Your Fuel-Sipping Car Screwed Up the Funding to Fix This

Photographer: Jonathan Alcorn/Bloomberg

U.S. states are taking more financial responsibility for roads and bridges as the expiration of federal transportation funding approaches, straining a partnership that dates to the administration of President Dwight D. Eisenhower in the 1950s.

At least six states have delayed about $2 billion in construction projects because of the uncertainty, and others are making contingency plans to pay contractors. Five states, all with Republican governors, increased fuel taxes this year, while Minnesota and Michigan are pursuing legislation or ballot measures to raise additional money.

The Congressional Budget Office projects that the U.S. Highway Trust Fund, which provides federal dollars for roads and transit, will become insolvent after the current funding bill, itself only a 10-month fix, ends May 31. There’s been no long-term funding plan since 2009, and Congress has failed to address an estimated $58 billion annual shortfall for surface transportation. States are charting their own courses.

“They have to do that,” Tennessee Commissioner of Transportation John Schroer said. “I don’t think we have any other option.”

States accounted for 40 percent of the average $213 billion in annual highway and transit spending from 2008 to 2012, with local entities paying 35 percent and the federal government 25 percent, according to the Pew Charitable Trusts in Washington. Yet in some states, federal funding accounts for more than half the transportation budget.

Fuel Efficiency

While U.S. infrastructure deteriorated, spending declined as cars became more fuel efficient and collections from state and federal gasoline taxes declined. Expenditures at all levels fell $27 billion, or 12 percent, between 2002 and 2011, and revenue for the Highway Trust Fund, created under Eisenhower in 1956 to pay for the interstate system, has fallen short of expenditures for more than a decade, Pew said.

About $163 billion is needed annually over a six-year period for highways, bridges and transit systems, yet only about $105 billion is being invested, according to a December report from the American Association of State Highway and Transportation Officials and the American Public Transportation Association.

The needs are pressing enough that even when states raise revenue, they can’t afford to lose dollars from Washington, U.S. Transportation Secretary Anthony Foxx said.

“The federal funding is still foundational,” Foxx told reporters in Washington last week. “They could take one step forward and two steps back if the federal government ends up going over this cliff.”

Backup Plans

The Obama administration has proposed a six-year, $478 billion plan, and there have been proposals that include raising the federal gasoline levy or taxing U.S. companies’ offshore profits brought home. None have advanced.

Amid the uncertainty, Arkansas, Delaware, Georgia, Montana, Tennessee, and Wyoming have delayed construction projects totaling about $2 billion, and more are likely to as the deadline approaches, according to the U.S. Department of Transportation.

Some states, including Iowa, are proceeding with the expectation of continued funding, and planning to borrow to pay contractors if that doesn’t happen, said Jim Tymon, chief operating officer of the highway officials group.

The roles of federal and state governments are changing by default as Congress fails to act, said Joshua Schank, president of the Eno Center for Transportation, a nonpartisan policy research group in Washington.

States will slowly provide a greater percentage of spending as long as funding from Congress remains stagnant, he said.

“With this continuous crisis, it’s very difficult for states to plan or figure out what the funding is that they should be raising,” Schank said.

The Highway Trust Fund’s main purpose was to pay for interstates. After the system was completed in the 1990s, the fund’s role and that of the federal government in paying for infrastructure became less clear, said Sean Slone, director of transportation and infrastructure policy at the Council of State Governments in Lexington, Kentucky.

Congress had passed long-term funding bills sending money to state and local governments until 2009, when it started enacting a series of short-term extensions. The federal gas tax, the major source of revenue for the fund, hasn’t been increased since 1993.

Candidate Plans

Some members of Congress, including senators Ted Cruz and Marco Rubio, both Republican presidential candidates, have advocated maintaining federal responsibility for interstates while shifting more authority to the states.

U.S. Senator Rand Paul, another Republican candidate, and Democratic U.S. Senator Barbara Boxer introduced legislation April 16 to extend the Highway Trust Fund by letting companies voluntarily return overseas profits at a tax rate of 6.5 percent.

An e-mail request for comment on infrastructure funding from Hillary Clinton, the announced Democratic candidate for president, wasn’t returned.

With needs mounting, states are moving to bolster their own funding. After no legislature increased gasoline taxes from 2010 to 2012, six states and the District of Columbia did in 2013, according to the National Conference of State Legislatures in Denver. Three others followed suit last year, and Georgia, Idaho, Iowa, South Dakota and Utah acted this year.

States are also borrowing more and turning to private sector. Ohio sold private-activity bonds this month for a $430 million highway bypass project, the state’s largest, and its first public-private partnership.

Michigan voters will consider in May whether to raise money for transportation, and the Republican-led Minnesota House of Representatives approved a bill April 22 to generate $7 billion for roads and bridges during the next decade.

“We would just as soon be proactive in making sure that we’ve got our needs met, and not relying solely on the federal government to come through,” said Tim Kelly, chairman of the House Transportation Policy and Finance Committee.

Minnesota Governor Mark Dayton, a Democrat, has proposed an alternative $11 billion plan for roads, bridges and transit with higher taxes because the state has no other choice.

“It’s not going to come from the federal government,” Dayton said at the Capitol in February. “It’s not going to come from the sky, so it’s going to have to come from us.”

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