Transportation Policy Academy 2015 – DC – James Corless, Transportation for America and Jeff Davis & Emil Frankel, Eno Center for Transportation

James Corless is the Director of Transportation for America (T4America). Jeff Davis and Emil Frankel are Senior Fellows at the Eno Center for Transportation. All three were panelists at a May 12 transportation policy roundtable as part of the 2015 CSG Transportation Policy Academy. In these excerpted portions of their remarks to state legislators attending the academy, they discuss the past, present and future of the federal-state-local partnership on transportation.

Jeff Davis is a Senior Fellow at the Eno Center for Transportation in Washington and is the Editor of the Eno Transportation Weekly, which began  publication 17 years ago as Transportation Weekly, monitoring and analyzing federal legislative and regulatory developments dealing with transportation and public works. He’s a former Congressional staffer and transportation consultant.

On how the transportation funding situation in Washington got so bad…

Davis: “The interstate (system) was built on what’s called a cost to complete basis. The 1956 Interstate Act basically said we—Congress and the President—are committed to build out this map of divided four-lanes no matter how much it costs, no matter how long it takes. We’re going to have this new Highway Trust Fund system and we’re going to build the roads on this map so that everybody in the country could look at the map and … tell that Montana could not pay for that long East-West interstate on their own but you see that you can’t connect the Northeast and the Northwest without it. It provided a great way to tie everyone together in a national need. …Now there’s really no single, compelling, unifying force to tell voters and politicians why we need a strong federal role.”

On why a gas tax increase has become a political third rail…

Davis: “On the revenue side, the problem was George Bush the 1st (George H.W. Bush) ‘read my lips, no new taxes’ because he wound up going back on that for a variety of reasons—many of them good—and we wound up getting a nickel-a-gallon gasoline tax (increase) out of that. But that was the moment that caused Newt Gingrich and the non-accommodationist, non-compromising wing of the GOP to overthrow the accomodationist, compromise-oriented wing of the GOP. … The fact that the gas tax was the centerpiece of the rebellion and then the approximate cause of the rebellion that put the non-compromisers in charge of the GOP has kind of tainted the gas tax at the federal level ever since. Then three years later, (a gas tax increase) was enacted as part of a budget process that got zero Republican votes in the House and zero Republican votes in the Senate and so the 4.3 cents per gallon was also sort of politically polarizing to the extent that even people who should know better like Bob Dole were proposing amendments on the Senate floor three and four years later to repeal the 4.3 cents-a-gallon … whenever gasoline (prices) got high. On the spending side we’re paying for the problems of not having a good central idea to hold the whole system together post interstate (construction) and on the tax side, the problem is that the two gas tax increases in the early ‘90s were very politically polarizing and have kind of poisoned the well on the gas tax for a long time.”

On why the federal Highway Trust Fund continues to flirt with insolvency…

Davis: “I have perfected my presentation on the problems of the Highway Trust Fund because there are really only two numbers that you need to know and they are 51 and 40. … For the last eight years, the federal government has been committing itself to start $51 billion in new projects every year paid out of the Highway Trust Fund. The trust fund currently only brings in $40 billion a year in taxes and both Congress’ and (the Office of Management and Budget)’s baselines project that we’re only going to get $40 billion a year max in the future under the current law because even as the economy grows and causes more miles to be driven, the effect of having higher fuel efficiency standards for cars will eat that up plus some. We’re going to be at 55 miles a gallon I think on new cars by 2024 and that’s going to kill all the growth. So Congress has so far been unable to reconcile $51 billion with $40 billion. We’ve thrown in $65 billion in General Fund money. But that’s the basic underlying issue: do you cut this down to this or do you raise 40 to 51 or meet somewhere in the middle and that’s what we’ve been debating for the last four years.”

On how the federal-state dynamic could change in the years ahead…

Davis: “One of the things that Congress is considering on how to change the system going forward is to ask really ‘what’s the compelling federal interest here?’… The Constitution says that the federal government can regulate commerce between the U.S. and other countries and commerce between the several states. It is promoting commerce between the states that has always been the constitutional justification for the highway program and most of your other public works programs. So you look at a program and say ‘what does this have to do with promoting commerce between states?’ Is the federal interest in building new lanes on U.S. 1 or 61 or 101 or these big interstate roads the same as the federal interest in resurfacing a backroad? Is the federal interest in replacing a bridge carrying a U.S. highway over a major river the same as the federal interest in replacing what we call an off-system bridge on a backroad that’s not part of the federal system? And if those federal interests are different, then why on earth are they all at 80 percent federal cost share?”

Davis: “So the committees (in Congress) are looking at trying to do incentives in the next (authorization) bill by changing that up. Maybe say the core national highway system is 80 percent share. Other projects that are not on the national highway system have a 70, 60, 50 percent (federal share), something like that. They’re thinking of fundamentally changing that system for the first time in 20-some years. … The problem is if you do that, you’ve also got to change the flexibility that the state has to move money from one account to the other. Otherwise states would just take all the money that has a 50 percent match and shift it to a program that has an 80 or 90 percent match.”

On other transportation revenue options…      

Davis: “The other thing looking forward on the revenue side: motor fuel taxes are dying off. Having to get cars up to 55 miles-a-gallon, electric cars, etc. are going to slowly eat away forever at the gas and diesel taxes. Plus telecommuting, mass transit, etc. are going to eat away at the number of miles driven. All of the other ideas to tax highway users somehow involve the vehicle or the driver. They’re either GPS-based (vehicle miles traveled), an odometer tax, registration tax. … If you can’t tax for fuel, you have to tax the car or tax what the motorist is doing. There’s a problem with that. Gas and diesel taxes at the federal level are incredibly cheap and easy to administer because the gas station doesn’t pay a federal gasoline tax. Federal gasoline excise taxes are paid at the terminal array. It comes out of the pipeline of the refinery and gets put on a truck somewhere and it’s only paid there. So you’ve got less than 2000 entities filing all these tax returns for the federal gas taxes that bring in $34 billion a year. Two-thousand tax returns? I don’t know how many IRS people—maybe a dozen or so, maybe a couple dozen—could run that entire program and bring in $34 billion a year. How do you go from 2000 taxpayers to 150 million taxpayers if you have some kind of federal tax on cars or drivers? … The IRS administrative costs of taxing cars or motorists would be huge. Not just the technology side if you put (GPS-enabled) boxes in cars but even if you just do it on the honor system. … The whole point of having a user tax is that users pay for what they use and then you have to find a way to get people who don’t file federal income tax returns to somehow file returns for this. …”

Davis: “The most reasonable approach looking 20 or 30 years down the road if we’re going to keep doing user taxes on cars and motorists is to have the federal government piggyback on the state registration system or whatever systems the state wound up using. It’s an open question of whether the federal government has the constitutional authority to force states to go along with it. So the degree to which states would voluntarily cooperate someday with establishing this kind of system would give states a lot of leverage in the future.”

James Corless is the Director of Transportation for America (T4America), a Washington, D.C.-based alliance of elected, business and civic leaders from communities across the country, united to ensure that states and the federal government step up to invest in smart, homegrown, locally-driven transportation solutions. He’s a former senior planner for the Metropolitan Transportation Commission in the San Francisco Bay area.

On why T4America has shifted its focus from Washington to the rest of the country…

Corless: “We’re a pretty young organization—about six years and four of those were spent trying to get Congress to do something—kind of that once in a lifetime, once in a generation opportunity to rethink federal transportation policy and investment, which did not come to pass. The Congress passed MAP-21, which for the first time—at least as far as I can remember—there  was not a significant increase in funding back in 2012. And I think that really did set up … this aha moment for many states and local governments saying ‘Congress is not going to come to our rescue anymore. We might not even have a federal program if we’re not careful.’ And it’s been pretty remarkable to see what has happened in state legislatures since then. … I know we had about 10 to 12 states in the 2013 and 2014 sessions raise significant revenue for transportation. We’ve already had a number of states complete successful packages this year and many, many more looking. …”

On whether the federal uncertainty has been a factor in states taking action…

Corless: “I would say I think that is absolutely about what Congress did not do back in 2012, even though they passed a bill. Secondarily I think … our federal gas tax has been stuck at 18 cents a gallon. It’s the same for many of you in many states—not all the states. But it’s important to understand that many states in the last three years have really been playing catch up. It’s what the feds should have been doing and the states have done. They’ve basically been making up for the fact that many of you have fixed state gasoline taxes. And so as remarkable as it is to see so many states act on new revenue, this notion that there’s a windfall—and believe me, it’s being used here on the Hill and in Congress to say ‘hey look, states are fine. We don’t actually have to have a federal program because all the states are stepping up to the plate.’… We’ve looked at what states would have to do to make up for a loss of the federal program. It is not as simple as just simply to raise 18 cents a gallon at the state level. It’s actually much more. … So we need to be very cautious. This notion that you all doing great things in the states is a reason for Congress to sort of wipe its hands clean of any kind of notion that there should be federal investment is certainly something that we would disagree with.”

On whether gas tax increases have become a political third rail…

Corless: “This notion … that it’s a third rail to vote on (a gas tax increase), I think it is harder the further away you get from your constituents. … There’s a joke around here that if we had an anonymous vote tomorrow, we’d actually vote a gas tax increase through Congress. … I do think there’s a lot of support in principle and in concept for raising revenue but there’s a real fear there that you’re going to pay the political price. In state legislatures in 2013 and 2014, those states that made a very direct increase in revenue usually through a gas tax increase, sometimes switching to a sales tax or adding a sales tax on top of that gas, sometimes other creative approaches, 98 percent of legislators in both parties won their next primaries after taking those tough votes, (based on) our analysis. So I think this notion that it’s a death knell for your political career I just don’t think holds true. I do think it’s harder in Congress and I think it’s remarkable what the states are doing but it’s really simply playing catchup.”

On states leading the way in exploring mileage-based user fees…

Corless: “We don’t want the feds to sort of get out of this business altogether but we do want the states to lead and I think the next wave of this is going to be in mileage fees and in figuring out basically how we’re going to begin to tax (mileage). I don’t think we’ll actually have it as the primary source of funding transportation, but we’ve got Oregon leading as they did 100 years ago backing the gasoline tax. We have other states following. I know there are tons of concerns about privacy. There are rural concerns. But we’ve got to get to a point where we’re doing pilots. Even if different states have different mechanisms and ways of doing this perhaps that address privacy issues, that address rural residents and some equity between urban and rural. I think the states are going to have to lead because Congress is not going to innovate on a revenue source before a clear majority of states do something.”    

Emil Frankel is a Senior Fellow with the Eno Center for Transportation, a Visiting Scholar at the Bipartisan Policy Center (BPC) in Washington, DC, and an independent consultant on transportation policy and public management issues. In April, he was appointed by Connecticut Gov. Dannel Malloy to serve on the Governor’s Transportation Finance Panel. Previously, he served as BPC’s director of transportation policy, Assistant Secretary for Transportation Policy at the U.S. Department of Transportation from 2002 to 2005 and Commissioner of the Connecticut Department of Transportation from 1991 to 1995.

On the legacy of 2012’s MAP-21 surface transportation authorization legislation…

Frankel: “MAP-21 was disappointing in the sense (that it was) a confirmation of the stagnation of transportation spending at the federal level. But there were some small but very significant first steps on the reform side, particularly the introduction of performance measures, the mentioning of national goals—not with real teeth and enforceability, if you will, but nonetheless they’re there and I think those policy reforms for which T4America and James can take much credit are really very essential first steps in terms of developments in national policy.”

On what the future holds for federal transportation funding…

Frankel: “Funding is stagnant. That is the reality. At least in nominal terms, federal surface transportation funding is stagnant and in real terms declining almost certainly. I see no expectation that revenues are going to be increased. Congress has this gap … that continues to be filled by transfers from the General Fund, by patches and temporary extensions of the surface transportation programs—now MAP-21. We’re about to have another extension of MAP-21. If it in fact goes to the end of the year … almost certainly it will have to contain another patch or another transfer from the General Fund. … Congress is having trouble figuring out what the so-called pay-fors will be for this transfer of $10 billion or $11 billion to keep these programs going until the end of the calendar year. They’ll find a way. If you don’t know what pension smoothing is, that’s exactly what Congress wants. They will find some smoke-and-mirrors, opaque way of ‘paying for’ another transfer and I expect … that this temporary extension and this transfer will be followed by others. I see no expectation that there will be a substantial increase on the revenue side or an increase in the funding levels or any way of dealing with this persistent problem of underfunding the Highway Trust Fund through the balance of this Congress and the balance of the Obama Administration. I think the only way we are going to see something done in this area … is as part of a broader, grand bargain on fiscal and budget issues or, at minimum, comprehensive tax reform legislation. There’s no chance in my mind that this will happen in this Congress. Will it happen after the 2016 elections? I guess my answer to that is it will only happen after the next presidential and Congressional elections. But if you press me to say why I think it will happen after that, I can’t tell you. And I think there are a lot of complicated reasons for that that go beyond transportation. It’s not … for a lack of recognition of the need. It is really much, much broader changes in American policy, American politics, political campaign funding, gerrymandering, all the rest. All these broader issues I think complicate what had been an area of substantial bipartisan agreement and consensus. That is now largely, if not entirely but to some significant degree, broken down.”          

On the impacts of the federal funding pie not growing for the foreseeable future…

Frankel: “The pie is not going to grow at the federal level and there are two implications I think of that. One is … the burden is going to grow on states and localities. That’s inevitable. It is happening and some might describe it as incremental or crawling toward devolution. I’m not a devolutionist because I believe that there are clear national interests in surface transportation. But I do think one thing Congress can do, and hopefully MAP-21 creates the basis for beginning to do this, is to redefine what the national interest is in transportation. Because it’s different from what it was 50 or 60 years ago. We need to redefine what the national interest is and the national and federal purposes are and shape federal programs around that. And it’s likely to be narrower than it was in 1956 or certainly in the 1940s when the lines were drawn on the map for the interstate program. But inevitably I think and hopefully in a more coherent way, clearer way, more transparent way, the burdens will grow on states and localities because of the definition of what is or is not in the federal interest.”

Frankel: “Some projects will clearly fall out of the federal interest so there will be no federal funding available for (them). … I think about projects in the metropolitan region I know best, which is metropolitan New York City. There are projects in New York City—for example, replacing the Tappan Zee Bridge, which is a bridge that carries Interstate highways and the New York State Thruway over the Hudson River. This is entirely in New York State but it is a facility which is of unbelievable importance to the Northeast region of the United States. … Even the tunnel under the Hudson River for commuter rail between New Jersey and New York City, which was killed by (New Jersey) Gov. (Chris) Christie, is a project that has national significance. One-hundred percent? No. Eighty percent? No. One-third? Probably. It’s probably a mix of state, local, regional, and national interest. That’s the kind of thing we’re going to have to do.”

Frankel: “Finally … because the pie at the federal level is not going to grow, we need to make better decisions about the investments that we make at all levels—at the federal level, at the state level, at the regional or metropolitan and local levels. We can’t afford to fund everything. Not all projects are equal.”

Frankel: “Some projects are more important than other projects. Some projects can generate revenues. A major highway facility or new capacity should be approached on the basis of can it generate revenues to pay at least to a significant degree for its construction and maintenance. So we have to define what projects are most significant.”

On reforming transportation planning processes…

Frankel: “We have to introduce a much more comprehensive, strategic transportation planning and capital programming process—and that’s where you come in. Because we still have 450 MPOs (metropolitan planning organizations) in the United States, give or take. Probably we should only have 100 or 125 MPOs in the United States. Everything requires action at the state level, whether it’s by governors or legislatures or some combination of them to reduce the numbers. Actually (U.S. Transportation) Secretary (Anthony) Foxx yesterday was implying this. … He was talking about governance. He comes from North Carolina as you know, which is unbelievably fragmented. Charlotte I think itself has five MPOs. … He was the mayor of Charlotte of course before he became Secretary. We can’t afford to do that because we need to define planning and programming regions on the basis of economic realities and not be so project driven but look at programs. What is the synergistic effect of projects and operations? The only way this begins to work is two plus two has to equal five. And that again puts the burden on you. That’s a decision that the federal government can incentivize, can remove barriers, but ultimately it’s up to the states to design capital programming processes that will allow this kind of strategic decision-making to be made.”

Frankel: “James (Corless) before he came here was with probably what’s the best MPO in the country—the Metropolitan Transportation Commission from the Bay Area. 8.5 million people, one MPO. I know there are a lot of problems. It’s not perfect. But it’s sure better than my state of Connecticut, which has reduced from 13 to 9 MPOs. Little Connecticut. So they can make decisions on a broader geographic area and they can go through an analytical process. What are the projects? What programs bring the greatest economic benefits? We need to make decisions. Y’know, if I were commissioner of transportation in Connecticut today as opposed to 20-plus years ago, I would have to decide between—it isn’t simply do I build great new capacity over here or restore this bridge over there. Today, I may have two bridges, both of which have to be restored and rebuilt, and I’m not going to have enough money to do both. So I have to decide which bridge has more economic benefit and which is more important to do and that one I would replace and the other one I would make sure it doesn’t fall down. Those are the kinds of decisions, as you all know … and we need to have strong institutions that can make tough decisions about the allocation and investment of scarce resources.”    

On how much states will need to contribute to transportation spending in the future…

Frankel: “First of all, it varies from state to state. There are some states—Utah, particularly, and to some degree California where the federal funding is a smaller portion. California I think is like 25 percent. In Utah, it’s probably down in the lower teens. In my state of Connecticut, essentially the transportation capital program is entirely federal. The only thing the state puts up in terms of the capital program is to match.”

Davis: “(The American Road & Transportation Builders Association) had a map of the states that was actually in Janet (Kavinoky)’s testimony before Senate Commerce last week and I was struck by it because (it had) in each state, what percentage of the total highway capital comes from the federal government and Rhode Island was 102. And I actually called and said ‘how is that possible?’ Well, Rhode Island is in such bad shape they’ve actually issued GARVEE bonds to borrow against future federal payments.”

Frankel: “I think nationally federal money is still significant. It’s always going to be significant. I don’t think we should minimize that. It’s averaging something like 45 percent.”

Frankel: “I will say I hope the direction in which we move is we look at programs and press for and convince Congress that the federal share should be equivalent to what the national interest is in projects and programs. Frankly, my friends from Texas complain (that) … this is a gas tax and it should only be used for highways. It shouldn’t be used for building the 2nd Avenue Subway in New York City, where roughly 25 to 30 percent of that money is coming from the federal taxpayers. But I would argue that building a 25-foot culvert in northeastern Oklahoma doesn’t have much national interest and that may be getting 80 percent federal money. It’s obviously not the same scale. We really need to go to purposes and interests here and to press for appropriate federal funding of things in which there’s a national interest. And for the states or localities as the case may be, I think they’re going to have to belly up to the bar and assume that most or all that funding is going to come from them.”

Corless: “I think the question is what’s Z (if X is state funding and Y is federal funding). … Federal funds are not really going to grow significantly. We’re kind of all fighting just to make sure that the feds stay in the game and there’s lots of questions about what does that look like and do you raise the gas tax and what’s the federal interest. But for the states I would say ‘what’s your Z at the end of the day that you need’ and then take that and do a business plan. What does 80 percent of Z look like? What does 60 percent of Z look like? And I think the name of the game in my mind is it’s going to be a diverse source of revenues that we’re going to need in the future. As I mentioned, we’ve got to go to some sort of mileage fee but I don’t think that’s going to cut it alone. We have to figure out how to get some private dollars off the sidelines in all ways, shapes and forms and we’re going to have to think about things like leveraging loan programs. We’ve got the TIFIA loan program. … We haven’t talked about the railroad bill. There’s a (Passenger Rail Reform and Investment) bill coming to the Senate and we’re hoping actually to renew that in terms of loans. So I know that’s not sometimes great news for all of you because you’ve got to pay loans back, right? So you need sources of funding. But I would say we have lost in this country especially around rail and public transportation the actual private development side of the increment of the land use. We give tremendous value to transportation investments to land owners. We need to begin thinking about how do you recapture some of that and make people sort of pay into the overall system.”

On the causes of the dysfunction in DC…

Davis: “In my opinion part of this still goes back to the fact that once we built the interstate, we weren’t quite sure what to do. … Most of the interstate (system) was done by the early ‘80s. There were a bunch of big, mostly urban, high-expense chunks they had to go. But I graphed out for 50 years the percentage of the highway budget that went to building the interstate (system) and as it so trailed off, two things took its place to keep the total level and they were guarantees for donor states—the donor-donee fight—and earmarks. They were what filled that gap because as the interstates faded away over 20 years and the single compelling, unifying thing that let some states pay more than others and allowed some states to subsidize others for road construction, once that faded away (Congress) had trouble getting the votes to pass the bill so they had to bribe states by giving them either earmarks or straight-up cash transfer subsidies via donor-donee.”

Davis: “Today there are no formulas for highways anymore. It’s all 95 percent rate of return on the gas tax times whatever your share was in 2009. That’s all the bill says now. There’s no rhyme or reason to it other than getting 60 votes in the Senate and getting political leverage. So I think it was the fade out of the interstates and nothing compelling to explain to Texas why they should continue to transfer a couple of billion dollars a year from the fuel taxes they pay to the northeastern states or the low population, high area Great Plains states. And now that we’ve run the trust fund out of money, it’s even harder to go back. Now there are no true donor states anymore. The only donor state is the People’s Republic of China from which we borrow the money that fills the gap in the trust fund. That’s the only donor state is the PRC. But it was the fade out of the interstate (system) that really caused this, I think, and we still have no compelling vision of some great national thing to explain why we should pay $50 billion a year that involves extensive cross-state subsidization from the revenue source.”

Corless: “It’s easy to get depressed if you’re inside the Beltway. That’s why I try to get out of Washington as much as possible. Having said that though, let me try to put a finer point on this because this is really, really important. There are two sides of this debate right now on infrastructure spending in DC as I see it. One is, which I think has the majority, it just doesn’t have the political heft to actually come up with the money—it’s a money and a politics question—that there is a federal role and we need to do something about it. We haven’t broken that ceiling but I tell you the fact that MAP-21 was done in an election year back in 2012 shows you there’s some juice left in this still.”

Corless: “But the other side of it is (the argument) that there is no federal role and that is a bill that gets introduced in Congress every year and it gets more and more co-sponsors. So there are two paths here that are diverging. It is absolutely essential and I’ll tell you I think we tend to rely too much—we even hear this from the Hill—on the folks that are actually making the money on federal transportation spending—all good people, the contractors … We need local people. I agree with Jeff. We have no national vision, but unfortunately there are still not a lot of members of Congress that are going to get really excited about a national vision for transportation as much as we wish they would. What they will get excited about is their local business, their local CEO, their local Chamber of Commerce, local projects that are federally funded that they can see a value in. That local voice is absolutely critical.”

Corless: “I am actually a glass half full kind of optimist person. That is separate from a reality, which I wish were different, that we are not going to grow the federal share of this program any time soon. Success is going to be to maintain a federal role and to grow it by inflation if we’re lucky. And to have a program that’s more performance-based and has a sense of purpose and we can actually point to true quantitative outcomes. That is success in the short term and I think we will continue this fight and in five years we will see where we stand in terms of winning the debate on a federal role. But I think don’t take the reality of the situation from us saying the states are going to have to do more. ... That’s different from we’re in a big fight, we really need your help and we actually think we’re making the case we need to just break through in terms of actually getting something done and getting the politics right.”

On the federal role and a national vision for transportation…

Frankel: “There is a federal role. … But it’s a changing federal role. I’m not entirely happy, quite frankly, with what’s going on this week during Infrastructure Week because there seems to be so much (about) we need a gas tax increase, we need to have more revenues. I think the burden remains—and we tried to do it in my work at the Bipartisan Policy Center, James at T4America—I’m not sure we’ve yet accomplished this important task of defining clearly what the national vision is. It sounds a little ethereal but it’s really critical because the American people and Congress are not going to support revenues over the long haul to maintain this unless we can do a better job in terms of defining it.”

On moving away from an entirely user fee-funded transportation program…

Frankel: “The other thing I want to say is policy—and this is a heck of a thing to say to legislators but you’ll perhaps agree with me when I say this—policy is more often than not made by inaction as it is by action. Policy is being made about federal transportation funding over the last several years and in fact we are moving away from an entirely user-based and funded system. Today…the Highway Trust Fund has come through a series of emergency measures and extensions and temporary patches and all the rest. The reality is that 25 to 30 percent of the revenues that flow into the Highway Trust Fund today are general funds. That’s about to go up again. My prediction is we’ll get probably to something like 40 percent of this. So it’s a mixed fund. Congress has decided through its inaction or its temporary actions… (that) it wants transportation funding at the federal level to continue, to remain at current levels, and to come from mixed sources. That I believe will go on indefinitely until that magic day when there’s a comprehensive tax reform bill or a grand bargain about budget issues.”

Frankel: “I think we need to look at what the implications of that are and, as I said, to go back to this thing of we need to keep pressing for a more performance-driven or goal-oriented visionary national program, in which the funding is built around specific national purposes. My ideas might differ from somebody from Arkansas or Iowa or Idaho but we need to come together about that. The Highway Trust Fund and the Interstate Highway System did not emerge in 1956 from the head of Dwight Eisenhower—a great American, whom I worship—but it didn’t just happen. FDR was the one who drew the lines on the map and in fact it goes back at a minimum to the 1930s and certainly the 1940s. There was a long gestation period for the Interstate Highway System and before we reached agreement about how to finance it. We’re struggling through that. We need to press forward, as James has said, to continue to fight the battle, what this national vision is, make sure it’s adequately funded and what the implications are of having mixed funding because I think that’s what it’s going to be, at least for a long time.”      

Frankel: “There are a lot of things that are going to be involved when we get to the day of more responsible fiscal policy. It may not be a balanced budget every year but a more responsible fiscal policy, which goes well beyond transportation obviously. They deal, unfortunately, with all due respect to Grover Norquist, with revenue enhancements as well as entitlement reforms. Everybody knows that. … Transportation will be maybe only the tail on the dog at that point but that’s the kind of environment when Congress is ready to grapple with those things that I think we’ll see some resolution of some of these funding issues in transportation.”

Frankel: “But there is a need for a national program. There is a national vision. We haven’t defined it as well as we need to. … The (Brent Spent Bridge) in Cincinnati between Kentucky and Ohio. If the federal government opts out of this stuff, how is that going to be built? A commuter rail tunnel between New Jersey and New York. We have clear national interests. We have multi-jurisdictional questions. There’s a reason that this program and its predecessors were created going back to the beginning of the republic. Read Alexander Hamilton’s great work on manufacturing, which begins to talk about a national transportation and infrastructure system. Not quite using those words. That’s always going to remain. We have to define it in so many different ways today. Make it more accountable, more performance driven but that’s going to remain and that’s going to continue to be what we need to bend our efforts to.”

On the impact of technology on transportation…

Corless: “The changes in technology are fascinating as they unfold. We have this big debate right now … (about) transportation network companies, also known as Uber. … That actual debate—kind of like the driverless car debate, which … you kind of think is either going to save the world or it’s the latest ‘Big Brother will track everywhere you’re going’—actually masks some really important, major changes in transportation. … I don’t think the answer is to basically over-regulate folks like Uber and Lyft and these new network companies to the point where they go away. I also don’t think the answer is to just kind of say ‘well, hands off, we’re just going to let it happen.’ … We think about public transportation and we think the big cities but we’re going to have more and more seniors aging in exurban and rural areas who are going to need transportation. Autonomous vehicles … could be part of that solution. … If you look at the budgets of most public transportation agencies—and not just the big cities like Boston, but some of the smaller ones—medical transportation, senior transportation is huge and it’s growing partly because of the federal (Americans with Disabilities Act). I guarantee you that a company like Uber or Lyft or whatever’s next—because I don’t know that Uber is going to be here in five years—can provide some of those trips not just in cities but in rural areas at a fraction of the cost. In five or 10 years they may be driverless. … But I think the role of government actually is to understand those gaps where they exist and to think about how we might provide subsidies to basically get senior citizens to dialysis appointments on time at one-tenth of the cost of what we are currently paying. And nobody is actually thinking about these new technology companies in that way. We’re thinking about it as this big war between Uber and taxis and that’s a distraction.”

On the implications of a substantially General Fund-ed Highway Trust Fund…

Frankel: “The donor-donee argument should be over. … Every state today, even Texas, which still claims it’s a donor state and wants to collect more than its appropriate share of federal transportation funds … is a donee state. In fact, transportation projects in Texas are being subsidized by income tax payers in my state of Connecticut. So the donor-donee argument should be finished, should be over. That’s one implication of a substantially generally funded Highway Trust Fund. The other I think breaks down the modal silos that we’ve had. The secretary (of transportation) and the president have talked about—as a matter of fact the president’s proposal GROW AMERICA talks about not a Highway Trust Fund but a surface transportation fund. And there’s something to be said for that when 25, 30, 35 or 40 percent of it is coming from general funds and not from highway users alone—people who use gasoline. I think those are clear and immediate implications of the policy Congress has adopted accidentally and unconsciously. … My state of Connecticut has had a consolidated transportation fund for many years, going back to the 1980s. I think that is something that hopefully can break down these modal barriers as well.”

Frankel: “I’m sort of a believer … in user-based funding—those who benefit should pay. Although, the benefits of a transportation system sometimes go beyond the people who are actually driving on the highway, right? I mean the trucks are bringing food to grocery stores and that kind of stuff. … But … Congress has decided the issue. They don’t really care. They’ve decided it should not be totally a user-based system, even though a lot of people still argue that it should be.”

Davis: “But they’re doing it in a way that is basically cheating and it causes problems. There’s a difference between making a conscious decision to have part of your system paid for by user taxes and part of your system paid for by general revenues. That’s fine. Most states do that and it’s fine if the federal government does that moving forward. The problem is what the federal government’s been doing is depositing General Fund money on an ad hoc basis in with the user taxes in a trust fund so that they become fungible. The problem is when the 20 percent of the money coming from the General Fund on a one-time basis is funged with the rest of it, that means when the General Fund money runs out, the whole system crashes. Even though we’re bringing in $40 billion into the trust fund in user taxes, as long as you’re running at the higher level, every time the General Fund bailout runs out, the whole system crashes and every state has to get in line for weeks and months to get paid back.”

Davis: “If you actually had two separate funds—a trust fund just for the user taxes paying for part of the program and a separate mechanism for the General Fund money, then you can do what my plan is: You should raise the gas tax. If you can’t and you can’t raise user taxes, then cut the amount of money out of the Highway Trust Fund from $51 billion down to $40 billion and make that permanent. You could give out that money 10 years in advance if you needed to, once you pay off some old stuff. You could have long-term guaranteed money out of the $40 billion and (for) the extra $11 billion or $12 billion a year, you’d have Congress every couple of years appropriate that money through the normal process. … Would states rather have 10 years of certainty for the $40 billion and then reasonable hopes of getting most of another $10 billion or $11 billion every year on a less regular basis or would you rather have a $51 billion program that crashes to a halt every 18 months to two years because the revenue streams are mixed? That’s the fundamental issue I think.”

Davis: “If you can put it on a rational process going forward with separate streams and separate accounting, it’s not necessarily a problem. You can say ‘okay, the interstate is 100 percent paid for out of the user taxes, national highways are paid for out of user taxes, maybe (the Congestion Mitigation and Air Quality Improvement Program) should be half user taxes, half General Fund,’ I don’t know. There are ways you can do it and set up moving forward to make sense. But continuing to fund the General Fund money into the user taxes so the whole system crashes whenever you run out makes no sense at all.”   

Further Reading

The 2015 CSG Transportation Policy Academy was made possible through the support of the American Society of Civil Engineers, Nissan and UPS.            

PowerPoint presentation by Jeff Davis124.24 KB