First, a few basics. Most big transportation projects -- bridge repairs, new highways, intercity rail -- are paid for with a stack of local, state, and federal funds. The federal contribution ranges between 35 percent and 95 percent of a state's total transportation budget, and is mostly supplied by the Highway Trust Fund. The Highway Trust Fund is mostly supplied by the federal gas tax, which is a robust stream of money that can't be used for anything other than transportation.
The problem for funding is that Americans are actually using less gas than they used to -- both because they aren't driving as much, and cars are getting more efficient. Meanwhile, Congress hasn't raised the gas tax from 18.4 cents per gallon since 1994, which is now far behind what it was then when you take inflation into account. Consequently, revenues have started to sputter in recent years:
Transportation funding needs, however, continue to rise -- especially for public transit, where ridership is growing faster than the mileage people are putting on their cars.
That's put the Highway Trust Fund in a tough spot. According to estimates released last week, it's expected to be in the red by the end of fiscal year 2014.
Congress has been aware of this problem for a while now. Instead of raising the gas tax, or finding some other funding mechanism, it's simply plugged the hole with multi-billion-dollar transfers from the general fund. The last authorization, a $19.5 billion chunk granted in 2012, expires at the end of this September -- at which point, unless Congress acts, the federal contribution for hundreds of state projects will drop to zero.
That's a big deal. According to calculations by the advocacy group Transportation for America, it could amount to a loss of $46.8 billion compared to current funding levels. Many states have already planned projects in anticipation of being reimbursed by the feds, from a bridge in the Coachella Valley to the reconstruction of I-91 in Massachusetts. They would have to slam on the brakes if the money failed to appear -- some have already done so, with the funding situation looking so uncertain. A big drop in federal transportation funds would strangle growth and force states to leave their transportation networks in a dangerous state of disrepair.
Various remedies are in the works. A couple of weeks ago, the White House sent Congress a $302 billion, four-year plan that shifts more money into transit over highways, and relies on corporate tax reform to create new revenue streams. But the Senate Environment and Public Works Committee has announced its intention to craft a bill that essentially maintains current funding levels, and it's probably too much to expect anything more from the House Transportation and Infrastructure Committee.
If we were to wipe the slate clean and design a new system for funding transportation needs from the ground up, it might look quite different from the one we have now. Over the past decade, wonks who track these issues have come up with lots of ideas, and states are already experimenting with a few of them. A "vehicle miles traveled" tax, for example, would assess fees for the distance you drive rather than the amount of fuel you use (which is a way to make sure electric and hybrid car drivers pay their share for road wear and tear). It's also possible to tweak the gas tax in a way that it responds to increases in transportation costs. Others think it would make more sense to devolve transportation funding to the states entirely, which would free them of the sclerotic congressional process and allow metropolitan areas to be more agile and creative with their transit projects.
In an election year, however, a more holistic fix doesn't seem likely. It's enough of a lift to maintain the status quo.