New Transportation Funding Plans Needed: Report

Published July 1, 2009

Funding the nation’s bridges and highways will become more difficult without a move away from fuel taxes to a vehicle miles traveled charge and congestion pricing, according to a new report by the congressionally established National Surface Transportation Infrastructure Financing Commission.

Among the “grim consequences” of failing to act identified in the report are “unimaginable levels of congestion, reduced safety, costlier goods and services, an eroded quality of life, and diminished economic competitiveness as a nation.”

The report’s authors argue Americans could be persuaded to move to a “user-pays” system for funding roads after learning not only of the dire straits facing the nation’s highway system but also of the benefits of alternative funding, including reduced traffic congestion in highly traveled areas.

Costly Congestion

According to the report, “Paying Our Way: A New Framework for Transportation Finance,” urban travelers are stuck in traffic the equivalent of nearly one entire work week—4 billion total hours—per year.

The report notes from 1980 to 2006 the total number of automobile miles traveled increased 97 percent, while truck miles traveled increased 106 percent.

The commission suggests addressing the problem by allowing states to implement congestion pricing, which allows higher tolls to be charged on portions of roads at peak travel times.

John A. Charles Jr., president and CEO of the Cascade Policy Institute, a Portland, Oregon-based think tank, prefers to think of such an approach as “congestion insurance.”

Improved Predictability

Charles said users value predictability.

“If you give people a price option where you’re guaranteeing them a congestion-free trip, then they can count on that,” Charles said. “If I’m going to the symphony, I don’t want to have to leave the house two hours early. I want to get there just a few minutes before the show starts, and with congestion pricing I know exactly how long it’s going to take.”

Such predictability could also have huge economic benefits for business, Charles said.

“You don’t have to leave hours early to get to the airport or to an appointment on time,” Charles said. “This is like just-in-time delivery, which everyone’s in favor of. But you can only do that if you have the infrastructure.”

Higher Gas Taxes, Too

Currently the improvement, expansion, and upkeep of that infrastructure is financed at the fuel pump. But the report says current federal gas taxes—18.4 cents a gallon on gasoline and 24.4 cents a gallon on diesel fuel—are not keeping pace with the cost of highway, bridge, and transit projects. It recommends raising the gas tax by 10 cents and the tax on diesel fuel by 15 cents a gallon, and indexing both to inflation.

The proposed gas tax increase of 10 cents a gallon would raise transportation costs by ½ cent per mile and cost an additional $5 per month for each vehicle and $9 per month for each household.

Because fuel taxes are not adjusted for inflation and more fuel-efficient vehicles are on the road, there has been a nearly 50 percent drop in real highway spending per mile since the federal Highway Trust Fund was established in the late 1950s, according to the report.

But raising the gas tax won’t relieve traffic congestion, Charles notes.

“The gas tax is neither time-sensitive nor location-sensitive,” Charles said. “Once you pay at 11 p.m. at the pump, you can have the gigantic mob still gathering in congested areas at 6 a.m. the next morning.”

Funds Misspent

While generally favoring moving in the direction recommended by the commission, Charles recommends a “constitutional lock-in” that restricts funds to actual road improvements.

“We must get the politicians to spend the money more appropriately,” Charles said. “It can’t just become an ATM for some goofy project such as light rail.”

A move to a users-pay system would involve equipping cars and trucks with a device that uses GPS technology to track the number of miles driven and compute the tax owed. The amount could be adjusted to charge more for peak travel hours.

Skeptical Truckers

While some trucking associations seem tepidly in favor of the idea, truckers on the ground are skeptical.

“Freight right now is the worst I’ve seen it in 30 years, yet the government keeps sticking it to us—in usage and other taxes and fees,” said Jimmy Thompson, a dispatcher for RONE Trucking Inc. in Morgantown, Kentucky. “Who’s going to bail out the trucking companies?”

The White House is ramping down talk of increasing federal gasoline taxes. Transportation Secretary Ray LaHood told the Associated Press the administration will not raise gasoline taxes during a recession.

Kentucky Cancels Tax Cut

Some states are not waiting for the federal government to raise motor fuel taxes. During its 2009 legislative session, Kentucky lawmakers voted to freeze the commonwealth’s gasoline tax, which was supposed to drop by 4 cents on April 1, at its current rate of 22.5 cents a gallon.

Jim Waters ([email protected]) is director of policy and communications at the Bluegrass Institute for Public Policy Solutions in Bowling Green, Kentucky.

For more information …

“Paying Our Way: A New Framework for Transportation Finance”: