Transportation Policy Academy 2014 – DC – Part 4: Joshua Schank, Eno Center for Transportation

Day two of the 2014 CSG Transportation Policy Academy in Washington, D.C. wrapped up with remarks by Joshua Schank, President and CEO of the Eno Center for Transportation, a D.C.-based foundation and think tank focused on transportation issues. He spoke about why Congress has been unable to pass a long-term surface transportation bill and some potential alternative approaches for structuring the federal transportation program. This page includes highlights of Schank’s remarks and some related links of interest.

Joshua Schank: “When the debate comes up, and it came up again this summer, Congress is faced with a very difficult choice. The choice is either we cut spending or we raise revenues to match the amount of spending we want and they are unwilling to do either of those things. … It’s very hard to go back to your constituents and say ‘we’ve decided to cut transportation spending, re-elect me. It’s also very hard to go back to them and say ‘you need to pay more in gas taxes.’ And both of those hard choices have been avoided.”

Schank: “There may be a bit of a different perspective on the gas tax from the local level because there have been some states including New Hampshire I know that have increased their gas taxes in the last five years. But you have to remember that from the federal perspective, transportation is not a campaign issue. It is a campaign issue at the local level and the state level but it is not a campaign issue at the national level.”

Schank: “If you look at the actual data, the amount that states are raising has not gone up. States have continued to raise money at about the rate that they’ve always been raising money. So they’re not replacing the federal money. The actual total amount of transportation investment is declining. The federal program’s declining and state programs are declining cumulatively. So it’s not like the state programs are filling the gap that the federal government is leaving. That’s a myth that’s perpetuated by people who would like to see the federal program go away.”

Schank: “What’s happening is that we have a system where the transportation spending in this country—approximately 40-50 percent of capital spending and 28 percent of overall spending—is tied to a federal gas tax that most people don’t know exists, most people don’t know how much it is, and most people don’t know that it goes to pay for their transportation and it has nothing to do with national politics. That’s a problem.”

Schank: “There is first of all the issue that you need to keep your infrastructure in a state of good repair. There is also the issue that you need to accommodate growth. Neither of those things are accomplished when you’re in a position of just having to use whatever funds you have to make sure that people aren’t dying. … It’s often cast—and I think miscast—as an issue of our bridges are going to fall down or our economy’s crumbling. Those things are not true. What is true is that it’s going to cost us more the longer we wait to make the investment and that’s the part that often gets lost.”

Schank: (on MAP-21): In 2012, the House “could not agree on passing a bill and here’s why they couldn’t agree: there was a division in the House of Representatives between those who said ‘here’s what we do, we cut spending’—in line with the budget that Republicans proposed in the House—we cut spending to match revenues and do the fiscally responsible thing. That was one option. Another option that was floated was we take public transportation out and only pay for highways and let public transit fend for itself. That was another option that was floated. And then of course the option of raising revenues was not even discussed. Those two options though interestingly could not get majority votes in the House even though it was a Republican House. The reason they couldn’t is that suburban Republican districts were not able to go home to their constituents and say ‘I just took transit and sent it to the wolves.’ They couldn’t kill transit. And virtually everyone recognized the perils of cutting spending overall and trying to sell that as great new progress for transportation. So neither of those could get enough votes to pass the House. … What that lesson tells us is that Congress is unwilling to cut spending, that they are unwilling to increase the spending and that we keep coming back to what do we do to avoid a major crisis just like we did this past summer. Obviously that is no way to run a railroad. It’s certainly no way to run a transportation program because as you all know, transportation spending is long term and it requires forethought and planning and you don’t just come in and say ‘well, how much money do I have today to spend on transportation?’ You actually have to make long-term plans and those long-term plans are based on long-term funding commitments. And so when you have a series of short-term funding commitments, it’s very difficult to make wise investment decisions in transportation because you’re always uncertain about how much money you’re going to have. So the end result of this is that we are not making wise investment choices with our transportation money at the federal level.”

Schank: “The way the federal program is structured was to build the interstate system. That’s how the program came into being and it retains much of the same structure, which is that states own and operate the infrastructure and the federal government provides about 80 percent of the cost.”

Schank: “Our perspective is that there is a strong federal role in transportation and the strong federal role is to use federal money to advance national goals that states on their own would not necessarily choose to advance. Such as for example, it is a federal responsibility to ensure safety of the transportation system across this country and if the federal government can provide funds to states to reduce fatalities and injuries, they should know that they’re getting a return on the investment and that states are using that money as effectively as possible in order to reduce fatalities and injuries. That’s a reasonable expectation. There should be a cost-benefit that goes into the federal money. …Similarly I would argue there’s a federal role in increasing mobility for Americans and for freight and that federal role should show some return on investment and there should be some accountability for how that money is spent in accordance with national goals. … The current funding structure does not encourage that.”

Schank: “If you come to the conclusion that gas tax revenues are inherently going to create these divisions between highways and transit and between donor and donee (states) and you notice that there’s no one willing to raise the gas tax to sufficient levels to support the federal program and you agree that there should be a federal program, you might argue that perhaps we should be moving away from the gas tax as the source of transportation funding.”

Schank: A likely scenario is “that we will not see a gas tax increase that will go to transportation for a very long time if at all and even if we did … it’s not going to be enough. In order to get a gas tax that would pay for transportation spending that’s in line with what our needs might be, we’d probably need at least a 20 cent increase in the gas tax and … it is currently 18.4 cents so that would be more than doubling the current gas tax and to try to get elected officials to sell that at the federal level in this environment is highly unlikely.”

Schank: “So I’m recommending and we are coming out with a report at the end of this month that will recommend that we start looking at other approaches and we start looking at ways to fund our national transportation system because the current way is not going to work. Some ideas that we’ve floated for consideration: one is we could keep doing what we’re doing, which is dedicate a portion of general fund revenues to supplement gas tax revenues but we could actually admit that we’re doing this and therefore make a long term commitment to doing it and therefore give states certainty about how much money is coming in. That in itself would be an improvement over the current situation. … You can say that you’re going to have multi-year appropriations for transportation. There have been multi-year appropriations from Congress in the past. … You can have a two-year appropriation. You can even have a three or four year appropriation. When you get into three or four it becomes more challenging. Two years is definitely doable. But what you can say is ‘we are going to codify this. We’re going to create programs that are funded exclusively by general fund revenues such as already exist today. You may be familiar with the TIGER program. The TIGER program is a general funded revenue program that has been in existence since the stimulus package in 2009. It has not gone away. All we have to do is admit that it’s not going away and that’s a portion of the program right there. There are a number of different programs like that like Projects of National and Regional Significance, which is another federal program that has not been funded but could be funded with general (fund) revenues and you could take that and say that this is another portion of a program that we’re going to continue to fund, that we’re going to commit to funding.”

Schank: “Another option is to say let’s get rid of the Highway Trust Fund entirely and let’s dedicate fees to transportation without a trust fund structure. So for example, you could have a portion of the income tax dedicated to transportation. There’s a huge amount of logic to that. Transportation contributes to GDP—approximately 10 percent of GDP. Even 10 percent of the income tax would be more than enough to pay for our transportation program. Take half of that and you’ve got enough to pay for the transportation program. An income tax makes a lot more sense because then you don’t have the fights over which mode is getting how much money. You don’t have the fights over how much is my state getting back. Instead you can focus the investment where it’s most needed.”

Schank: “A similar concept that’s been floated, which admittedly would be a huge challenge in this country but has a lot of logic to it is a national sales tax. I’m not naïve to the political challenges of trying to do something like that but I would just point out that when you poll voters and ask them ‘how would you like to pay for transportation,’ they hate gas taxes. They hate tolls. They hate vehicle miles traveled fees. Even though they don’t exist yet, they hate them. And sales taxes are actually the most popular option.”

Schank: “The U.S. Chamber of Commerce is on record supporting a gas tax increase. They also give a tremendous amount of money to candidates who run for national office who will never vote for a gas tax increase. So the business community is a little conflicted on this because they are completely against any kind of tax increase except they actually think there should be tax increase for transportation. That’s why I think there’s a lot of value to saying let’s divorce transportation from the gas tax. It’s a declining value tax. It is dying. It is not helping the cause. There are other ways to go about this and perhaps we should be looking at them.”

Schank: “You’ve got a President who is not by any stretch a forceful leader. He’s not directing us in any (way). He’s already come out and said he would not support a gas tax increase if it were proposed. His solutions that he’s proposed for this crisis have been short term only. He’s said ‘let’s use corporate tax reform to fund the bill’ but even if that happened, that would be only a short-term solution. So there’s no leadership coming out of the executive branch on this issue and the executive branch is where you pretty much need to look to for leadership on this issue because Congress is always going to be focused on how much does my state or my district get out of this bill. They’re not the ones who are going to take the national perspective. It’s much harder from them. The most hope you could have is from the committee chairs who might take a national perspective on it.”

Schank: “There’s no real opportunity for leadership on raising revenue in this country right now. The real hope that people hold out is that there could be some kind of grand bargain where if Republicans took control of Congress perhaps they would say ‘we need to do something about the long-term deficit. We need to do something about entitlements. And perhaps as part of that large bargain, there could be some agreement that would include transportation. … But let’s say that happens. My only point to you is if that happens and I care about transportation, I would want a different funding source than the gas tax. I don’t want to be stuck with the gas tax because as soon as that plan is over, you’re going to have the same problem again.”

Schank: “The problem with a vehicle miles traveled fee is that even if you could get it enacted, which strikes me as very unlikely at the federal level where people have tremendous concerns about privacy…you’re still faced with the same fundamental problem, which is that everyone is going to know exactly where that money’s coming from. Therefore, they’re going to want it to come back to that exact place and that’s no way to run a federal program. And number two, all that money’s coming from drivers and truckers and you have other (transportation) needs that are not driving and trucking. So neither of those problems are solved by transitioning to a vehicle miles traveled fee.”

Schank: (On why a sales tax or other broad-based tax to fund transportation might make sense) “The benefits of transportation are economic, they’re environmental, they’re safety. There (are) a lot of benefits. Those benefits are not just going to the users. The benefits are going to everybody. When you reduce the cost of transportation, you reduce the cost of goods for people who may not be traveling at all. You could be sitting in your house and ordering from Amazon, you’re still going to see a reduced (cost if transportation costs go down). The benefits are going to everybody so then why shouldn’t everybody be paying? The fact that just the users are paying is weird and we wouldn’t expect that from any other component of our federal programs. The people who are benefitting should be paying into the system. Everybody benefits, everybody should pay.”