Appeals court judges hear arguments over limits on use of Missouri Road Fund

Missouri Western District of Appeals Judges Gary Witt, Mark Pfeiffer and Thomas Chapman consider whether the Missouri Highways and Transportation Commission can spend leftover money from the road fund without an appropriations bill. The appellate case was heard Thursday at the University of Missouri's law (Annelise Hanshaw/Missouri Independent).

Deputy Solicitor General Sam Freedlund ran into a skeptical panel of judges Thursday as he tried to persuade the Western District Missouri Court of Appeals to overturn a ruling giving state transportation workers a raise.

Cole County Circuit Judge Cotton Walker misread the Constitution, Freedlund argued, when he ruled last year that the Highways and Transportation Commission could implement the "market adjustment" pay plan adopted in 2021.

There is language giving the commission authority to spend money from the state Road Fund without a legislative appropriation, Freedlund said, but it is limited to repaying road bonds and reserving enough money for a future payment. Everything else the Department of Transportation does, he said, must have an appropriation.

"All sorts of agencies, I'm sure, want to pay their employees different amounts, but it's the legislation that ultimately controls the public purse strings," Freedlund said.

Taking away the control the commission exercises over the fund would leave the state paralyzed in an emergency, Jim Layton, attorney for the commission, told the three-judge panel. He noted that flooding closed Interstate 44 in Wayne County this week. If the flood had been worse, and the road needed major repairs, he said, the public wouldn't want to wait for the legislature to provide the money when it meets in January.

"The Highways and Transportation Commission would then be faced with the choice of either leaving Interstate 44 closed until it could get a supplemental appropriation, if ever, or to close down a lot of other stuff," he said.

Presiding Judge Mark Pfeiffer focused on how two paragraphs in the constitution interact. The first says the Road Fund shall " stand appropriated without legislative action " and names debt service as the first priority of the fund. A subsequent paragraph says the remaining balance "shall be used and expended in the sole discretion of and under the supervision and direction of the highways and transportation commission."

Pfeiffer said the spending has to relate to the mission of the commission and, reading the arguments filed by Layton, that is what it appears to be doing.

"They can't abuse that discretion," he said. "They can't buy lotto tickets with the fund."

The judges heard the case, as well as three others, in the courtroom of the University of Missouri Law School in Columbia. The visit is part of regular trips to the counties included in the Western District, Pfeiffer said in a break between cases.

On Wednesday, the judges heard four cases at Lincoln University in Jefferson City.

"We want students who are interested in a career in law to see real judges and real lawyers arguing a real case in a real courtroom," he said.

The case over pay began when the commission sued Ken Zellers, commissioner of the Office of Administration, in late 2021 after he refused to honor raises authorized for MoDOT employees. The highways commission wanted to stem turnover at MoDOT and attract new employees.

The department lost an average of 600 employees per year from fiscal 2018 to fiscal 2021 out of an employee base of about 5,000. In October 2021, MoDOT separations exceeded 70 for the seventh consecutive month, Layton wrote in his briefs to the appeals court.

One example of how poor pay was driving workers away is that at the end of 2021, 669 employees were paid so little that a family of four living off the income would be eligible for food stamps, Layton wrote.

Lawmakers appropriated $267.5 million for salaries and $243.8 million for health, retirement and other benefits for MoDOT for fiscal 2022. The market adjustments, based on a consultants report that compared pay to road agencies in St. Louis, Kansas City and other states, would have cost an additional $37.2 million in salaries and $22.5 million in benefits.

If drafters of the constitution had intended that the commission could use the Road Fund for pay raises, they would have repeated the "stands appropriated" language, Freedlund said.

"It doesn't make sense to say something explicitly in one paragraph and implicitly in the next," he said.

Judge Gary Witt said he didn't read it that way.

He noted that the Missouri Supreme Court ruled last year that lawmakers could not limit the way the Conservation Commission uses its appropriated funds for purposes outlined in the Constitution. In that case, lawmakers sought to block the purchase of a specific property. The Conservation Commission is authorized to buy land to fulfill its duty for the "control, management, restoration, conservation and regulation" of fish, wildlife and forestry resources.

"This seems a lot more clear, even, that they have this sole discretion than the Conservation Commission's constitutional authority that the Supreme Court just said they have the right to expend the funds without legislative oversight," Witt said.

The "sole discretion" provision applies to efforts to pressure the commission to use the money in one way or another, not whether the fund should be appropriated, Freedlund said.

"Once the legislature appropriates the money, it can't then go in after the appropriation and fiddle with it," he said.

The lawsuit was filed two months after the first state fuel tax increase in 27 years took effect. State lawmakers approved the tax increase – 12.5 cents per gallon phased in over five years – without seeking a statewide vote.

So far, the tax increase has added 10 cents a gallon to the cost of fuel and when fully implemented on July 1, 2025, motorists will be paying a total of 29.9 cents per gallon in state fuel taxes.

The lawsuit enraged some lawmakers. State Sen. Cindy O'Laughlin, and five other Republican senators, in a February 2022 letter to the commission, demanded that MoDOT Director Patrick McKenna either resign or be fired.

McKenna survived the attacks. In August, after securing a new job , he told the commission he was resigning after nine years.

And the lawsuit hasn't prevented lawmakers from making huge appropriations for road projects the Road Fund can't afford. Lawmakers in 2023 approved $2.8 billion for widening Interstate 70 and this year agreed to spend $727.5 million on improvements for I-44.

That money came from surplus general revenue funds and new bond debt. The constitutional language, Layton said, is to stop lawmakers from diverging Road Fund money when times are tight.

"The people of the state of Missouri did not want the State Road Fund to be used for things other than roads," Layton said, "and so we adopted this language to make it eminently clear that it can't be used for anything except roads."