In a time when Congressional job approval ratings are hovering somewhere below 15 percent, many Americans have lost interest in the lawmaking process in Washington, D.C. By most accounts, the current Congress is on track to pass the fewest number of laws in any Congressional session in the history of the United States. That’s reason enough to be uninterested in the legislative activity of Washington – even for political buffs. So why should we be interested in the status of federal transportation funding?
Federal transportation funding has historically paid for the vast majority of funding for highway and transit projects. Dating back to the creation of the Highway Trust Fund in 1956, federal funding has provided the foundation upon which all highway and transit projects are built. Typically, federal funds make up 80 percent of funding for highway construction projects.
The Highway Trust Fund is funded by federal gas and diesel taxes – currently 18.3 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel. Those rates have not changed since 1993. Since then, highway construction costs have increased, and revenue collection has decreased, due to improved fuel efficiency, resulting in a dramatically reduced fund.
The Highway Trust Fund has also been depleted several times in the last 20 years. As a temporary fix, Congress has appropriated general fund revenue and transferred it into the Highway Trust Fund to keep the fund solvent. This summer, Congress adopted a 10-month extension of the current federal highway legislation and appropriated general funds to keep the fund afloat. Congress has approved more than $45 billion in general fund appropriations to the Highway Trust Fund since 2008.
An Inefficient System
The current trend of temporary extensions and general fund appropriations is a challenging way to run a transportation system. States cannot plan and budget for coming construction seasons because it is unclear how much federal funds they will have, resulting in inefficient construction planning and execution.
We need to revamp the way that we collect and distribute revenue in the Highway Trust Fund. Many believe we simply need to raise the fuels taxes to meet current and projected transportation system needs. Groups as diverse as the American Automobile Association, the U.S. Chamber of Commerce, and the American Society of Civil Engineers advocate for this position. Some advocacy groups go even further and suggest indexing federal fuels taxes to inflation, as Massachusetts recently did with its gasoline tax.
Two U.S. Congressional panels have suggested that the future of generating revenue lies in a new approach, known as the Vehicle Miles Traveled (VMT) highway user fee. In 2008, the bipartisan, congressionally appointed National Surface Transportation Policy and Revenue Commission called for a nationwide VMT fee to replace the gas tax. In 2009, another bipartisan, congressionally appointed commission – the National Surface Transportation Infrastructure Financing Commission – concluded that VMT fee collection is the way forward for collecting surface transportation user fee revenues. Technological barriers aside, the VMT approach seems to have wide support.
However Congress decides to collect revenue for the Highway Trust Fund, most observers are hopeful that a long-term fix will be adopted in the next surface transportation bill, due to be passed in the spring of 2015. There is little disagreement about whether or not our transportation infrastructure needs the infusion of capital. The question of how much the federal government should be spending on transportation infrastructure is the policy issue to be decided next spring.
Historically, transportation funding has enjoyed wide bipartisan support. While few people like raising taxes, especially congressional Republicans, most understand the link between our transportation system and the economy, our national security and public safety. More importantly, construction jobs are important as a visible sign of tax dollars at work.
The last few congressional sessions have seen a call from congressional Republicans to devolve the funding of transportation to the states. The federal fuels taxes would not go up; instead, the federal share of highway funding would go down. In tandem, states would be free to raise their gas taxes to make up for the lower federal funds. In this approach, the policy goal is to devolve more power and control over tax dollars to the states.
However, the trend is already starting to move away from the devolution approach. Influential Republicans, including Sen. James Inhofe (D-Oklahoma) and Sen. John Boozman (D-Arkansas), have announced support for a new highway user fee approach to maintain federal highway spending at current levels. This signals a shift in Republican thinking away from devolution and towards a more comprehensive solution.
Whatever approach is taken, we should all care about this issue. If the federal government opts for devolution, then Massachusetts will need to consider increasing its state gas tax – again. If highway user fees are adopted, it will dramatically alter how we pay for highway construction. Either way, change is coming.
William F. Lyons Jr. is president of Fort Hill Cos. of Boston.
