Vol. 16, No. 5; Sep/Oct 2005

Rethinking the Future of the Federal Surface Transportation Program

Innovation Briefs, Sep/Oct 2005

Finally, after almost two years of a contentious debate, adequate multi-year funding is in place, allowing the established highway, safety and transit programs to continue and even a few new ones to be launched. But beyond Fiscal Year 2009, the end of the current authorization, the future of the surface transportation program appears murky. The reauthorization debate has left three major issues unsettled. How these issues are resolved will influence the future directions of the nation's surface transportation program.

New Financing Strategies

The first imperative facing Congress in the next reauthorization cycle will be to find ways to augment transportation revenue. The nation's transportation needs have been well documented. Since 1980, traffic on the Interstates has more than doubled - from roughly 296 billion VMTs [vehicle-miles traveled] in 1980 to more than 702 billion VMTs in 2003- while capacity of the system has remained virtually unchanged. Maintaining bridges and pavements of the 42,700-mile system in good condition is consuming a major share of available highway resources. Metropolitan portions of the Interstates have become clogged with commuter and local traffic generated by suburban growth - travel demand that was not foreseen by the planners of the original Interstate System. More recently, serious bottlenecks have arisen at gateways to the nation's ports, causing delays in freight deliveries and adversely affecting international trade. Overall system performance shows no signs of improvement despite advances in technology that have led to more efficient methods of collecting tolls, capability to monitor system performance in real time, and more effective approaches to handling highway incidents. The problem cannot be solved through improved management and operations alone. Traffic bottlenecks will have to be removed and existing highways widened to keep pace with projected growth in vehicle-miles of personal travel and freight movements. New infrastructure will have to be provided to accommodate emerging new population concentrations.

The motor fuel tax revenues currently flowing into the Highway Trust Fund are clearly inadequate to fully finance these investment needs. Accumulated balances in the Trust Fund will have been exhausted by the end of the current authorization. With the cost of fuel at the pump rising, opposition to increasing or indexing the fuel tax is expected to remain strong. Thus, new revenue strategies will have to be devised that generate adequate funds to meet the nation's growing transportation needs and at the same time meet with broad public acceptance.

New Program Directions

A second challenge confronting transportation policymakers in the next authorization will be to give the federal surface transportation program a new sense of purpose. Throughout the second half of the 20 th century the federal transportation program had a well-defined objective - construction of the Interstate System. States were willing to contribute more than their proportional share in the interest of achieving a common goal of nationwide road connectivity. But once this mission was completed, the federal-aid highway program lost its unifying purpose. Increasingly, it became a source of revenue for local public works. States began to compete for their "fair share" of Trust Fund resources to spend on projects benefitting local economies and special constituencies. TEA-LU contains a staggering total of 6,371 such projects, including many that have only a tenuous relation to improving mobility (e.g. snowmobile trails, hiking paths, museums, graffiti elimination, dust control mitigation, "bridges to nowhere"). These congressionally earmarked projects account for $24 billion or nearly 9 percent of total spending. By contrast, earmarked projects numbered only 10 in 1982 ($0.36 billion), 152 in 1987 ($1.4 billion), 538 in 1991 ($6.2 billion) and 1850 in 1998 ($9.4 billion).

Should the current drift be allowed to continue? Should the federal-aid highway program become a vast revenue sharing program with hundreds of millions dollars channeled to projects that have little or nothing to do with enhancing mobility or reducing congestion? Or can the federal program once again be given a mission that transcends parochial interests, conveys a sense of a national purpose and captures the imagination of the public? If so, how should new national goals and priorities be determined? That is the second important challenge facing transportation policymakers in the next legislative round.

Continued Need for Federal Involvement?

Finally, questions have been raised about the need for a continuing strong federal involvement in transportation. Today, the nation is facing a vastly different set of circumstances than those that gave rise to the federal surface transportation program. With the Intestate Highway System completed and urban rail infrastructure brought up to date, the rationale for a strong federal role in surface transportation has become less compelling. Devolution advocates contend that states are perfectly competent to determine their transportation needs and should be allowed to raise transportation revenues that match those needs. A major portion of the federal motor fuel tax could thus be turned back to the states, with only sufficient tax revenue retained by the federal government to support maintaining the Interstate Highway System in good repair and supporting certain national priorities such as research. (See, "Is There a Case for Devolution?" Innovation Briefs , July/Aug 2005). With sentiments toward a leaner central government running strong, and with the donor-donee issue a continuing source of contention, devolution is a policy option that cannot be ignored.

Congressional Commissions

Congress has wisely taken notice of these challenges. In the recently enacted surface transportation bill (TEA-LU), it has created two commissions to address the future of the federal surface transportation program: a 12-member "National Surface Transportation Policy and Revenue Study Commission" [Sec. 1909(b)] and a 15-member "National Surface Transportation Infrastructure Financing Commission" [Sec. 11142]. Both commissions are directed to assess the adequacy of the Highway Trust Fund to meet anticipated long-term transportation needs and both are to consider alternative revenue sources to replace or supplement the fuel tax. One can only speculate why Congress felt it necessary to create two commissions with such similar mandates. Only one substantive provision distinguishes one commission from the other: the Sec. 11142 Commission is specifically directed to consider a devolution scenario that would permit states to partially or fully opt out of the federal-aid program and obtain an exemption from the Federal gasoline tax.

The specific mandate of the congressional commissions is to address the long range financial needs of the nation's transportation system and to ensure the continued integrity of the Interstate System. But the commissions also offer an opportunity to consider the broader issues discussed above. We hope the commissions will construe their mandate broadly enough to pick up this challenge.

We also urge the commissions to reach out to the broad community of transportation stakeholders, professionals and financial experts in order to obtain the benefit of the widest possible range of views. The resulting flow of ideas is bound to enrich the work of the commissions. We, at Innovation Briefs, look forward to closely following the commissions' deliberations and contributing to the flow of ideas. We believe our publication can offer our readers a valuable independent channel for the communication of creative ideas that will stimulate the commission members' thinking and expand their horizons.

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