While the Senate pats itself on the back for passage of a mere two-year surface transportation bill, a handful of states are pushing what most of their federal brethren decry as infeasible: fuel tax hikes. That the efforts continue as consumers grumble over the gasoline prices inching toward $4 a gallon shows the dire state of state transportation coffers.
Although average state transportation spending in fiscal 2011 rose 8.5 percent year-over-year, states saw their gas tax revenue plummet a total $10 billion in the same period, according to the Institute on Taxation and Economic Policy. The average state hasn’t raised its gas tax in nearly 11 years, and it needs a 6.8 percent bump on average to get back to those funding levels.
Unfortunately, Congress isn’t setting much of an example, with talk of fuel tax hikes reserved for wonks’ dreams, not legislators’ actions. The 18.4 cents-per-gallon gas tax, which fuels about 90 percent of the Highway Trust Fund, hasn’t been increased since 1993, and inflation has cut about 7 cents from the tax’s buying power. The Senate’s $109 billion transport plan would maintain current spending levels for the next two years, giving time for the economy to recover and fuel tax revenue to surge back, supporters say. That’s possible as long as Americans stop driving fuel-efficient vehicles or if they dramatically increase how much they drive.
Instead, it’s far more likely the nation’s infrastructure woes will worsen. Federal, state and local governments need to spend at least $101 billion annually, taking inflation into account, over the next 20 years to maintain the U.S. highway system, according to a recent Department of Transportation report. Another $69 billion would need to be spent annually if the U.S. wants to improve its infrastructure system and not just maintain it.
Despite legislators’ claims that voters won’t take to a fuel tax increase, particularly ahead of a presidential election, a fuel tax hike couldn’t cut as deep as one would decades ago. State gas taxes make up the smallest share of families’ budgets since the 1920s, and some states even offer low-income tax benefits to cushion poorer consumers.
But more than anything, the push by states to raise fuel taxes and add fees is driven by necessity. Maryland Gov. Martin O’Malley said a roughly 20-cent fuel tax hike is needed to avoid crumbling roads and bridges. But O’Malley’s efforts, along with those of Iowa, Michigan and Arkansas, are struggling to gain support as gasoline prices rise week to week.
History isn’t on the side of states, either. Only a handful approved fuel tax hikes in 2008 and 2009; no increases were passed in 2010; and just two states succeeded last year. Such resilience is forcing state legislators to follow the lead of their federal counterparts by looking for other pay-fors. For instance, South Dakota last year raised vehicle registration fees $18 over the next two years, while Rhode Island set surcharges and fees to fund highway maintenance through its budget approval.
States find it easier to pass legislation to encourage private investment in infrastructure. Twelve public-private-partnership-related bills were enacted in 11 states last year after 32 such bills were introduced in 17 states.
Like the simplest road, there are two lanes and states’ transportation revenue only covers one of them. The federal government, which kicks in the rest of the funding for infrastructure needs, takes the other lane at a slower speed and lacks the political courage to shift into a higher gear.