Commentary -- Getting Off the Highway Bill

Commentary -- Getting Off the Highway Bill

I  have a working assumption that will seem unwarranted to most, but if you will suspend judgment for a bit, I would propose that this will be the last transportation reauthorization as we know it, and it might be the end of the federal surface transportation program as we know it. Why? It is because of the battle over so-called donor/donee status among the states.

If the target is 95 percent return to all states of the gas taxes collected in their states, it will mean hurting the donee states if there is not a substantial increase in revenue to the trust fund. That will mean a gas tax increase that would go mostly to the donor states, not an easy task for the Congress.

This is not a partisan issue. Donor/donee is a line that divides the Senate in a way that makes it impossible to solve without a large increase in revenue.

The reality of this issue is that our country has needs that transcend the needs of any individual state, but parochial greed will outweigh national purpose every time. The real problem is that it means that the program is just about revenue distribution, and not about national transportation needs.

The forces behind this movement are so emotional and greed driven that I do not have much hope for a resolution that benefits the entire country.

The national transportation program had as its original mission a clear objective "to get America out of the mud." But it is now a revenue block grant to the states with no clear federal objectives.

Most of the mission and purpose language in ISTEA was removed in TEA 21. The program is now about the national government collecting the revenue for the states and sending it back to them for limited national purposes, and no accountability for even those limited goals. This has made the logic of 95 percent return to each state almost inevitable. As a nation, we earlier had connectivity as an issue that literally kept us together. We still have critical national transportation purposes like world economic competitiveness in goods movement, security in the movement of our citizens, and safety for all the users of the system, but we cannot make those purposes fit into the authorization processes that we have created.

If this program has no clear national purpose, other than revenue sharing, how can we expect the American public to support an expansion in the revenue base? We cannot. The insatiable demand for pork (or earmarked projects, as the members like to call them) is destroying the credibility of the program in the public's mind.

Members who say that they know better than their local communities or their state DOTs how to program transportation funding are making a mockery of the state and regional planning process.

In addition to adding transportation projects, the number of earmarks for nontransportation projects has grown at an extraordinary rate. If the reauthorization process crosses the 5,000 mark for earmarks, the actual cost of the accumulated earmarks may exceed 20 percent of the annual program.

The pressure to keep the costs of these earmarks above the apportionment numbers is already intense.

If they stay outside of the program apportionment process, the pressure to load up on new earmarks will become even more intense. If there is continued growth in pork, the core programs will shrink. If there is no perceived integrity to the investment process then how can you get the American public to support increased revenue for the program? You cannot.

Gas tax revenues are slowing down. A Congressional Research Service report shows that U.S. Trust Fund revenue (in 2001 dollars) fell from $21.2 billion in 1999 to $20.9 billion in 2002.  On a longer horizon, CRS shows an increase in revenue (in 2001 dollars) from $20.8 billion in 1997 to revenue of $20.9 billion in 2002.

Local referendums on gas tax increases are seeing some significant and visible failures. The recent referendums in Virginia and Missouri failed by unexpectedly wide margins. Is it an indication that the public has lost its belief in the viability of the transportation investment process? Most states have turned to a variety of debt instruments in the face of the political resistance to increasing gas tax revenue, but the combined impact of creative financing in states like New Mexico and New Jersey has been to rob those states of their future financial capacity.

Increases in the federal funding levels for transportation have only led states and local governments to reduce the amount that they are spending on transportation themselves. Today, state and local governments reduce their transportation expenditures by 60 cents for every dollar of federal increase. In other words, a dollar of additional federal transportation spending today yields a 40-cent increase in total transportation expenditure.

If tolls are a state resource, if debt financing is not a credible alternative, and states continue to reduce their commitment to transportation as federal expenditure increases, then I think that it is time to seriously consider an option that has been rejected out of hand in the past: the reversion of the 18.4 cents federal gas tax to the states.

There are numerous advantages to the shift and a couple of serious down sides.

First, the donor/donee issue goes away immediately. States can assume the tax, reduce it, or increase it by themselves.

Second, pork goes away. No federal appropriation, no earmarks.

Third, states get the level of economic activity, system performance, and maintenance of effort that they need and that they deserve based on their own decision-making.

Fourth, the states will have a lot of extra incentives to crack down on gas tax collection fraud. Reversion would raise the stakes for states significantly.

Fifth, regulatory oversight and program complexity would be reduced. Overhead costs for federal compliance could be slashed.

Sixth, the federal categories and program limitations go away. The states would be responsible for their own outcomes and more directly accountable to their constituents.

Seventh, states can create unified trust funds and allocate transportation revenue to investments that solve state problems like competitiveness in goods movement, and intermodal investments that are difficult now because of limits imposed on the use of funds.

Eighth, no more reauthorizations!

There are some serious downsides. 

A number of the donee states would see a reduction in revenue if they did not increase the gas tax. There is no easy solution to this problem, and each state would wind up having to make some very tough choices.

The national transit program would see the loss of all of its general fund revenue and all of the trust fund revenues. Something like this may be inevitable over the long term.

Stagnation of federal gas tax revenue and the inability of the Congress to increase the gas tax in any meaningful way means that there will be constant pressure from the highway interests to reduce the transit allocation in the national program.

It also would mean the loss of any national role in surface transportation. The executive branch of the national government has shown no interest in leading the country to new visions or programs in the critical areas of international competitiveness, intermodalism, or even a cooperative effort to creatively expand the transportation program's scope and reach.

This is also not a partisan comment: the decline of the U.S. Department of Transportation has spanned almost 15 years and several presidents. There is not much federal role here to lose.

I  am enough of a realist, or cynic, to know that changes like this do not occur in the United States unless there is a catastrophic failure of a system, and that the forces for the status quo, including the Congress, are incredibly powerful.

Having said that, it is time to start talking about the fact that the national transportation program is adrift and sinking under the weight of parochialism and greed. It is time to seriously look at the possibility that we need to devolve all surface transportation funding out of Washington. It is time to look at how we might do this incrementally over the next several decades, and we need to start asking these tough questions as soon as this reauthorization is completed.

Just creating a serious alternative to the existing system will force a discussion about options other than the dead-end ones we are now pursuing.

If we have nothing better to offer the American public than unseemly parochial fights over who gets the money, and how many pork projects you can squeeze into a bill, then we should call the next bill G-CASH (Grab the Cash and Send it Home).

Downs is president of the Eno Transportation Foundation, a Washington-based nonprofit organization "dedicated to improving all modes of transportation." This was excerpted from a presentation at the annual meeting in Baltimore of the American Society of Civil Engineers.