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Transportation funding, running on empty

Updated: Jun 6, 2020

Reform of financing highway improvements is necessary for the success of our nation’s infrastructure.

Is the federal highway funding system about to go broke? According to the U.S. Department of Transportation, the Highway Account of the Highway Trust Fund will “encounter a shortfall before the end of fiscal year (FY) 2014.”

That has spurred several recent news articles (see here and here, for example) asking whether the U.S. should fundamentally change the way it finances highway improvements.  In a recent New York Times opinion piece, Joshua Schank of the non-partisan Eno Center for Transportation notes:

“[U]nless we reform the way we pay for transportation improvements, we will keep lurching from funding crisis to funding crisis, with our roads getting worse by the year. The only solution is to supplement the [highway] tax with dedicated federal funding — which would not only solve the money problem, but open the door to long-dreamed-of innovations in our transportation system.”

Chris Ingraham at The Washington Post’s Wonkblog is even more direct, saying that “the federal gas tax is about 20 years behind the times [and the] economically sensible fix would be to index the gas tax to inflation.”

With the highway trust fund soon to go underwater, there is no doubt that a fix is urgently needed.  Current Congressional proposals that include one-time corporate tax receipts aren’t sustainable.

Neither is the idea of abolishing the dedicated Highway Trust Fund in favor of annual appropriations for the general fund. A viable highway and mass transit funding program needs a smooth and predictable revenue stream, not the “one foot on the accelerator, one foot on the brake” whiplash that such a system would bring.

Another option, indexing the gas tax, ignores that evolving vehicle technology is making the gas tax less relevant as highway use and highway user fees become less connected for owners of electric vehicles and other new technologies.

Another approach, partnerships between public agencies and private companies address limited situations where tolls can be realistically collected, but will not help in maintaining and improving most of our nation’s 3 million miles of roads.

The truth is that we will either pay for adequate highways with our wallets or pay with our time, frustration, and drag on the economy for a transportation system that becomes increasingly more unreliable and could spiral downward to third world conditions.

The financing and implementation of the Interstate Highway System was a U.S. success story that was right for its time.  A new approach is needed now that is widely viewed as being fair and understandable to users (and isn’t overly intrusive to privacy), provides predictable funding for transportation agencies, and makes sense given upcoming demographic and technological changes.

The logical choice is a set of user fees that combine the following features:

  1. Reliable collection of use data that protects the users’ privacy,

  2. Higher rates for heavy vehicles (a fully loaded semi does as much pavement damage as 10,000 passenger cars),

  3. Peak pricing for travel during times of high demand, and

  4. Appropriate financial incentives for travel that has a smaller environmental footprint.

A phase-in process would make sense to ease the change and allow the public to understand and become comfortable with the new system.

Politics is usually about winners and losers. We need to understand that we will all be losers if we don’t come up with a fix soon.

Fred Skaer Senior Advisor

A senior advisor at Dawson & Associates, Fred spent 34 years with the Federal Highway Administration, during which time he served as Director of FHWA’s Office of Project Development and Environmental Review.


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