I couldn’t agree more with Paul Burka’s latest post, Investing pension funds in toll roads is an irresponsible and “immoral” idea.
The issue here is not toll roads per se. It is toll roads built with pension funds (and probably other investment funds as well, such as the Permanent School Fund and the Permanent University Fund). These are trust funds. They belong to the members. It is morally wrong to require fund managers to invest them in risky ventures like toll roads. Does anybody doubt that there will be pressure on the pension funds to invest in certain projects that favor certain people and certain contractors and certain areas? We all know what kind of people we are dealing with here. Rick Perry can’t resist it. He appointed the members of the boards that oversee the pension funds. These deals will be neck-deep in politics.
I have said this before, and I will say it again. There is a sensible way to finance roads. It is to increase the gasoline tax and index it to inflation in the highway construction index.
While the resistance to tax increases is formidable, so is the resistance to toll roads. If you can persuade the public that a gasoline tax increase will reduce the need for toll roads, I think that proposition could be sold. Anything is better than insisting that the savings of retired teachers and state employees be invested in risky ventures like toll roads.
It’s a very good post even though he leaves out the obvious, that the current trio – Perry, Dewhurst, and Craddick – won’t do it. And the gas tax can’t be raised until at least two, (Perry and Craddick), of the three are gone – three of three being preferable.
McBlogger adds his, ahem, 2 cents, The Transportation Daisy Chain.
The reality that no one on the R side wants to admit is that their ideology is fundamentally flawed. In the real world, privatization does not always work to the benefit of consumers, especially in the absence of substantive GOVERNMENT oversight. An old school economic conservative can you tell you that. In fact, I’ve done it several times. We, unlike the ideologues running the government who’ve never really worked in business, know from first hand experience that private enterprise can be every bit as wasteful as big government.
And to back all this up is this latest item from The Newspaper on the Grim Financial Outlook for Toll Roads.
A major credit rating agency on Wednesday warned investors that toll roads no longer make a great investment choice. In a special report entitled “U.S. Transportation Assets: Facing a Temporary Decline or a Permanent Change?” Fitch Ratings cautioned that a number of economic factors challenge the creditworthiness of tolling projects, including the current state of fuel prices, currency exchange rates and sluggish economic growth. In its report, Fitch changed the outlook on toll roads to “Negative” after having issued an outlook of “Stable” as recently as March.
“Small but frequent toll increases will likely be necessary over the next several years to maintain credit quality if current conditions persist,” the report explained. “Fitch’s ratings for airports and toll roads reflect the relative ability of each credit to deal with some volatility in revenue and the expectation that management will take appropriate actions to deal with such developments.”
And at least as far as 183-A is concerned, going “cashless”, will make those necessary frequent tax increases almost invisible. And that just means the “something for nothing conservatives” plan is working as designed.
Immoral is right, but it can be stopped. I would recommend that anyone who is a teacher or state employee call Perry, Dewhurst, and Craddick and tell them what a bad idea this is. Also call State Sen. Steve Ogden, whose brainchild this is. And don’t forget to call your own state senator, state representative and the board members of either ERS or TRS. Surely they’d all like to hear what you have to say.