paul) Excellent.

(Will) Yeah, absolutely. Without, you know, beating these absolutely to death, one last kind of thing I want to talk about is just the timeline, the deadlines that we're looking at right now. Uh, so we got this week is the revenue deadline coming up. What do you think the next couple of weeks will look like as far as these two measures go?

(Brad) Well, the Senate has to get their bill off the floor this week. And, uh, it would then be transmitted to the House. The House bill was passed out of committee and off the House floor early on in the session, and it's been resting in the, in the Senate. Uh, the next deadline would be, I think, March 4th, which is where all the general bills that originated in the other House have to get out of committee in the House that they were sent to.

Um, I think you'll see a lot of negotiations start, you know, in good faith, as soon as the Senate bill is passed, uh, and I think that that'll be an all-consuming conversation behind the scenes. Uh, hopefully it'll be a positive one. Um, normally in, in years past, if there's a breakdown in that, when the other deadlines come, you start seeing a lot of bills die.

And that's normally an indication that people aren't getting along and they're trying to figure a way to, to force the other side to act. Um, the one component that's, uh, kind of a wild card in this is the governor could always step in and call a special session, uh, to deal with the tax structure. Um, if the legislature allows that to happen, the governor, you know, the governor has full control over the call and what the session would be about.

And it would put him in a driver's seat, um, to push what his policy initiatives would be. Um, it remains to be seen if things will go that far, it's all dependent on how the negotiations go. Uh, hopefully they'll be able to find common ground and look at legislating in a way that no one lets the perfect be the enemy of the good and that we try to come up with something that's a positive.
You know, Senator Cochran used to always talk about legislating is we, very seldom do we get everything we want on the first bite of the apple. And so, you have to play the long game. And every time you, you legislate, you try to go as far up the mountain as you can, stake a flag with the intention of being returning the following year and trying to accomplish more.

So, I'm under no illusion that we at the department would get everything we need out of whatever the final product is, but I think any step in the right direction should be viewed as a very positive victory and something that we should all be proud of and grateful to the legislative leadership for. So, um, the next thing to watch for though is the Senate passing it off the, the Senate floor. Assuming they're able to do that, then the two chambers will start negotiating on what this should look like. And I, like I said, I'm sure the Governor will be in the middle of those conversations, and we'll see what they come back with.

(Paul) Awesome.

(Will) Just a little bit over halfway, uh, through the session there, I guess we, would it be five, about five weeks left on, on the calendar? Uh, certainly could go longer, you know, hopefully it doesn't. We'll wrap this baby up and get everybody back to their, uh, home places. But, uh, anything else you wanted to mention with either of those two bills?

(Brad) No. No, I can, uh, other than, I would tell all of our people or anybody that watches this, if you care about transportation, you should reach out to your legislator, thank them for, uh, the legislature making transportation a major part of this discussion and help us just keep the focus on that need for the tools and resources to do the work that the people expect from the department.

(Paul) Awesome. Yeah. Very nice to see it being one of the top priorities of the session for sure. Well, Brad, uh, busy man, Will, you're a busy man on the same court too, all this stuff, but, uh, really appreciate you stopping by –

(Brad) Thank you.

(Paul) the MDOT podcast and talking with us. So, we'll go ahead and wrap things there. Thank you to our listeners, our viewers for tuning into the Extra Mile Podcast. Uh, we want to, uh, let you know you can watch and listen to episodes by visiting GoMDOT.com/TheExtraMile. Follow us on social media, @MississippiDOT is the handle. Thanks, Drew Hall, behind the scenes, and remember to drive smart out there on Mississippi highways.

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