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Did you know? For transportation agencies in the Chicago region, the federal government is an essential source of funding for expanding and maintaining infrastructure. The Chicago Transit Authority’s five-year capital investment strategy, for example, will rely on the federal government to cover 46 percent of total costs. Similarly, 62 percent of the State of Illinois’ highway capital improvement priorities over the next few years are expected to be sponsored by Washington.
While state and local governments provide considerable revenue to improve and expand our nation’s transportation network, inflation has eroded about a third of the gas tax’s purchasing power since 1993, while improvements in vehicle fuel economy also have reduced the effectiveness of fuel taxes. MPC supports increasing revenues to upgrade our transportation system, concurrent with creating new goals, objectives and performance measures to ensure that money is spent responsibly and with clear accountability to the taxpayers.
The federal role in transportation
According to the latest estimates, the federal government contributes about 23 percent of the nation’s overall public spending on transportation, accounting for a quarter of all highway funding and one-fifth of transit programs. Those figures are down from the late 1970s, when Washington accounted for almost 40 percent of all transportation spending in the U.S., about half of highway capital investments and virtually all mass transit capital investments.
Yet federal investment in transportation infrastructure remains an essential counterpart to state and local spending, which, as of late, has not grown. Indeed, state and local investments in highway capital projects in 2007 were at their lowest levels, inflation-adjusted, since 1997. Non-federal funds for transit capital projects in 2007 were at their lowest levels since 1993—despite a U.S. population that grew by more than 40 million.
A major cause of the failure of transportation investment to keep up with the need has been a strict adherence to low fuel taxes, which are the primary source of federal transportation investments. The federal government first began collecting gas taxes in 1932, but its role expanded tremendously in 1956 when Washington decided to use a 3-cent-per-gallon tax (worth about $0.26, more than Americans pay today) to fund the planned Interstate Highway System. Over the course of 40 years, that tax was raised every few years until it reached 18.4 cents per gallon in 1993. Meanwhile, states instituted their own taxes, including Illinois, whose per-gallon rate reached 19 cents in 1990.
Neither rate has been increased or adjusted for inflation, while at the same time, construction costs and people’s demands for transportation investment have only grown.
As a result, the average motorist pays about half as much in motor fuel taxes to drive a mile as he or she would have 20 years ago and, more importantly, the level of funding available to pay for improved transportation infrastructure has been steadily declining. American public spending on infrastructure investments, as a share of the U.S.’s gross domestic product (GDP), has declined from over 3 percent in the early 1960s to about 1 percent today. At the same time, Asian countries are investing 9 percent of GDP and European, 5 percent. It is hardly surprising that the nation’s infrastructure is falling apart.
The Highway Trust Fund, which receives federal fuel tax revenues and then sends them out to states and cities to fund roads and transit, is running out of gas. Because of declining tax receipts, better fuel efficiency and fewer vehicle miles traveled, the Fund has been on the edge of bankruptcy several times over the past few years. Since 2008, Congress has voted to move $53.6 billion from the general fund (mostly derived from income taxes) into transportation programs; another $12.6 billion will be necessary this year.
As the chart above shows, the Fund will run out of money again this September if Congress fails to transfer in the needed dollars. There is no guarantee that transfer will happen.
States plot a new path
Faced with uncertainty from Washington, slowly declining resources and the tremendous need to upgrade older infrastructure, states and cities all over the country are charting their own approaches to funding. From Massachusetts to Virginia, states have passed laws to raise new revenues and fund new transportation investment programs.
At the beginning of this year, for example, drivers in Pennsylvania began paying a 9.5-cent-per-gallon wholesale fee charged on gasoline. This user fee will raise $2.3 billion for transportation in the Keystone State by 2017. Maryland and Massachusetts increased their taxes and indexed them to inflation.
Meanwhile, in New Hampshire, legislators are working to increase the gas tax. Certain representatives argue that the fee should be linked to the consumer price index so that it keeps track with inflation.
In several major cities, citizens have opted to fund new transportation programs themselves. In Los Angeles County, California, for example, the 2008 passage of Measure R, a half-cent sales tax increase, promises to pay for a major expansion in rail lines, as well as upgrades in bus service and several highway improvements. Citizens recognized that the benefits of transportation were worth a few extra dollars a month.
MPC is working with state and local partners in the Chicago region to identify new sources of funding and innovative new financing tools to improve the area’s transportation infrastructure. MPC supports the proposal by the Chicago Metropolitan Agency for Planning (CMAP) to increase the state fuel tax by 8 cents per gallon and then index it to inflation.
A need for a continued federal role
Despite considerable momentum at the state and local levels, there remains a considerable need for federal support. Forecasts by CMAP, for example, show that declines in federal support cut into long-term regional funding for transportation investments. This may make it very difficult to fund not only expansions to the system, but also necessary maintenance on the existing network.
In December 2013, U.S. Representative Earl Blumenauer (D-Oregon) introduced a bill that would raise the federal gas tax by 15 centers per gallon. A three-year phase in of the proposal would result in an average of $17 billion additional federal dollars each year, in effect significantly expanding federal dedicated funds for transportation.
Though Rep. Blumenauer’s bill faces long odds, it was endorsed by the AAA, which cited the importance of maintaining the transportation infrastructure that we have.
Former U.S. Secretary of Transportation Ray LaHood (a former Illinois Congressman) similarly has endorsed the idea of raising the federal gas tax. “America is one big pothole,” he told CNS News. “We need people to step up, provide some leadership, and come up with the money. That’s what we have always done in America.”
The long and short of it is, our current transportation dollars are insufficient. To ensure that highway and transit systems across the country remain usable, we have to accept the need for change. Biting the bullet on a gas tax increase today means a better system tomorrow.