Transportation Policy Academy Highlights Federal Uncertainty, State Innovation

Congress’ decision this summer to once again tap general funds to temporarily patch up the dwindling federal Highway Trust Fund loomed large over discussions at the 2014 CSG Transportation Policy Academy, held Sept. 15-17 in Washington, D.C. But the nine state legislators who attended the event also heard about plenty of innovation going on in states and communities around the country.

Policy Academy attendees following the meeting at U.S. Department of Transportation, September 17, 2014. Pictured L to R: Rep. Diane Lanpher (VT), Sen. Ernie Harris (KY), Rep. Bill Brawley (NC), Rep. Jay Roberts (GA), Rep. Patricia Higgins (NH), Sen. Mike Vehle (SD) and Sen. Curtis King (WA). Also attending the policy academy but not pictured were Rep. Ryan Yamane (HI) and Sen. Jim Smith (NE).

“Congress did give us a bit of breathing room (but) it’s going to run out really quickly,” Carlos Monje, Counselor to U.S. Transportation Secretary Anthony Foxx, told participants during a meeting at the U.S. Department of Transportation on September 17 at the conclusion of the policy academy. “We need to get Congress to do what it always has done, which is to pass a bipartisan bill and try to do it as quickly as possible.”

The latest trust fund patch and extension of 2012’s MAP-21 surface transportation authorization bill just until May of 2015 had many of the state legislators in attendance concerned about continuing uncertainty of the federal program.

“We need a long-term bill,” said South Dakota Senator Mike Vehle, who this summer is chairing a special committee on highway needs and financing in his state.  “These extensions are tough on everyone for planning.”

Vermont Rep. Diane Lanpher agreed.

“We’re all going to be holding our breath when we go to budget in January,” she said. “We have to pass our budget by May and (then) the construction season (begins).”

Joung Lee of the American Association of State Highway and Transportation Officials called the funding uncertainty “a chronic problem” during a policy academy roundtable discussion.

“We’re spending essentially $17 billion more out of the Highway Trust Fund than what it takes in from fuel taxes and truck fees and the like on average each year,” he said.

Congress is unable to address the underlying problem for the long term because they can’t decide between two difficult political choices, said Joshua Schank, president and CEO of the Eno Center for Transportation, a Washington, D.C. think tank.

“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,” he said. “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.”

Potential Solutions

The Eno Center for Transportation is preparing a report that will recommend alternative approaches to fund the nation’s transportation system.

“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,” he said.

“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.  

“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.”

Another option, albeit a potentially politically challenging one, Schank said, would be a national sales tax. He argued it makes some sense to divorce transportation from the gas tax, a revenue source in decline, and to recognize that a user fee-based system is no longer a reality in this country or even necessarily a worthy goal.

“The benefits of transportation are economic, they’re environmental, they’re safety,” he said. “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.

“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.”

Others, like Emily Goff of the Heritage Foundation, a conservative Washington, D.C. think tank, believe Congress should move the federal transportation program back to its roots.

“I think one thing we learned in this most recent federal highway and transit bill fight is that the federal highway and transit programs don’t have a single guiding purpose anymore,” she said. “That’s why you didn’t have a six-year, long-term bill. That’s why you didn’t have any policy changes. That’s why you had yet another patch, another general fund bailout of the trust fund. You weren’t able to get a gas tax increase or any other new revenue.”

Goff believes the lack of a guiding purpose for the program has led to a poor use of resources at the federal level and has hamstrung state and local officials on how they can spend their allotment of federal dollars resulting in an inefficient, wasteful system that fails to meet the nation’s transportation needs.

“My near term solution is before we talk about more money at the federal level, let’s clean up the mess that is the highway and transit program,” Goff said. “It should be … returned to its original purpose, which is to fund roads and bridges that are benefitting the motorists who are (paying for them). … But transit, bicycle paths, nature trails, flower plantings, Main Street revitalization … are best done at the state and local level on a regional basis or individually and with the private sector as well when it makes sense.”

The Heritage Foundation’s lobbying arm, Heritage Action, was a supporter of federal legislation introduced by U.S. Sen. Mike Lee of Utah and Rep. Tom Graves of Georgia that would, over a period of five years, reduce the federal fuels tax, narrow the scope of the federal transportation program, and give states much of the responsibility for transportation funding and decision making. When introduced as an amendment to the Highway Trust Fund patch last month, the measure garnered 28 “yes” votes. With some polls showing the November election could swing the Senate to Republican control, some are concerned about what it might mean for states if this so-called “devolution” approach wins additional support next year.

“We need to understand that taking away the federal Highway Trust Fund idea is not going to work for rural America,” said Vehle, the South Dakota Senator. “Because (in South Dakota) we’re not going to be able to tax our people in order to pay for (the roads). … Just compare South Dakota and Florida. … Florida has … about 18 and a half million people to pay for their roads. We’ve got 850,000 and that’s sometimes counting dogs, cats and mice.”

Other policy academy speakers argued the federal interest in transportation should be about more than roads.

“We would never say the federal interest is in a piece of transportation equipment,” said Sarah Kline of Transportation for America, a coalition of local officials that advocates for transportation concerns. “It’s in an outcome. It’s in a stronger economy or it’s in a cleaner environment or it’s in a safer community for people to live in. These are the types of goals that I think we are looking at in terms of trying to develop a federal transportation program and helping state and local folks also work towards these outcomes.”

Kevin DeGood of the Center for American Progress, a D.C.-based advocacy organization founded by a former Clinton Administration official, said changing demographics and other factors show policymakers are asking for the wrong thing.

“You shouldn’t be asking for roads,” he said. “You should be figuring out ways to provide people options not to drive. We need better land use and we need to support that better land use with roads that are safe for pedestrians and have lots of public transportation and for our longer trips, we need to have intercity passenger rail.”      

DC Benefits from Transportation Choice

The policy academy’s opening night speaker told legislators transportation options have allowed the D.C. region to thrive in recent years, even the nation struggled to recover from a crippling recession. Successful car and bike sharing programs and a yet-to-open streetcar line are among the more recent additions to the D.C. transportation landscape. Harriet Tregoning of the U.S. Department of Housing and Urban Development has served as both D.C. Planning Director and Maryland Secretary of Smart Growth.

“What’s so amazing is at this point, more than 81 percent of households in the District are what I would call “car-lite”—one or fewer automobiles,” Tregoning said. “Almost 39 percent (are) utterly car-free. … Because of the transportation choices, (people are) attracted to be here.  

“The Washington region is the most highly educated region of the country and the people that are moving to the District—1,100 people a month by last count… are much more highly educated than our regional average. It used to be that people followed jobs. Now jobs follow the talent, so all kinds of companies that had never been in the District or were never interested in the District, are flocking to the city.”

Some of those companies include technology startups that are helping to expand the transportation choice landscape even more, Tregoning said.

“Biking wouldn’t work if we didn’t also have transit,” she said. “Streetcar wouldn’t work if we didn’t have transit for the longer trips. We almost can’t have enough density of choices and people really thrill to it. Our citizens are so into transportation and new apps and new technology that dozens of startups have come here to start up because they know that people will kick the tires and give them really brutally honest feedback but it also means we’re going to have more of that transportation innovation here than maybe anywhere else. So it’s kind of a virtuous cycle.”

Tregoning recalled a period about a dozen years ago when the District’s economy seemed moribund and little development of any kind was happening. Two-thirds of the people who worked in the District lived elsewhere.

“When people started to come back and come back largely because of these transportation choices that are so dense here, amazing things happened to our revenue picture,” she said. “Our entire streetcar system we’re funding out of general revenue. We have universal pre-Kindergarten for three- and four-year-olds. Free all-day daycare for everybody—not means tested—out of general revenue. I mean we’re paying for everything out of general revenue because the people that are moving here … for the new people, two-thirds of the people who work here at the new jobs do live here. So it’s entirely changed our revenue picture.”

State Transportation Funding Activities

Even as the federal inaction on transportation continues, a number of states have moved forward over the last couple of years to address their transportation needs, other policy academy presenters noted. Other states, including some represented among the policy academy attendees, could be poised to do the same in 2015. But legislators from states that have already tackled the issue said they continue to see the need for a strong federal partner.

“I have reminded federal people right to their face that the fact that Vermont raised (its gas tax in 2013) had nothing to do with covering (the gap) and giving them cover,” said Lanpher, the Vermont Representative. “It was about being able to raise what we needed to and be responsible at the state level, not to cover them. And that they need to come to the table to do what they need to do on their level. I didn’t want them thinking ‘oh great, they did this” that relieved them from their responsibility because it does not.”

Public-Private Partnerships

Increased revenues aren’t the only way states are addressing transportation challenges.

One key focus of the policy academy was public-private partnerships—known as P3s—in transportation.

Lawmakers had the opportunity to see and hear about P3 projects in the capital region including now operational express toll lanes on the Capital Beltway in Virginia, soon-to-open express lanes on I-95, and a proposed light rail transit project in Maryland.

“Virginia and other states are well ahead of where Kentucky (is) and I’m learning stuff to take back,” said one of the policy academy attendees, Sen. Ernie Harris, who chairs the state’s Senate Transportation Committee. “It’s a new environment in transportation. It’s been tried and we know the failures that have been publicized but we’re learning of the successes.”

The news about one notable recent failure was just coming to light during the week of the policy academy. The private company running the Indiana Toll Road, one of the nation’s first transportation P3s, recently announced its intentions to transfer operations to a new entity as part of a bankruptcy filing.

But even states that have had greater success with P3s are continuing to evolve.

Douglas Koelemay, who leads Virginia’s dedicated office for P3s, told attendees the state is currently reviewing its manual of guidelines for P3 projects to make transparency a key goal throughout the process and to enhance competition.

The federal government also is working to help facilitate more public-private partnerships around the country, speakers noted.

The U.S. Transportation and Treasury departments recently set up a center to provide assistance in that area and members of the U.S. House Transportation & Infrastructure Committee’s special panel on P3s last week issued their final report and recommendations on how to balance the needs of the public and private sectors when undertaking P3s.

The Road Ahead

Policy academy speakers and attendees alike said there is a need to invest in the nation’s infrastructure at all levels of government and the time to do it is now.

“When we invest and projects move forward, we see results,” said Brian Pallasch of the American Society of Civil Engineers, one of the sponsors of the policy academy. “It’s about picking the right projects, it’s about going forward and investing and making that commitment to improve the infrastructure (and) to improve the economy. … We need to stop thinking that we can spend 1993 dollars and fix 2014 problems.”

For Vehle, the South Dakota Senator, it comes down to what we want to leave for the next generations.

“I happen to be a Republican but to the ones that are further to the right than me … I always say we always complain about D.C. not paying for what they’re doing,” he said. “I don’t care whether it’s Social Security or Medicare or whatever. I say okay, is that what we’re going to do with transportation? Are we going to use it all up and just leave it to our kids and grandkids to fix it up or are we going to pay for what we use? And I’ve got a lot of them going ‘oh, darn, he’s right.’”

Portions of this article also appeared in the September 25, 2014 edition of the Capitol Ideas E-Newsletter.