Pennsylvania Auditor General, Jack Wagner, says the State General Assembly must amend or appeal a rule requiring the Turnpike Commission to provide $450 million a year in infrastructure funding to the Pennsylvania Department of Transportation.


Wagner says the agency's long-term debt has increased by 181%, from $2.6 billion to $7.3 billion, since Act 44 was implemented. Since 2009, the Turnpike Commission's total net assets plunged 997%, from a surplus of $156 million to a deficit of $1.4 billion. (Net assets is total assets less total liabilities of an organization. Assets include things such as cash, equipment, investments and buildings and liabilities include things such as accounts payable, interest payable, bonds payable etc.)

Wagner's letter noted that, like the City of Harrisburg and Jefferson County, Ala., the Pennsylvania Turnpike was in danger of becoming financially insolvent and defaulting on its debt obligations. Under Act 44, the Turnpike Commission is required to make annual payments of $450 million to PennDOT for 46 more years without a new revenue source. This annual payment would add at least $20 billion in additional debt to the Pennsylvania Turnpike Commission. If the Commission were to default on the obligations then Pennsylvania taxpayers would be required to assume the Turnpike Commission's debt obligations.

"The statistics show clearly that the Pennsylvania Turnpike Commission is drowning in debt due to the burdens placed on it by Act 44," Wagner said. "With Pennsylvania facing nearly a half-billion dollar budget shortfall this year, the commonwealth cannot afford to take on any additional debt. Immediate action must be taken to ensure this important state entity can continue to meet its mission to serve Pennsylvania taxpayers with excellent roadway service and to ensure that taxpayers aren't unfairly charged in the process."

The General Assembly passed Act 44 on July 18, 2007, creating a "public-public partnership" between the Turnpike Commission and the Pennsylvania Department of Transportation to provide funding for roads, bridges and transit throughout the commonwealth. Under Act 44, a Lease and Funding Agreement was entered into by the Turnpike Commission and PennDOT on Oct. 14, 2007 for a period of 50 years, extending until 2057.

The funding agreement required the Turnpike Commission to make scheduled annual payments to PennDOT for funding for roads, bridges and transit. The Turnpike Commission's obligation to pay the annual debt service on any special revenue bonds on a timely basis is also part of its payment obligation under the funding agreement. The funding agreement also gave the Turnpike Commission the green light to toll Interstate 80 in Pennsylvania as another source of additional revenue, pending approval by the Federal Highway Administration.

However, FHWA prohibited the tolling of I-80 on April 6, 2010, leaving the Turnpike Commission with the ability only to raise turnpike tolls and to increase borrowing as the only funding mechanisms for meeting its annual funding obligations to PennDOT.

Wagner said that the Commonwealth of Pennsylvania's Comprehensive Annual Financial Report audit for the year ended June 30, 2011, which was jointly completed by his department and a private accounting firm, shows that the Turnpike Commission will be forced to pay Act 44 debt by assuming additional bond debt, placing a severe negative impact on the Commission's financial position.

Wagner said the Turnpike Commission's stated intent to finance its payments to PennDOT solely through the issuance of new debt for the foreseeable future was especially troubling. The Turnpike Commission's financial position has deteriorated rapidly in recent years, Wagner noted.

In 1998, the Pennsylvania Turnpike Commission was awarded with the highest bond rating of any turnpike agency at that time by one of three bond rating companies. By 2008, this same bond rating company had downgraded the Turnpike's bond rating stating: we have "raised a caution flag about the Pennsylvania Turnpike's financial future because of the transportation funding bill that the state Legislature passed last summer [Act 44]."

"It is crystal clear that, with the passage of Act 44, the Pennsylvania Turnpike Commission has been placed in a position where its very existence is at risk," Wagner said. "No entity can continue to operate with significant increases in long-term debt and the continued serious depletion of assets caused by Act 44. It is time to rescue the Pennsylvania Turnpike Commission by repealing Act 44."