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Bumpy road

ST. PAUL - If you've driven Minnesota highways, the scene is familiar: Approaching a road construction zone, several traffic lanes may merge into one. Multiple lanes then branch out at the other end of a road work area.

ST. PAUL - If you've driven Minnesota highways, the scene is familiar: Approaching a road construction zone, several traffic lanes may merge into one. Multiple lanes then branch out at the other end of a road work area.

Minnesota's highway funding system - a web of federal, state and local dollars supporting state, county and city roads - follows a similar pattern.

Road funding affects just about everybody - motorists get angry when sitting idle in traffic or traversing rough roads and state policymakers engage in heated debates over how to pay for new projects.

Despite motorists' gripes and legislative squabbling over how much money should be spent on transportation, Minnesota has a reputable road funding plan, Rep. Bernie Lieder said.

"The part I think is difficult sometimes for the public to understand is that it's really one of the best formulas in the country," Lieder, DFL-Crookston, said. He is a former Polk County highway engineer and is considered the Legislature's transportation expert.


How roads are funded isn't all that complicated, said Kevin Gray, chief financial officer for the Minnesota Department of Transportation.

"There's a lot of intricacies, but it's fairly straightforward," Gray said.

Using the construction zone comparison, several state sources of transportation revenue are funneled into one major fund. That revenue includes:

-- A fuel tax paid by drivers at the pump.

-- License taxes, or tab fees, shelled out by vehicle owners.

-- Sales tax generated when cars and trucks are purchased.

The state Constitution requires those taxes go to road funding. Federal dollars and other sources are added to the pot, and a series of standard formulas determines how the dollars are divided.

About 60 percent of the revenue from those three taxes is used for state highways. Another 32 percent goes to county highways that receive state assistance based on factors such as traffic levels. The remaining 8 percent is split among cities.


Even with an estimated $1.7 billion pouring into state, county and local roads in 2006, there are more highway projects lined up than there is money. There is between $750 million and $1.2 billion in annual unmet state highway needs, MnDOT spokeswoman Lucy Kender said.

Republican Gov. Tim Pawlenty and the Democrat-controlled Legislature are at odds over how to raise new revenue, including for public transit such as buses and trains, which are funded differently than highways.

Many Democratic-Farmer-Labor lawmakers want to increase the gasoline tax by as much as a dime per gallon. Pawlenty has proposed paying for road improvements with borrowed funds - similar to how other state construction projects are financed.

Regardless of the ongoing debate, road funding will change in the coming years. Minnesota voters decided as much when they approved a constitutional amendment last year dedicating all of the vehicle sales tax to transportation.

That sales tax on new and used cars generated $163 million in 2006. More than half of that money traditionally went to transportation; the rest was spent elsewhere.

The ballot measure guaranteed that all of the vehicle sales tax revenue will be directed to roads and transit by 2012. The tax comprises 9 percent of all transportation revenue - a figure that will grow as the entire fund is shifted to roads and transit.

The gas tax is the largest - and most controversial - funding source. Minnesotans pay a state charge of 20 cents per gallon, which generated $656 million in 2006 - or roughly one-third of all transportation revenue.

Minnesotans are driving more, but the gas tax revenue is leveling off because of increased fuel efficiency and other factors, Gray said. Several years ago, for example, gas tax receipts grew by up to 3 percent a year, but officials forecast annual growth of only 1 or 2 percent in coming years.


Federal funds make up a significant portion of highway spending, but follow an alternative route into Minnesota's road system, going into another pot than state taxes. Seventy percent of that revenue - which includes money from the 18-cent-per-gallon federal gas tax - is directed to the Transportation Department, where it is dispensed for state projects. The remaining 30 percent goes to county and municipal roads.

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