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Federal Funding: Don’t Read This, It Is Too Depressing

Posted by Larry Ehl on Friday, May 3rd, 2013

Transportation Issues Daily

We know federal transportation funding is in bad shape. But the updated numbers from CBO are just downright depressing. The numbers were provided by the Congressional Budget Office during last week’s House Budget Committee.

Thanks to a declining revenues and previously-approved spending obligations, the Highway Trust Fund will go “broke” in early 2015. To prevent that, Congress will have to cut transportation spending by 92%, raise the gas tax by more than 50% (10 cents added to the current 18 cents), continue transferring about $14 billion annually from the general fund, or some combination of those actions.

Continued transfers from the general fund will be difficult, with Members facing increasing pressure to reduce or end the transfers. Some will want to use those funds to help offset sequestration funding cuts to social service and/or defense programs. Others will simply want transportation spending to match transportation revenue.

Since 2008 Congress has transferred $41 billion to the trust fund, with another $12.6 billion transfer planned for FY 2014. Another $14 billion transfer would be needed to prevent the projected shortfall in 2015, the CBO claims. You can read the updated CBO report here.

CBO Highway Trust Fund Status Chart

Raising the gas tax will be even more difficult. Many Senators and Representatives are inhibited by public opposition to increasing the gas tax. On one level, it’s understandable: most polls show strong public opposition to a gas tax.  A recent Gallup Poll found that 66% of respondents opposed a gas tax increase. In this case the poll was a little misleading – it asked about a 20-cent increase. The average respondent probably assumed it the increase would happen all at once. It’s amazing that at least 29% did support such a huge increase.

The Gallup question would be much more useful if it (a) asked about a smaller tax increase (e.g., ten cents); (b) indicated the 20-cent increase would be phased in over a length of time (e.g, ten years); and/or suggested revenue would go to an objectively-selected list of projects.

Here’s the Gallup question:

“Suppose that on Election Day you could vote on key issues as well as candidates. Would you vote for or against a law in your state that would increase the gas tax up to 20 cents a gallon, with the new gas tax money going to improve roads and bridges and build more mass transportation in your state?” (In U.S., Most Oppose State Gas Tax Hike to Fund Repairs, Gallup Politics.)

On the other hand, this year about thirty states considered increasing taxes and/or fees for transportation. If you’re a regular reader here, you already know that most local ballot measures to increase transportation funding are passed by voters. Two keys in nearly all of these cases: the tax/fee amount is relatively small, and the revenue goes to specific projects or programs that people can identify with.

And we’re still waiting for someone to identify a legislator who has lost reelection because they supported a gas tax increase.

Meanwhile, delaying repairs to our aging roads simply means the repairs will cost more when we get around to them. And that rough roads will continue to cost drivers in maintenance. Changing population and goods delivery patterns call for road and transit projects which remain unfunded, and only increase congestion and the cost of goods.

For a simple snapshot of the pent-up demand for transportation projects, just look at the TIGER program.  In four grant rounds, USDOT received about 4,050 project proposals, from all states and territories, seeking more than $105.2 billion.  Just 218 projects were awarded some of the $3.2 billion provided to USDOT by Congress for the TIGER program.  Even if you assume half of those 4,050 are nice-to-have project and not critical, you’re still left with close to 2000 unfunded projects that could help communities across the entire country

BUT WAIT – there is hope.

The U.S. Chamber, shippers, truckers and several other groups support a moderate increase in the gas tax over a number of years, with certain conditions. The Chamber also supports indexing the tax to inflation. For some reason, this fails to move many – if any – legislators. Still those groups along with the transportation construction industry and unions are becoming more and more vocal about their support, and the need, for transportation tax and fee increases. And maybe that will move enough legislators to support increases, and build enough public support.

Some stakeholders are optimistic Congress will act because the transportation funding situation will be at its worst ever.  The situation was bad when MAP-21 was being crafted, but it will be even worse next year.  This will force Congress to finally increase the gas tax, these optimists believe.

There might be some evidence for that, in the thirty or so states seriously raising transportation taxes and fees this year.  In some states, the increases are proposed or supported by a Republican Governor. Just last week, Vermont raised the gas tax 6.5 cents a gallon, and the diesel tax by 3 cents. Virginia increased transportation funding by adopting a wholesale tax on motor fuels and eliminating the gas tax. Wyoming adopted a 10-cent gas tax increase.  Maryland increased its taxes. Arkansas voters will decide in November the fate of a ballot measure to increase the sales tax by a half-cent for transportation. Iowa and Texas, no hotbeds for tax increases, are considering gas tax increase proposals.

Sure, there are probably more states which considered and rejected a gas tax increase, than adopted an increase. Our point is it appears some elected officials are raising transportation taxes and living to tell about it. (So far, that is.  The final chapter will be told in subsequent November elections.)

Finally, not all polling goes against raising the gas tax. A very different perspective comes from the Mineta Transportation Institute (MTI). The Institute has polled on transportation taxes and fees each of the last three years.  (See 2012′s Research Brief or the full report.)  The results indicate a majority of respondents would support higher taxes for transportation under certain conditions. For example, a gas tax increase of 10¢ per gallon to improve road maintenance was supported by 58 percent of respondents, whereas support levels dropped to just 20 percent if the revenues were to be used more generally to maintain and improve the transportation system. For tax options where the revenues were to be spent for undefined transportation purposes, support levels varied considerably by what kind of tax would be imposed, with a sales tax much more popular than either a gas tax increase or a new mileage tax.  [April 30 update: we just came across this excellent story that goes into more detail about the MTI research: “Is Raising the Gas Tax Truly Politically Unpalatable?” from Ryan Holeywell of Governing.]

It might be depressing to think about federal transportation funding. To think about all the unfunded projects that could improve safety, move people and goods faster, and improve our environment and community.  But there is hope, you just have to possess the patience of Job.

Meanwhile, some argue there is no infrastructure crisis, and perhaps no need for a massive increase in transportation funding: “The Myth of the Falling Bridge,” Bloomberg.

Larry Ehl is the founder and publisher of Transportation Issues Daily. In the public sector, Larry was Federal Relations Manager for Washington State DOT; Chief of Staff to US Senator Slade Gorton; and was twice elected to the Edmonds School Board.

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