The House panel studying freight transportation saved the toughest for last: how to pay for it. It was a sign of the enduring paralysis over funding that the panel had Jack Schenendorf and Robert Atkinson as witnesses in its final hearing last week.

They led the two seminal commissions that reported to Congress five years ago that the national highway infrastructure is in dire need of reinvestment through a variety of funding mechanisms, including substantial increases in fuel taxes.

Schenendorf, a Washington, D.C., attorney, led the National Surface Transportation Policy and Revenue Study Commission, which called for an 8-cent per gallon increase.  Atkinson, president of the Information Technology and Innovation Foundation, led the National Surface Transportation Infrastructure Financing Commission, which called for a 10-cent hike on gas and a 15-cent hike on diesel.

Some of the reforms they called for five years ago, such as improvements in administration of the federal highway program, were implemented in last year’s highway bill, but Congress has not been able to do anything about federal funding.

The House panel, composed of members of the Transportation and Infrastructure Committee, is scheduled to post its recommendations by the end of the month, based on six months of hearings and data-gathering. The recommendations will help the committee shape next year’s transportation bill.

The leaders of the panel, Reps. John Duncan, R-Tenn., and Gerald Nadler, D-N.Y., acknowledged the need to find funding solutions.

“The most important question is how to fund and finance the freight system,” Nadler said. “We’re not making the investments to keep the system up. If we fail to address this issue, all we will have will be lofty plans.”

Ways to Fund the Highway Trust Fund

Schenendorf and Atkinson presented the panel with an array of possible funding mechanisms.

Schenendorf’s list includes the usual financing options, such as infrastructure banks and public-private partnerships, but also features a pair of new user fees to supplement current revenue streams.

He is proposing a Federal Interstate User Fee that all Interstate Highway users would pay through an automated toll collection system similar to E-ZPass.

Revenues from this fee would go into a special account in the Highway Trust Fund that would go only to Interstate Highways, rather than to the entire federal-aid highway system.

The idea is to ensure funding for Interstates by users of those roads.

“This user fee would restore the Interstate Highway System to being the crown jewel of the U.S. surface transportation network and the envy of the world,” Schenendorf said in his testimony.

In addition, he is proposing a separate truck fee that would be collected through GPS tracking systems and spent exclusively on freight projects. This fee would not overlap with the Federal Interstate User Fee, he said.

Atkinson, on the other hand, suggested that Congress double the Heavy Vehicle Use Tax. That levy has not been raised since 1983, he noted.

He also suggested that if Congress cannot increase fuel taxes it should at least index them to inflation. And he supports additional tolling systems.

He suggested that Congress allow the Department of Transportation to create incentives for states to use tolling.

“Too many states do not want to support toll-funded projects because of fear of public opposition,” he said in his testimony. But the public usually tends to support toll projects after they’ve been introduced, he said.

We Need a Vehicle-Miles-Traveled (VMT) Tax

He also is pushing for a mileage-based fee system on trucks.

The country will eventually have to employ a vehicle-miles-traveled (VMT) system because the fuel tax system cannot sustain revenues as fuel efficiency improves, he said.

The transition to a VMT will take 20 years, but trucks should lead the way, he said.

“Congress should accelerate the transition to a VMT system by requiring that trucks adopt the system first.”

National trucking interests are not enthusiastic about the VMT approach. American Trucking Associations supports raising the diesel tax, in part because the fuel tax collection system is already in place and is cost-efficient, but has expressed concern about the expense and complexity of a VMT system.

Virginia's Highway Funding Story

Also testifying at the October 10 hearing was Virginia Transportation Secretary Sean Connaughton.

Virginia is one of a number of states that have dealt with highway shortfalls by mixing and matching funding mechanisms.

The state uses public-private partnerships and has an infrastructure bank, but had not increased its fuel taxes in 26 years and was not pulling in enough revenue to keep up with transportation needs, Connaughton said.

The governor proposed to get rid of the fuel tax altogether and increase the state sales tax, but that would not work politically. The compromise was a reduced fuel tax and a higher sales tax plus other fees including $64 for alternative fuel vehicles, he said.

These changes netted an increase of more than $1 billion a year, Connaughton said.

He offered the panel a hint on how to overcome resistance to such changes:

“All of the stakeholders were supportive because they all got something,” he said.