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The End of the Road? The Looming Fiscal Disaster for Transportation

Posted by Content Coordinator on Wednesday, May 7th, 2014

SMART GROWTH AMERICA 

Table 1: Federal dollars as a percentage of state (capital) transportation budgets (2001-2012)America is at a crucial decision point for transportation. The nation’s transportation trust fund is facing a crisis. The gasoline tax that has sustained the federal transportation program since the middle of the last century is no longer keeping up with investment needs. Starting this fall, every dollar of gas tax revenues collected will be needed to cover the federal share of projects already promised to states, regions, and transit agencies, according to the Congressional Budget Office. 

Unless Congress adds new revenue to the trust fund, the federal government will be unable to commit to funding new projects, depriving states and localities of resources critical to maintaining and improving the infrastructure that makes our economy possible. At the same time, Congress has an opportunity to reform and reinvigorate one of our most important infrastructure programs in order to boost today’s economy and ensure future prosperity. The federal law that sets national transportation policy and investment levels — known as MAP-21 — expires on October 1, 2014. As Congress reconsiders this vital program, business and elected leaders across the country are calling on their representatives not only to save the transportation trust fund, but also to refocus federal transportation policy on locally-driven, innovative transportation solutions.

This report examines the impact of Congressional inaction on the transportation needs of each state and metropolitan area, a potential loss of nearly $47 billion that would jeopardize the nation’s future economic growth. It demonstrates why Congress must act — and soon — to avoid depriving states and communities of the critical resources needed to provide the 21st century transportation networks that allow people to thrive and businesses to succeed.

Introduction

Cities, towns, and suburbs across the country are working hard to make sure that they have the transportation networks they need to keep their local economies strong. They know they need to repair roads and bridges to handle 21st century demands. They are planning to build new transit lines to bring workers to jobs. They want to fix bottlenecks that slow freight shipments through our ports, rail lines and roadways. In short, they know they have to take the steps needed to keep their economies strong. When they are successful, the entire nation benefits, as local economies are the foundation of America’s strength and vitality.

Throughout our history, the federal government has been a partner in these efforts. In some cases the federal government has been the leader, such as President Lincoln’s efforts to build the Transcontinental Railroad during the Civil War and President Eisenhower’s work on the Interstate Highway System during the 1950s. In many cases, though, the federal government has been a supportive partner as states have designed and built the infrastructure they need to address the challenges of moving people to work and goods to market.

Today, this partnership is on the brink of collapse. The Highway Trust Fund, the federal government’s primary source of support for transportation projects, is facing insolvency. If Congress does not act to shore up the trust fund, the federal support that states and regions have been counting on for next year’s projects simply will not be there.

This report examines the impact of Congressional inaction on the transportation needs of states and metropolitan areas: a potential loss of $46.8 billion to state and local governments, which would jeopardize the nation’s future economic growth. The report concludes that Congress must not abandon its state and local partners at this critical moment. 

Instead, the nation must seize the opportunity to enact a 21st century investment plan for transportation and make the policy reforms needed to support strong local economies and reward smart, locally driven transportation innovations.

What is the Highway Trust Fund and why does it matter?

The Highway Trust Fund is the nation’s primary source of transportation funding, sustained by revenues from taxes on motor fuels and other transportation-related taxes. The 18.4-cent per gallon tax on gasoline is the largest revenue source for the trust fund. Trustfund revenues are then provided to states, regions, and transit agencies by the U.S. Department of Transportation according to a set of distribution formulas enacted by Congress. Some of the funding is narrowly targeted to specific transportation needs, such as highway safety or maintenance of the National Highway System, while other funding can be used for a wide variety of transportation projects.

Until recently, the Highway Trust Fund had for decades provided stable and growing funding for states and localities. In 1998, Congress decreed that the revenues deposited in the trust fund could only be used for transportation. They cannot be used to pay for other government programs. This so-called “firewall” between the Highway Trust Fund and the rest of the federal budget has enabled the federal government to make multi-year commitments of funding to states and local governments without fear that the money would be diverted in some future year for other priorities. The certainty that this mechanism provided to states and regions allowed them to plan multi-year transportation investments.

States and regions depend upon these commitments to address their transportation needs. As Table 1 shows (at the end of this report), federal funds make up a significant portion of state transportation budgets. Should these funds not materialize in any given year, states would find themselves trying to plug a large hole in their budgets — or worse, deferring needed projects, perhaps indefinitely. Local leaders looking for a strong federal partner to help them achieve their regional transportation goals would be turned away. 

Download full version (PDF): The End of the Road?

About Smart Growth America
www.smartgrowthamerica.org
Smart Growth America advocates for people who want to live and work in great neighborhoods. We believe smart growth solutions support thriving businesses and jobs, provide more options for how people get around and make it more affordable to live near work and the grocery store. Our coalition works with communities to fight sprawl and save money. We are making America’s neighborhoods great together.” 

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