How Transportation Funding Fails to Work the Way Anyone Intended

This article was originally published by Mobility Lab, with my co-author Howard Jennings.

This is the first of a two-part Mobility Lab series. Part 1 looks at the big-picture history of transportation funding in the United States. Part 2 will examine ways we can fund transportation in a future of flat federal funding.

OPTIONS OPPORTUNITIES

Even with a bleak outlook for federal funding, state and local leaders can use historical arguments to change the mindset towards transportation projects.

As the Senate and House are finalizing touches on the first new transportation authorization bill in more than 10 years, everyone agrees there are major problems with our transportation systems in the U.S. But nobody agrees on how to fund the necessary improvements.

The new six-year bill will provide some welcome certainty, but it is not expected to provide adequate funding to meet the needs for new capacity in any modes, and there will likely be few incentives for innovation.

The bottom line is that we must improve transportation as a path to better health, better places to live, a more robust economy, and ease of personal mobility. In reaching these goals, however, it seems clear that states and localities will have to be inventive in finding funding sources to supplement what will be available from the federal government.

A majority of the interstate highway system is well beyond its 50-year design life-span. And even the new authorization bill, with no real increase in funding, will not come close to covering the need for maintenance and replacement of crumbling roads, bridges and transit systems.

In fact, it is fair to say that the U.S. transportation system has been in a state of crisis since at least 2008, when Congress had to begin transferring funds from the General Fund to the Transportation Trust Fund just to meet operating obligations. Plus, funding has been authorized on a year-to-year – or sometimes month-to-month – basis since the last long-term authorization law, SAFETEA-LU, expired in 2009. Disagreement over how to fund transportation and at what level have stymied Congress ever since.

The 18.4-cents-per-gallon federal gas tax was first devoted entirely to transportation by creating the Highway Trust Fund in 1956 to fund the interstate highway system. In 1982, the Mass Transit Fund was created within the Highway Trust Fund. There were gas-tax increases by presidents Ronald Reagan, George H.W. Bush, and Bill Clinton, but the tax has not kept pace with inflation since 2005, and the revenue it brings in isn’t enough to cover current highway and transit needs, let along provide expansion.

Since 2000, the balance in the Highway Trust Fund has declined dramatically and since 2008, both the Highway and Mass Transit funds have been within a month of running out of funds numerous times, according to the Congressional Budget Office. Congress has responded in an ad-hoc manner year after year, authorizing transfers from the General Fund as stop gap measures. In all, Congress has authorized a total of $65 billion in transfers from the General Fund since 2008, and the CBO estimates the average annual shortfall to be on the order of $15 billion per year at least through 2020.

Voters in various surveys support a gas tax hike, but California voters recently opposed one, reflecting the fact that the tax is tough for politicians and a conflicted public to deal with. Moreover, the gas tax is not a viable long-term solution because it will produce less and less net revenue in the coming years.

States also tend to use a tax on gasoline to support highway and transit projects, supplemented by revenues from tolls sales taxes, other local taxes, and general local and state revenues. Their sources are typically not keeping pace with inflation or overall needs either.

So where should more reliable funds come from? Growing congestion, lessening mobility, slower goods movement, and higher citizen frustration are going to be in our future unless we figure out better approaches.

There is nearly unanimous agreement that the gas tax has basic structural problems as a long-term revenue source. Vehicles today are getting better and better gas mileage, and the total mileage that Americans drive is no longer rapidly increasing as it once did. So the tax produces less and less revenue each year relative to the need. But no other funding mechanism has emerged to take its place.

A variety of other sources of funding have been debated for years, including tolling, Joan Lowy of the Associated Press put it well recently:

To help fund new construction, the Obama administration has proposed letting states toll federal interstates. That’s been prohibited since the interstate system was launched in 1956, except for a few exceptions, including highways that already had tolls. Congress would have to approve the change.

One way to make existing highways more efficient is “high occupancy toll” (or HOT) lanes. The idea often involves converting carpool lanes that may be relatively car free into lanes that solo drivers can pay to use. Carpoolers typically travel for free. Hundreds of miles of toll lanes already are operating in or around Los Angeles, Houston, Atlanta, Salt Lake City, Miami, Washington, D.C., and other cities.

We’ve gotten to this point because most of our transportation system and land-development patterns make us dependent on the car. Even in places where we do have other options, most of us simply don’t consider how else we could travel and haven’t researched our transportation options, which leaves us chained to our cars.

The irony of all this is that roads were federally funded in the first place because a bunch of lawyers wanted to be able to ride their bikes on them. In 1880, the League of American Wheelmen, led by a Civil War veteran and leading bicycle manufacturer, requested that roads fall under a federal mandate, which was pushed through as the National Highway Act in 1896 and later provided a means for getting cars on the roads by the burgeoning auto industry.

Meanwhile, transportation should truly be one of those issues that is non-partisan. Reagan, the Republican standard bearer, raised taxes during a recession to fund increased infrastructure investment. As former Transportation Secretary Ray LaHood, himself a Republican, said at a Mobility Lab forum, “There are no Republican roads or Democratic bridges.” And Arizona’s former Democratic Representative Stewart Udall once noted that “a rational transportation policy should seek a balance between individual convenience, the efficient use of limited resources, and urban-living values that protect spaciousness, natural beauty, and human-scale mobility.”

Despite all those warm words, the new authorization law will be keeping the gas tax as the only politically feasible funding mechanism for now. And what do we do in the face of all these shortfalls and limitations?

The exciting thing about the times we live in today is that there are lower-cost solutions like:

• improving bicycle and pedestrian infrastructure
• an on-demand economy that has opportunities to improve traffic flow
• automated vehicles that also might do the same
• an uptick in private-funding possibilities, and
• a growing focus on user-based road fees to help hobbling public investment.

And fortunately, we – Republicans, Democrats, and everyone else – can still all agree that sitting in bumper-to-bumper traffic is something worth fixing.

Part 2 of this series will examine some of the alternative and innovative transportation solutions that are being employed and that local leaders can use to supplement traditional projects and funding sources. 

Photo: Tops, rush hour traffic on LA’s 101 freeway (Eric Demarqc, Flickr, Creative Commons). Bottom, HOT lanes on a state road in Washington (Washington State DOT, Flickr, Creative Commons).