Highway Funds Are So Tapped that Republicans Want Higher Taxes

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Cars sit in miles-long traffic jam on southbound highway 101 as they approach a flooded section of the freeway on December 3, 2014 in Mill Valley, California.

Cars sit in miles-long traffic jam on southbound highway 101 as they approach a flooded section of the freeway on December 3, 2014 in Mill Valley, California.

Photographer: Justin Sullivan/Getty Images

Falling fuel prices, crumbling roads and bridges and a gridlocked Congress have U.S. states, even those run by Republicans, debating higher taxes.

States including Iowa, Michigan and New Jersey are considering higher levies at the pump, borrowing more or other money-generating maneuvers to improve infrastructure. Prices at the pump falling by more than $1 per gallon since April may help ease opposition.

“The timing is right in light of the fact that fuel prices have dropped significantly,” Iowa Governor Terry Branstad, a Republican re-elected last month, said during a Dec. 8 news conference in Des Moines. “This is a difficult and challenging issue, but if we work together, I think we can get something done.”

The American Society of Civil Engineers estimates that the U.S. requires $3.6 trillion in infrastructure investment by the decade’s end. Congress hasn’t raised the gasoline tax since 1993, allowing the Highway Trust Fund to reach the brink of insolvency this year before approving a solution that will sustain it only through May. Meanwhile, federal and state levies raise less as vehicle fuel efficiency has increased.

“There are a number of factors that are converging to up the pressure to invest in transportation,” said David Goldberg, a spokesman for the Washington-based group Transportation for America, which advocates increased infrastructure funding.

Crumbling Pavement

Goldberg said representatives from 30 states attended the group’s Denver conference last month exploring ways to raise funds, and he said at least 10 are considering action. Sean Slone, program manager for transportation policy at the Council of State Governments in Lexington, Kentucky, identified 20 states where investment could be on the agenda.

To meet surface-transportation needs, $163 billion of investment is required annually for the next six years, according to a Dec. 9 report by the American Association of State Highway and Transportation Officials and the American Public Transit Association. The World Economic Forum ranked the quality of U.S. roads 16th worldwide this year, down from eighth five years earlier.

States can increase gasoline taxes, seek other revenue or simply neglect their needs, said Richard Auxier, a research associate at the Tax Policy Center in Washington.

“Option C is untenable,” he said. “The problem is that this is always going to be a difficult political vote.”

Stubborn Opposition

That was evident this year when Delaware Governor Jack Markell, a Democrat, wasn’t able to persuade his own party, which controls the legislature, to increase the fuel tax by 10 cents per gallon and borrow $250 million.

In states dominated by Republicans, who have made opposition to taxes a pillar of political identity, the sell is still harder.

Iowa has an estimated $215 million shortfall in annual transportation funding. Yet, during the past two years, measures that would raise the gasoline tax for the first time since 1989 went nowhere, said Representative Josh Byrnes, the Republican chairman of the House Transportation Committee.

While the Iowa chapter of Americans for Prosperity, the pro-business group backed by billionaire industrialists David and Charles Koch, supports infrastructure spending, existing revenue should pay for it, state director Drew Klein said.

Election Survival

Byrnes said he’s optimistic that Iowans are ready to support a funding proposal dedicated to transportation.

He said that he was re-elected with 63 percent of the vote Nov. 4 though he was a vocal advocate for raising revenue. Transportation for America said 98 percent of representatives in 10 states who supported bills to raise transportation revenue won their next primary.

“Voters aren’t going to kick you out of office because you supported a fuel tax,” Byrnes said.

There’s some room to maneuver. Gasoline has fallen below $2 a gallon in some places, including Oklahoma and Texas, amid an oil glut that has dragged international rates down 39 percent in the past five months.

Pump prices have fallen since reaching this year’s high of $3.696 on April 26, according to data compiled by Heathrow, Florida-based motoring club AAA. That may make voters more likely to accept higher taxes.

Byrnes said he will push a funding plan when Iowa lawmakers reconvene Jan. 12.

Dire Straits

Republican elected officials, who generally oppose higher taxes, are seeing the link between spending on infrastructure and improving the economy, said Slone of the Council of State Governments.

There has been “a realization among Republicans in the last few years how dire the situation has gotten in some states as far as the condition of the infrastructure, but also how important it is to invest,” he said.

In Michigan, Republican Governor Rick Snyder proposed a plan to raise an estimated $1.2 billion a year. He would replace the 19 cent per-gallon gasoline tax and 15 cent per-gallon diesel fuel levy with a percentage tax on wholesale gasoline that would increase annually for three years. The Senate has passed the bill, and it awaits action in the House, which has passed a competing plan.

“The message from every corner of our state is clear,” Snyder said in a Dec. 5 release. “It’s time to fix the roads.”

Christie’s Conversion

New Jersey’s main roadwork fund will be unable to borrow by June 30, and all its tax-and-toll revenue pays off bonds, leaving nothing for maintenance or construction. Republican Governor Chris Christie, who had opposed raising the gasoline tax, put a Democrat in charge of transportation spending and now says he’s open to all options.

Garden State residents aren’t sold on a tax increase. Voters oppose increasing the gasoline levy to finance road and mass transit improvements by 58 percent to 39 percent, a Quinnipiac University poll released today shows.

More than 30 states have passed transportation-related fiscal initiatives during the past three years, according to the National Conference of State Legislatures. Yet even some of those still need more.

Making Do

While Texas voters approved a ballot measure Nov. 4 to send about $1.7 billion in oil-and-gas tax revenue to highway work instead of a reserve fund, researchers say the Lone Star State will be about $4 billion a year short of what’s needed.

Republican Governor-elect Greg Abbott is proposing an additional $4 billion for transportation, including money from the ballot issue, without raising taxes, fees or tolls. Abbott would dedicate more of the motor-vehicle sales tax to highways, according to a policy plan.

Raising taxes or fees is “not in the cards,” said John W. Johnson, former chairman of the Texas Transportation Commission.

Whatever the approach, states have little choice but to try, because they can’t trust Congress to act, said Byrnes of Iowa.

“If we don’t do something at a state level and be proactive, we’re in big trouble,” he said.

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