Transportation Professionals Ponder Future Transportation Financing

E-newsletter Issue #107 | January 31, 2013

MAP-21, the long-awaited, two-year federal surface transportation authorization bill passed by Congress last summer, included many key policy changes long sought by state governments that are now being implemented. 

But for transportation professionals who gathered in Washington, D.C., in mid-January for the Transportation Research Board’s annual meeting, the bill’s shortcomings, especially in the fiscal arena, and impending fiscal cliffs in the months and years ahead drove much of the dialogue at the five-day conference.

“I think all of us wanted MAP-21 to be this big, great, multiple year bill,” said Sylvia Garcia, deputy assistant secretary for management and budget and chief financial officer at the U.S. Department of Transportation. “But in the end, the MAP-21 timeframe is based on how much money there was to go around.”

In MAP-21, Congress had to shore up the Highway Trust Fund with general fund dollars just to reach October 2014, when the bill expires. The trust fund covers many federal transportation programs but has seen dwindling gas tax revenues in recent years due to increased fuel efficiency and other factors. 

“At the end of two years, we’ll have our own version of the fiscal cliff,” said Jack Basso, director of program finance and management at the American Association of State Highway and Transportation Officials, commonly called AASHTO. 

Unless Congress takes action, the Highway Trust Fund would become insolvent, annual federal highway investment would be cut from $41 billion to $6 billion and annual transit investment would be cut from $11 billion to $3 billion.

Basso’s colleague at AASHTO, John Horsley, who retires this month after 14 years as executive director of the organization, offered some ideas on what could be done to avert the cliff. 

Horsley called on Congress to pass legislation proposed by U.S. Sens. Ron Wyden, D-Ore., and John Hoeven, R-N.D., which would authorize a $50 billion Transportation Regional Infrastructure Project—or TRIP—bond program. Under that program, each state would receive $1 billion over six years to be invested in transportation. Horsley also said Congress should convert the cents per gallon gas tax to a sales tax on fuels. The fuel tax change would support $350 billion in spending on highways and transit over the next six years, Horsley said.

“Fully supporting the (federal) program through highway user fees, rather than through (general fund) transfers from the U.S. Treasury, would reduce the federal deficit by $150 billion over 10 years,” Horsley said. “The cost of the reform to taxpayers would be less than $1 per week, per vehicle.”

Horsley’s proposal came just days after Virginia Gov. Bob McDonnell surprised some by proposing eliminating his state’s gas tax and funding transportation through an increase in the state sales tax, increased vehicle registration fees and new fees on alternative fuel vehicles.

The proposals got a somewhat mixed reception from other experts at the conference.

Peter Rogoff of the Federal Transit Administration said sales taxes wouldn’t necessarily provide a more stable funding source for transportation. 

“In transit land, sales taxes rise and fall with sufficient amplitudes here that it makes or breaks projects,” he said. “I have had to slow projects down for fear that local sales taxes were not coming in as quickly as envisioned. … Just because it’s a sales tax, doesn’t mean that it’s stable. It’s going to rise and fall with the economy.”

Jim Barna of the Ohio Department of Transportation commended McDonnell on his proposal. 
“States aren’t waiting around anymore,” he said. “We’ve grown up quite a bit since the federal Highway Trust Fund was enacted years ago and the states are taking it on their own to seek out innovative financing to fund our transportation programs.”

But Joshua Schank of the Eno Center for Transportation, a Washington, D.C., transportation policy think tank, said the Virginia proposal is one that reflects a lack of federal leadership and guidance to states on how they should be working to fund transportation going forward.

“How you pay for transportation has a major impact on use and on the system and on how much you spend,” he said. “Because of the federal (investment) stagnating and declining, states and locals are being forced to fill in some of the gap. The question is: How can the federal government change from what has basically been since the Interstate era a grant-making organization … into something that’s actually incentivizing state and local revenue sources?”

Despite an October 2014 deadline that doesn’t seem very far off, the fact that it isn’t here quite yet means a commitment to any fiscal solution may still be a ways off.

“In Washington, things get solved in a crisis atmosphere, unfortunately,” said Polly Trottenberg, undersecretary for policy at U.S. DOT. “I think there are a lot of good ideas out there about how we might come up with some new revenue sources. But we’re going to need a little collective will to do that and I think that collective will hasn’t yet gelled.”

On the CSG Knowledge Center, you can read additional comments from experts at the Transportation Research Board meeting. Among the topics they addressed: how federal restrictions on tolling might need to change to allow states to meet their infrastructure needs; why cuts to federal transportation programs could be on the way even sooner than 2014; and why some think MAP-21’s legacy will likely be determined not by its fiscal shortcomings but by its provisions to implement a performance measurement-based system, accelerate transportation project delivery and expand a program that could allow the nation to tackle some iconic transportation projects.  

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