Federal Update
Logical way forward
Some highway funding solutions are better than others

By David Tanner, associate editor

Father Time is not the kindest of friends to transportation. Vehicles and their components wear out, and so do the roadways and bridges the nation relies on to move people and goods.

Those holding the purse strings for transportation have their work cut out for them as the National Highway System gets another year older without a solution to sustain funding long term.

The problem
Much of the highway and bridge network is decades old. It’s over-capacity and underfunded. Congestion leads to squandered hours, productivity and fuel. Truckers know these issues well.

The bank account that serves the system – the Highway Trust Fund – has not been taking in enough fuel taxes and other fees to keep up with the need for investment and spending.

Fuel taxes have not increased since 1993, and the purchasing power the highway fund once had is no longer there thanks to inflation and increasing costs of materials.

In 2012, Congress passed a two-year, $109 billion highway law known as MAP-21. Despite a feeling that the pressure was off, at least for a while, transportation stakeholders, lawmakers and think tanks are already crunching hard to find a longer-term funding solution to avoid transportation’s version of the fiscal cliff.

“MAP-21 was basically a bandage on the funding perspective,” says Ryan Bowley, OOIDA Director of Legislative Affairs.

“The legislation transferred just enough money to the Trust Fund to remain solvent through the duration of the bill. So the Trust Fund is going to face fiscal challenges on the very day that MAP-21 expires.”

The difference between this deadline – Sept. 30, 2014 – and other deadlines that transportation has faced since the economy sent the Highway Trust Fund dangerously close to red figures in 2008 is the advance warning signs, Bowley says.

“In this case, we know this is coming,” he said. “There’s no other way to say it. We know that the bad situation is coming down the pipe and there are no more bandages in the bandage box.”

Congress has transferred $35 billion in general funds to the Highway Trust Fund since 2008. That’s when fuel-tax receipts and other user fees that keep the trust stocked with cash fell noticeably behind expenditures.

MAP-21 included some reforms, but did not address the long-term issue of solvency for the Trust Fund.

Adding everything together, the Congressional Budget Office projects a $105 billion shortfall by 2022 in the highway and mass transit accounts that make up the Highway Trust Fund.

Possible solutions
Some options for fixing the funding gap for transportation are better than others.

A pair of federally appointed commissions studying ways to generate more revenue have suggested fuel tax increases, a possible tax on vehicle miles traveled, and increases to other highway user taxes including the heavy vehicle use tax, the tire tax and licensing fees.

“The situation that the Trust Fund is facing basically leaves Washington with a few difficult options,” says Bowley.

“They can stabilize the Trust Fund with some form of new revenue, more general fund transfers – which increases the deficit – or they can significantly scale back the program and devolve more responsibility to the states, which is largely going to lead to tolling and expanded use of public-private partnerships.”

House Transportation and Infrastructure Committee Chairman Bill Shuster, R-PA, has not ruled out an increase in fuel taxes as an option.

OOIDA’s list of highway funding principles insists that Congress use highway money for highways and get rid of the diversions that use road money for other purposes.

Congress last raised the 18.4 cent tax on gasoline and the 24.4 cent tax on diesel in 1993. During the first two years of that tax increase, half the money went to balance the federal budget while still leaving the Highway Trust Fund in good standing. Things are different now, as the Trust Fund no longer enjoys a surplus.

Some lawmakers have proposed reducing the federal role in transportation and returning more funding decisions to the states.   Trouble is, that would likely lead to more tolling and public-private partnerships for infrastructure.

OOIDA remains opposed to tolls on existing highways built with tax dollars and opposed to the long-term lease or sale of public infrastructure to the private sector.

Replacing the fuel tax with a tax based on vehicle miles traveled may not seem like a complicated thing to do, but highway users have reasons to believe it could open Pandora’s Box in terms of privacy and the overall relevancy of a federal infrastructure system.

Some lawmakers support a tax on vehicle miles traveled, or VMT.

U.S. Rep. Earl Blumenauer, D-OR, has introduced numerous bills over the years to further a pilot program modeled after one in his home state.

Truckers have raised concerns about privacy in the past in terms of how a VMT tax would be levied, most likely through GPS or some other mileage tracking system.

The largest obstacle with a VMT, however, remains the scale involved with implementing a nationwide network of tracking locations most likely at fueling stations, where motorists would see and pay their individual tax bills.

“Outside of the privacy issue, outside of the technical feasibility, is a problem of scale,” Bowley says.

“It’s an enormously complex issue. Any real discussion of this needs to be a process.”

Tried and true
Truckers have long relied upon the fuel tax as the fairest and most equitable user fee to fund transportation.

Truckers make up about 10 percent of traffic, but account for 36 percent of the money going into the Highway Trust Fund through fuel taxes and other user fees. In return, truckers expect good roads and their tax dollars to be spent on what they are meant for.

The economic benefits of a strong highway system cannot be denied.

“For the people who have made tremendous investments in our current system, there really is no logical way forward other than to follow a tried-and-true method for funding highways,” OOIDA Executive Vice President Todd Spencer says.

“Will it always be that way? Maybe not, but the only alternatives on the table are to fund the roads through tolls, and that should be a nonstarter.”

Recent reports bolster the case for investment. The Federal Reserve Bank of San Francisco recently reported that “government investment in infrastructure, such as roads, can raise the economy’s productive capacity” anywhere from 1.5 to three times the dollar amount spent.

“The basic element hasn’t changed since it was theorized and put into motion by President Eisenhower – that if you want a National Highway System that serves the public, then the approach has to be national,” Spencer said.