A Transportation Funding Power Shift

Throughout the 20th century, the federal government’s role in transportation infrastructure steadily increased. The construction of the interstate highway system, conceived and begun under President Dwight D. Eisenhower, was emblematic of the dominance of Washington, whose ever-expanding role ranged from establishing highway construction standards to denying federal highway funds to states that did not establish 21 as the legal drinking age. Then, beginning about 1993, the last time the federal fuel tax was increased, the political climate in Washington began to become so polarized that reasonable, stable funding and planning, although desperately needed, were no longer happening.

The shortfall in federal spending on transportation infrastructure is running at about $30 billion annually. There was, of course, a brief respite for the states in the form of federal stimulus money for transportation: About 6 percent of the $831 billion in American Recovery and Reinvestment Act funding, or $49 billion, was spent on transportation infrastructure. But as much as states welcomed that money, it was a one-time infusion that did not address the long-term funding shortfall.

Now, in the aftermath of the recession and the stimulus, there is even less likelihood of major federal investment in infrastructure. Whatever political juice is left in Washington will likely be spent trying to bring the federal deficit under control. In fact, the Eno Center for Transportation reports that a 35 percent cut in federal transportation funding is likely in order to bring federal funding in line with Highway Trust Fund revenues.

Read the March issue of Governing magazine.

So it isn’t surprising that governors and state legislatures, closer to their constituents and driven by a greater need to show results in terms of quality of life and economic competitiveness, have begun moving to fill the void left by the feds. During 2009-2011, in the teeth of the recession, 10 states and the District of Columbia raised fuel taxes. Now, however, most policymakers see that the traditional gas tax is a less and less viable funding source, given increased fuel efficiency and the rising number of alternative-fueled vehicles. Something different has to be done, and we are beginning to see it happen.

For example, California, Oregon, Washington state and British Columbia have combined to form the West Coast Infrastructure Exchange to create and develop innovative new methods to finance and facilitate development of infrastructure. In Michigan, Gov. Rick Snyder has put forward a $1.2 billion package of increased transportation funding that proposes replacing the state’s cents-per-gallon gas tax that drivers pay at the pump with a percentage-based wholesale fuel tax. Virginia Gov. Bob McDonnell wants to do away with his state’s gas tax and increase the sales tax to provide more transportation funding. And in Massachusetts, Gov. Deval Patrick has proposed raising more than $1 billion a year in new or higher taxes and fees to fund public transit and highways.

These are politically risky proposals, but I predict that we will see more like them. Some will work and others will not, but policymakers are seeing that continuing to wait for the feds to deal with infrastructure is riskier. The absence of federal action has created a power vacuum. We are entering an interesting period of experimentation and innovation as the power to drive transportation policy in America shifts to the states.