States’ Growing Autonomy Frees Up Federal Highway Funding

Published May 28, 2015

With no political consensus on how to fund a $90 billion shortfall in the U.S. Highway Trust Fund, attention has focused to shifting a larger share of transportation funding to the state and local levels.

That approach has been gaining attention not just among fiscal conservatives and congressional Republicans but also with groups such as Transportation for America, the Brookings Institution, and the American Road and Transportation Builders Association (ARTBA).


Seeking Financial Stability

Governors and state legislatures of both parties deem the prospect of future federal funding highly uncertain, and they are therefore trying to place their transportation programs on a more stable and predictable footing less dependent on the vagaries of federal budgeting.

Using local funds enables states to avoid cumbersome federal requirements that increase project costs and delay implementation. States have a genuine incentive to embrace a more proactive role in funding transportation. 

Twenty-three states have taken steps to raise transportation revenue in 2015. Twelve have increased their gas tax or sales tax on gasoline since 2014, and seven have increased their taxes in 2015, according to ARTBA’s Transportation Investment Advocacy Center, which tracks state transportation funding initiatives.

Other measures include increasing reliance on highway tolls. Nearly 350 miles of new toll roads have been added nationally since 2011, according to the International Bridge, Tunnel and Turnpike Association. States are financing large-scale construction projects with long-term credit and entering into public-private partnerships that utilize private equity capital, availability payments, and highway tolling concessions.


Assuming More Responsibility

With state transportation revenue on the rise, many Republicans say states are in a position to fund a greater share of their local infrastructure projects. This would allow federal revenue to be refocused on national programs and issues, such as maintaining and upgrading the Interstate Highway System, fixing aging bridges, modernizing critical transit infrastructure, and supporting highway safety programs.   

Such a rebalancing does not necessarily preclude additional revenue, but federal subsidies should be treated as a separate matter, and the rationale for federal subsidies should be reexamined in light of the states’ increased ability to fund local transportation and congressional budget policies.

Those policies have just undergone a reformulation. In March, the House and Senate agreed to a budget framework gradually constraining discretionary spending on transportation and aligning it with incoming revenues from motor vehicle fuel taxes.

A concurrent budget resolution, the first joint budget resolution to be approved by Congress since 2009, was passed by the House on April 30 and by the Senate on May 5. Although the budget resolution is not legally binding, it signals Congress’s commitment to restrain spending and balance the budget without increasing taxes. It also sets overall spending levels for separate appropriation bills Congress will vote on later in 2015.  

Offsetting and Concentrating

Although the new budget agreement calls for a 20 percent cut in outlays, it gives authorizing committees flexibility to increase budget authority in future legislation as long as any future general fund transfers are fully offset. Finding credible offsets will be a serious challenge.

Gov. Pat McCrory (R-NC) said at a March 17 House Transportation and Infrastructure Committee hearing the urgent priority is to provide states with funding certainty and continuity to pursue large, capital-intensive infrastructure projects requiring funding over multiple years. This can be effectively accomplished by a multiyear core program funded with Highway Trust Fund revenue.   

Concentrating Highway Trust Fund revenue on programs of clear national interest while allowing states to assume more responsibility for local transportation could create a long-lasting solution to the transportation funding crisis, and it’s an approach that resonates among Republicans on Capitol Hill.

Kenneth Orski ([email protected]) is a public policy consultant and former principal of the Urban Mobility Corporation. An earlier version of this article appeared on the Innovation NewsBriefs website. Used with permission.