Bridging The Funding Gap
Back to the starting line on highway funding
February 2013, TruckingInfo.com - Cover Story
In March, the $ 110 billion in automatic spending cuts contained in the sequestration deal will kick in unless Congress and the White House can agree on an alternative.
And in May, Congress will have to come to terms on how to manage the debt ceiling or put the country at risk of defaulting on its obligations.
Transportation experts hold out hope that some sort of funding mechanism could be included in the deals to resolve these issues.
Kavinoky thinks there's a good argument for it. There's a win-win proposition in using transportation to address the big picture of the deficit, she says.
For some time Congress has been keeping the Highway Trust Fund whole by feeding it from the general fund. Over the past four years, that transfer has amounted to $48 billion.
“If you actually go back to paying for transportation with the excise taxes that come from transportation, you can take over the next 10 years about $ 150 billion off the plate of the general fund, and solve the transportation [shortfall],” Kavinoky said.
Another transportation expert whose glass is half-full is Marcia Hale, president of Building America's Future.
“I actually think that if we can get past some of the fiscal hurdles we have right now, and if the economy begins to improve, you can become a little more hopeful,” Hale says.
Hale worked on the last fuel tax hike for the Clinton White House in 1993.
“I am quite aware of how painful that vote can be,” she said. “But it gets less painful once the economy begins to improve. [The economy] is improving but it needs to improve a lot more before [a fuel tax hike] can go on anyone's plate.”
State funding initiatives
In the absence of leadership from Congress, states are stepping up to fill the funding gap.
The National Conference of State Legislatures found in a 2012 survey that states anticipate having to carry more of the infrastructure burden than they have in the past.
“The federal government is providing less money, so we need to find additional capital if we are going to meet the needs,” said one respondent to the survey.
The legislators, who place infrastructure third in their list of priorities after education and economic development, reported that bonding, fuel and vehicle taxes and other fees are their main funding tools.
Around half of the states are using public-private partnerships and tolling, while 37% are using a sales tax to fund transportation.
The vehicle mile tax is way down on the list, at 1.4%.
While a number of states are considering fuel tax hikes, Virginia is headed in the opposite direction.
Republican Gov. Bob McDonnell has proposed to abolish the state's gas tax and replace it with a 0.8% increase in the sales tax, new registration fees and new fees on alternative-fuel vehicles.
This would make Virginia the first state to get rid of the gas tax. The diesel tax would remain in place.
He bills the move as the only way to save transportation funding.
“The gas tax is a stagnant revenue source, and no changes to it will provide a reliable growth mechanism for transportation in the state,” he said in a statement.
The U.S. Chamber of Commerce takes the more traditional view that the people who use highways should pay for them.
“You can't grow an economy in a significant way without a strong supply chain, without strong infrastructure,” Donohue says. “You need money for it and it ought to be paid for by the users.”
Kavinoky says McDonnell is making a political calculation in electing to abolish the gas tax.
“If you mention the words gas tax, people tend to go crazy,” she says. “The question is if they can do it without losing transportation support because money is coming from general revenues.”
Other states are sticking to more tried-and-true approaches:
• Massachusetts Gov. Deval Patrick is pushing for $ 1.02 billion in new gas taxes, higher tolls and increased fees.
• Pennsylvania Gov. Tom Corbett is showing interest in raising the tax paid by gas-station owners.
• A Minnesota advisory committee put together by Gov. Mark Dayton is recommending an immediate 10-cent bump in the fuel tax, followed by a 1.5-cent increase annually for the next 19 years.
• Wisconsin Gov. Scott Walker op poses any increase in the gas tax but has not ruled out tolling as a funding alternative.
• A committee in the Wyoming legislature has endorsed increasing the fuel tax by 10 cents a gallon, and rais ing registration fees by $10.
• The Mississippi DOT is pushing to raise the gas tax for the first time in 25 years, from 18 cents to 28 cents a gallon.
The states will do what they must do, but the federal government still needs to step up, Kavinoky says.
“There needs to be a strong federal role,” she says. “Federal money should help guide dollars to federal chal lenges, to dealing with interstate com merce. We think there still needs to be a federal presence.”