Streetsblog Capitol Hill

The Highway Trust Fund is expected to slip into negative territory in 2015. Estimates are based on CBO's February 2013 baseline projections. Image: CBO

MAP-21 expires in a year and five months. When it does, if lawmakers haven’t already found a solution to the “transportation fiscal cliff,” they’ll have to do one of three things, according to a report issued last week by the Congressional Budget Office [PDF]:

• Transfer $14 billion more in general funds
• Raise the gas tax by 10 cents a gallon
• Cut the authority to obligate funds in 2015 from about $51 billion projected under current law to about $4 billion

“If lawmakers chose to wait until fiscal year 2015,” wrote CBO analyst Sarah Puro, “at the expiration of MAP-21, to reduce spending, those cuts in 2015 would need to total about 92 percent for the highway account and 100 percent for the transit account.”

It couldn’t be clearer. Congress has to stop dithering and start working on a revenue solution, stat. Oh, and the president and his new secretary of transportation have to get behind it, guns blazing.

Congress has three potential vehicles for a revenue solution: 1) a “grand bargain” on the deficit, the sequester and the fiscal cliff, 2) tax reform, and 3) the next surface transportation bill.

And what will that “revenue solution” be? The simplest, most easily implemented fix is a gas tax hike, but over the long term, taxing fossil fuels as a way to pay for transportation infrastructure just won’t cut it.

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The House is a dangerous place these days. You want to have a fruitful conversation about how to solve the transportation funding crisis and you end up ruminating about whether to tax bikes.

Watch out, Robert Poole, if you sit too close to that guy in the audience with the bike pin, you might start to have progressive thoughts about transportation!

That’s what happened to Rep. Earl Blumenauer (D-OR). He requested that the Budget Committee hold a hearing on the impending insolvency of the Highway Trust Fund, but guess who controls the agenda? Not Earl Blumenauer! Committee Chair Paul Ryan controls the agenda. And he invited Robert Poole of the Reason Foundation and Richard Geddes of Cornell University and the American Enterprise Institute as the Republican witnesses.

Ryan didn’t stick around past his opening statement – he had other business to attend to – but guess who he passed the gavel to? Rep. Scott Garrett of New Jersey – the guy who keeps sponsoring a bill to diminish the federal role in transportation funding and pass it along to the states. This hearing was clearly going to be a doozy.

Highways only and forever

The hearing started off crazy and just got crazier. Poole got right to the point: Let’s stop funding anything but highways out of the Highway Trust Fund. There’s plenty of money in it if we only spend it on highways – and not just any old highways either, only the ones with a role in interstate commerce. You know, the ones that are “truly federal.”

Not only that, let’s move the Federal Transit Administration out of U.S. DOT and into the Department of Housing and Urban Development – “That would be consistent with the increasing emphasis at FTA on smart growth, community economic development and so forth.” Essentially, let those woolly urban liberals go crazy over at HUD — we weren’t using that agency anyway. Let’s keep DOT clean of all that livability junk.

Oh, and let that new HUD FTA fight for general funds every year, instead of having guaranteed income from a trust fund.

Some more tolling could be helpful, too, Poole said; some public-private partnerships, some private activity bonds, TIFIA, and let’s talk about switching to a mileage-based user fee, or VMT tax – but really, the red meat here is highways and only highways.

Thanks, Robert Poole. Next up, Richard Geddes wanted to talk about the insustainability of any funding mechanism that depends on the burning of fossil fuels and the benefits of a VMT fee — a decent start. But the part of his talk that Rep. Garrett homed in on was the mention of a “permanent” public trust fund (basically a Highway Trust Fund, but invested in the stock market). Garrett speculated that Washington would get its mitts on that “permanent” fund and “use it for different things – highway beautification, bike paths – ooh, great things” but not what highway money should be used for.

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Believe it or not, in many U.S. states one of the biggest obstacles to active transportation is in the constitution.

Embedded in the constitutions of 22 U.S. states are bans on spending gas tax revenues and/or vehicle registration fees on anything but highways and bridges. That means no matter how much practical value a sidewalk, busway, or bike lane would add, those projects must go begging for funds.

Municipalities throughout the Denver area will soon be able to use gas tax revenues on projects like light rail expansion. Image: Captured Refractions

But thanks to the efforts of a broad coalition in Colorado, the number of states with constitutional restrictions on sustainable transportation spending is about to fall to 21. Governor John Hickenlooper will sign a bill tomorrow that opens up $250 million a year in state gas tax revenue to walking, biking, and transit projects.

Colorado-based transit and environmental advocates found a way to overcome the ban without the monumental effort and expense of a statewide referendum. And they’re eyeing six other states around the Southwest with hopes for a repeat or two.

Colorado’s constitutional amendment — passed in 1935 — states that gas tax revenues and vehicle registration fees can only be spent on highways and bridges. To make matters worse, the state had always depended on a narrow reading of the term “highways” to exclude local roads, sidewalks, and bike infrastructure, as well as transit.

Rather than try to overturn the rule, advocates in Colorado simply challenged the way it was being interpreted, said Will Toor, a former mayor of Boulder who helped lead the campaign as director of transportation at the Southwest Energy Efficiency Project.

“Fifteen years ago, a group of us began making the argument that that was really an inappropriately narrow interpretation,” said Toor. “There are other places in the constitution that describe railroads as highways of the state.”

In 2009, a coalition of transit advocates had a small breakthrough. The Colorado legislature wanted to pass a new vehicle registration fee, but lawmakers needed the political support of transit advocates. The transit coalition was able to win a small, but important, fraction of the funding for transit – just $15 million out of $1.2 billion.

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Just last month, the American Society of Civil Engineers gave U.S. infrastructure another dismal grade and every media outlet and lawmaker in the country, it seemed, bellyached about how we need to invest more. And then Gallup asked Americans if they’d be willing to raise the gas tax by 20 cents a gallon. The answer was a big, fat, “No.”

The state of disrepair of American infrastructure apparently isn't enough to convince most Americans to support a gas tax hike. Photo: PBS

Two-thirds of respondents in the Gallup poll said they would oppose a hike in the gas tax. Republicans were especially opposed, with just 15 percent favoring the hike. Perhaps if it were framed as a user fee that kept taxes from being raised on the general public, they would be more amenable to the idea?

Somewhat embarrassingly, low-income respondents were the most willing to accept a higher gas tax. Thirty-six percent of people who make under $24,000 a year said they’d support a tax hike, where only 25 percent of folks who make $24,000 to $59,999 said they would. Midwesterners and Southerners were also most tax-averse, with people on the coasts somewhat more willing to pay.

The poll was conducted April 9 and 10, about two weeks after Maryland lawmakers passed the first increase in the state’s gas tax in 20 years to pay for road and transit projects.

But Marylanders aren’t alone in facing the prospect of higher gas taxes whether they want them or not: Thirty states are currently debating or have recently passed measures aimed at bringing in more funding for transportation [PDF]. Arizona and Florida want to study the feasibility of a vehicle-miles-traveled fee; Arkansas is considering raising sales taxes and raiding the general fund to pay for highways; California wants to raise the gas tax; Connecticut is contemplating tolling — and on and on. In the absence of the political courage to act at the federal level, states are making difficult choices themselves.

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Rep. Paul Ryan’s budget proposal has gotten a conversation going about a tax code rewrite. Rep. Dave Camp, head of the Ways and Means Committee, recently put out a small business proposal that included some tax reform, and he’s pledged to pursue more reforms this year. His committee has already set up 11 bipartisan working groups to work on it. Sen. Max Baucus, chair of the Finance Committee, has expressed a similar readiness to tackle the issue.

The Washington Post’s Jerry Markon wrote what would appear to be an exhaustive article about all the interest groups lining up to lobby Congress on a tax code rewrite: Broadway producers, Native American tribes, roofers, and of course, the country’s biggest corporations. But transportation lobbyists aren’t even mentioned. It looks like a simple hike in the gas tax isn’t part of the tax reform conversation.

Democratic Capitol Hill staffers say it should be, in light of the convoluted funding mechanisms for the most recent transportation bill. “We always talk about wanting to do tax reform and we never do,” one told me this week. “We need to have that conversation. There are only so many fake pay-fors we can find.”

“It’s hard to raise the gas tax in the context of a transportation package,” said another. “The magnitude of the increase we need just to maintain what we have makes it hard.”

But tax reform might not be the place either. “I think tax reform is going to look more just at the income tax,” said Annette Nellen, professor of accounting and taxation at San Jose State University. “The gas tax is supposed to go into the Highway Trust Fund, so I don’t think it would come up, if there is an issue about needing revenue. The obstacle to the gas tax is just that [Congress is] concerned the public thinks the price of gas is already too high, even though the excise tax hasn’t been changed in some time.”

Nellen thinks Congress will probably be forced to bail out the trust fund a few more times before they’ll actually do anything about the gas tax.

What might happen in the context of tax reform this year, however, is an elimination of tax loopholes for the oil and gas industry. President Obama has been clear that that is a priority of his. Nellen says that could make a gas tax increase even less likely: Oil companies facing higher taxes could pass along the expense to consumers, raising the price of gas and making the public even less willing to pay more at the pump – or making Congress too scared to even ask.

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New House Transportation Committee Chair Bill Shuster (R-PA) clearly knows he’s got some devolutionist conservatives in his caucus (and on his committee). While many Republicans would like to see the federal government get out of the business of infrastructure and just let the states raise and spend their own money, Shuster has always been clear that he is in favor of a strong federal role.

Before the session gets underway, Transportation Committee Chair Bill Shuster wants to make one thing clear. Photo: PoliGu

He likes to remind conservatives that Adam Smith, the godfather of free-enterprise capitalism himself, argued that there were three essential functions of government–security, justice and transportation. He notes that many Republican presidents have overseen massive infrastructure expansion, and that the work continues.

So Shuster is devoting the first committee hearing of the session to clarifying his view that the work of the committee is not just to channel all decisions and funds down to the states. Before anything else — before anyone on the committee has a chance to undermine the very purpose of the committee — Shuster hopes to dispense with that entire line of argument.

So next Wednesday’s hearing, entitled “The Federal Role in America’s Infrastructure,” will give a platform to three of the most vocal advocates of increased federal infrastructure spending: U.S. Chamber of Commerce President Tom Donohue, Building America’s Future Co-Chair and former Pennsylvania Governor Ed Rendell, and Laborers’ International Union of North America President Terry O’Sullivan all have been invited to testify.

They’ll have a lot of minds to change. The lobby for devolution to the states is growing, and not just among conservatives. Rohit Aggarwala — former director of long-term panning and sustainability for New York City and now top advisor to the C40 Cities Climate Leadership Group — made the same case a few weeks ago in a Bloomberg News op-ed.

“Every bipartisan commission that has studied the situation has advocated raising the [gas] tax, but a polarized Congress has been unable to do it,” Aggarwala wrote. “A strong, smart, well-funded federal program would be great. But if Congress can’t pass one now, it should just get itself out of the way, by eliminating the federal gas tax entirely and cutting Washington’s role in surface transportation. It would streamline government. And it would probably lead to more investment in infrastructure and greener transportation policies.”

Shuster and Aggarwala have flipped traditional roles, with the green sustainability leader now calling for Washington to get out of the transportation biz and the conservative rural Republican defending the importance of federal involvement.

Three scenarios for congestion pricing: 1) priced lanes on all major highways, 2) a mileage charge levied on all roads and streets, and 3) priced zones. Image: MWCOG/Brookings

Could a congestion pricing program work in the DC region? Maybe. But first, officials would need to get the public on board — no easy task. A report on the conclusions from five public forums, held in the region between October 2011 and January 2012, suggest that more and better transportation options need to be in place before a congestion charge is levied, so that commuters feel they have options.

The National Capital Region Transportation Planning Board, together with the Brookings Institution, found that the 300 people they talked to are skeptical of any government plan to get more money, and are sorely undereducated about how transportation funding works. The study was funded by FHWA as a followup to a 2003 study to determine the technical viability and potential benefits of congestion pricing. Now they want to know the political viability of such an idea.

The biggest barrier to acceptance is the simple fact that people don’t understand transportation. The participants in the study didn’t know that funding was a problem or a cause of many of the inadequacies of the system. They didn’t know how much the gas tax is, that it doesn’t rise with inflation, or that it hasn’t changed in 20 years.

They don’t see themselves and their own driving as contributors to the problem of congestion. They blame construction and other drivers (especially those from “other jurisdictions” — DC and Virginia residents love to beat up on “Maryland drivers”) — anything but their own driving. They assume that congestion pricing can’t work because everyone on the road is there because they have to be. They don’t think they, or their fellow drivers, have choices in travel behavior.

The Washington region is relatively well-served by transit and ride-sharing, so many of them were probably wrong in assuming they don’t have options. Be that as it may, participants were supportive of adding new transportation options. Even the most car-centric people — those who live far outside the urban core and drive alone to work — thought it was important to build more transit and facilities for biking and walking.

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There’s a persistent misconception in American culture that transit is a big drain on public coffers while roads conveniently and totally pay for themselves through the magic of gas taxes. And that used to be true — at least for interstate highways, a fraction of the total road network.

Drivers directly pay for just 50.7 percent of the cost of the American road system. Image: Wikipedia

But that was many, many failed attempts to raise the gas tax ago. A new report from the Tax Foundation shows 50.7 percent of America’s road spending comes from gas taxes, tolls, and other fees levied on drivers. The other 49.3 percent? Well, that comes from general tax dollars, just like education and health care. The way we spend on roads has nothing to do with the free market, or even how much people use roads.

“Nationwide in 2010, state and local governments raised $37 billion in motor fuel taxes and $12 billion in tolls and non-fuel taxes, but spent $155 billion on highways,” writes the Tax Foundation’s Joseph Henchman. Another $28 billion of that $155 billion comes from revenue from the federal gas tax.

Meanwhile, transit fares cover 21 percent of costs nationwide, indicating that the difference in subsidies for roads and transit is not as great as it’s often made out to be. (Though in absolute terms, there is a big difference: The total subsidy for roads dwarfs the total subsidy for transit.)

Even more interesting is to compare roads to Amtrak, a favorite target of self-styled fiscal conservatives in Congress. Amtrak recovers about 85 percent of its operating costs from tickets — a relative bargain compared to other modes. Even accounting for capital costs, Amtrak — which operates mostly on privately owned tracks — covers 69 percent of its total costs through ticket prices and other fees to users.

The Tax Foundation also analyzed transportation spending in every state to determine which states subsidize their road systems the most through general taxes. Drivers in Delaware, Florida, New Jersey, North Carolina, and New York cover the highest share of road spending compared to drivers in other states. Drivers in Wyoming, Alaska, South Dakota, and Vermont cover the lowest share.

Correction: An earlier version of this story, using Tax Foundation calculations that don’t factor in the federal gas tax, understated the share of road spending covered by drivers. Also, updated 1/24/13 to reflect total Amtrak costs.

When the federal gas tax was set at 18.4 cents per gallon, it represented 17 percent of the cost of a gallon of gas. Now it’s barely 5 percent.

AASHTO Director John Horsley is thrilled with the new transportation bill, which gave state DOTs just about everything they wanted. Photo: International Transport Forum

That was 20 years ago. Some say the answer for today isn’t just to raise the gas tax but to re-imagine it. John Horsley, executive director of the American Association of State Highway and Transportation Officials, who retires at the end of this month, made his proposal yesterday at the annual Transportation Research Board conference.

He’d like to see the fixed gas tax replaced with a percentage sales tax on fuels. He said such a move could avert a looming “transportation fiscal cliff.” An AASHTO press release explains:

Under Horsley’s proposal, sales tax rates on fuels would be set at a level that restores solvency to the Highway Trust Fund. The fund is currently spending $15 billion more annually than the revenues it receives. The change would support spending on highways and transit over the next six years at $350 billion. If the program were limited to expected excise tax revenues, it would have to be cut to $236 billion.

Horsley didn’t propose a figure for the sales tax percentage. Right now, the price of gas in DC is $3.59 per gallon. If the gas tax went back up to 17 percent, it would be 61 cents a gallon.

Let me be clear: Horsley’s idea is much less ridiculous than Virginia Gov. Bob McDonnell’s sales tax proposal, which he introduced last week, which would have levied the sales tax to pay for roads on everything but gas. This would still charge drivers at the pump to pay for the transportation network, it would just do it in a way that goes up according to prices, like all sales taxes.

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In transportation circles, there’s an endless debate about how to fund infrastructure. Raise the gas tax? Index it to inflation? Institute a vehicle-miles-traveled fee? Many jurisdictions have turned to property taxes, bonds, and sales taxes as a supplement.

Virginia Governor Bob McDonnell wants to eliminate the state's gas tax and replace it with a sales tax. Photo: Wikipedia

But Virginia Governor Bob McDonnell is blowing the whole thing wide open with a half-baked scheme for the ages: Stop asking drivers to pay any gas tax at all.

Who will pay? Everyone else. Instead of having drivers chip in for the roads they use, he proposes to raise the sales tax.

But wait, it gets crazier: He also wants to add a $100 fee on drivers of vehicles powered by alternative fuels.

Fees like that make sense when you’re dealing with a gas tax-funded system that hasn’t found a way to adequately charge electric- and hybrid-car drivers. But taxing only drivers of alternative-fuel cars is just a complete perversion of incentives.

And it’s all made so much worse by the fact that McDonnell proposes to keep exempting fuel from the sales tax. So, that 5.8 percent sales tax he wants to levy on milk and pencils and television sets? Drivers won’t have to pay any of that for the fossil fuels they pump.

It’s bad enough when states exempt gas from the sales tax because it’s taxed separately, as 37 states and the District of Columbia do. But to exempt it from both just makes no sense.

What’s more, a sales tax is more regressive than a gas tax, taking a bigger chunk out of poor people’s wallets than rich people’s — a double whammy if you’re a low-income Virginian with no car who would end up subsidizing other people’s driving.

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