Beacon Hill leaders Tuesday announced a $500 million transportation finance plan that would raise gas, tobacco, and business-related taxes to put the MBTA and regional bus systems on firmer financial footing, but does not fund any of the ambitious transit projects put forth by Governor Deval Patrick.
House and Senate leaders’ scaled-down funding plan would likely prevent the need for immediate MBTA fare increases. Patrick had argued that his bigger $1.9 billion capital investment plan — financed by an income tax hike, with money for schools as well as roads, bridges, and transit projects — is essential to the state’s economic health.
Reaction to the lawmakers’ plan was varied. State House Republicans said the bill raises taxes excessively without sufficient cuts in spending, while advocates for transportation expansion called the plan underfunded and shortsighted.
The legislators’ bill represents potential political failure for Patrick, who staked much of his cachet in recent months on efforts to shore up widespread support for his expansive proposal.
At a State House press conference, Senate President Therese Murray said legislators saw a need to be “a little bit more cautious” than the governor.
“This proposal allows us to use revenues in the most responsible and efficient way possible,” Murray said.
The House-Senate plan calls for raising the state gas tax by 3 cents, and indexing the rate to inflation beginning in 2015, to bring in $110 million a year. That increase, legislators said, would cost the average driver $12 to $30 per year. Taxes would be increased on cigarettes, cigars, and smokeless tobacco to raise an additional $165 million annually.
Changes to the tax code affecting computer services would raise an additional $161 million a year, while changes to the tax code for utilities would raise $83 million.
The House-Senate bill was also smaller in scope than a proposal released last month by the Massachusetts Taxpayers Foundation, which called for a more moderated approach to Patrick’s funding plan. The organization estimated that $800 million per year would be enough to prompt long-term changes in the state’s transportation system, and many transportation specialists had considered that estimate to be a likely compromise.
The bill makes no mention of income or sales taxes, while Patrick’s proposal had called on legislators to raise the state income tax from 5.25 percent to 6.25 percent while cutting the sales tax from 6.25 percent to 4.5 percent.
The $500 million in new revenue, legislators said, would also provide increased funding for snow and ice removal on the state’s roads.
The plan would also make it possible, within the next three years, for MassDOT and the Massachusetts Bay Transportation Authority to stop the practice of borrowing money to pay staff salaries, and instead incorporate labor costs into annual operating budgets — a dramatically expedited timeline from the one Patrick proposed, which outlines a 10-year process to end the practice of paying staff with borrowed funds. Additionally, the bill would require that the transportation agencies meet targets set by legislators to increase revenue and identify savings.
In explaining the smaller tax increase, House Speaker Robert A. DeLeo said he was worried that raising taxes too much would have a detrimental effect on the state’s credit rating.
“These were not easy decisions,” DeLeo said.
Legislators also steered away from relying too heavily on the gas tax, which they said might be less reliable in the future because of more fuel-efficient vehicles, and would disproportionately burden drivers, as opposed to those who use public transit.
“Placing too much of an emphasis on the gas tax would simply set the stage for another transportation crisis in the years to come,” said Senator Stephen M. Brewer, Democrat of Barre .
The legislative plan does not include funds earmarked specifically for capital investments such as the expansion of South Station or rail service to Fall River and New Bedford, as Patrick’s plan had, but legislators said they were not giving these projects short shrift.
By putting the current Massachusetts Department of Transportation operating budget on more stable financial footing, legislators said, the state will better be able to fund large-scale expansion projects in the coming years.
“The point is that to determine how much new investment we can afford, we first need to know the cost of continuing the current system,” Brewer said.
Ending MassDOT’s dependence on borrowing for labor costs in three years, Murray said, would eliminate interest payments. That money, she said, could be used in the future for large-scale capital projects.
“We’re going to free that money up seven years earlier,” than under Patrick’s proposal, Murray said.
Representative William M. Straus, a Democrat from Mattapoisett and House chairman of the Joint Transportation Committee, said ending MassDOT’s dependence on borrowing money for labor costs will allow infrastructure projects to get off the ground. “Capital expansion is here,” Strauss said.
DeLeo and Murray bristled at the suggestion that their bill’s stark departure from Patrick’s proposal was a vote of no-confidence in the governor’s vision.
“I like to think of this as just agreeing with the governor, working with the governor,” DeLeo said. “This is just a different method, if you will, but I think we both achieve the same goal.”
“He put out a 10-year vision, and we’re just saying maybe 10 years is too ambitious right away,” said Murray.
Patrick said he planned to scrutinize the bill before offering a critical response.
“I thank the House and Senate leadership for considering my plan and look forward to thoroughly reviewing theirs,” Patrick said in a statement.
House Republicans issued a statement condemning the proposed tax increases, and calling on DeLeo to hold a public hearing on the proposal.
“By seeking to raise five separate taxes, the Speaker and Senate President have sent a clear indication that they believe they have exhausted all options when it comes to reforming our state’s transportation system," the statement reads. “House Republicans don’t believe this to be true – in fact we believe numerous other areas of savings still exist.”
Senate minority leader Bruce E. Tarr said Republicans will work in coming days to add measures to the bill that would require the state’s transportation agencies to find further cuts in their budgets.
“The framework announced today by the Senate President and the Speaker makes it clear that there is no legislative appetite for the massive increases in taxing and spending proposed by the Governor,” Tarr said.
Advocates who had lobbied for increased taxes to fund transportation projects in recent months, many of whom rallied outside the State House Tuesday morning before the bill announcement, said they were disappointed by the plan.
Kristina Egan, director of Transportation for Massachusetts, an advocacy group that had pushed for Patrick’s funding plan, called the proposal “woefully inadequate.”
“We have an unprecedented opportunity to make a transportation fix for the next generation, and I’m worried that we’re squandering it here,” Egan said. “It feels like this package is locking in chronic underfunding.”
Richard A. Dimino, president of A Better City, a public policy organization focused on transportation, land development, and environmental policies in Boston, said the absence of capital projects in the Legislature’s $500 million bill would mean that the state would possibly lose federal money for projects such as the Green Line extension.
Dimino also said he worried the 3-cent gas tax increase was too modest, and that too much of the additional revenue for transportation funding will come from the business community.
“While it’s a step forward, we’re not sure the numbers go far enough,” Dimino said.Michael Levenson contributed to this report. Martine Powers can be reached at email@example.com. Follow her on Twitter @martinepowers.