Out of Control Policy Blog

The Highway Bill Debate Sheds Light on the Future of Transportation Funding

National Journal's Transportation Blog asks about the status of the highway bill and whether the debate in Congress over surface transportation has changed substantially.  I’m not surprised that crafting a reauthorization bill in 2012 is more contentious than usual. Given the out-of-control growth in annual budget deficits and the national debt, the size and cost of the federal government will likely be cut back in coming decades—and transportation will be no exception.

This context explains why there is more similarity between the House and Senate bills than you would imagine based on most pundits’ commentaries. Here is a short list of similarities, drawn from my recent article in Public Works Financing:

  • Program consolidation—both bills would dramatically reduce the number of separate programs, letting states make more choices in how to spend federal funds;
  • Optional “Enhancements”—both bills would no longer require a set percentage of the major highway program to be spent on things like bike paths, scenic trails, and other “transportation enhancements”;
  • Environmental streamlining—both make further attempts to reduce the convoluted and time-consuming process of getting large projects through the review process;
  • No high-speed rail funding—neither bill provides funding for the Administration’s signature HSR program;
  • No infrastructure bank—neither would create a new grants and loan entity for transportation projects;
  • TIFIA expansion—both would greatly expand TIFIA, a remarkable shift from grants to loans, so as to make limited federal dollars go further.

And perhaps most significant of all, neither bill would increase real annual funding beyond the levels of the last several years—the first time this has been the case since the program was created in 1956. These similarities all reflect the federal government’s dire fiscal situation and the need to start limiting—rather than endlessly expanding—the federal government’s role in transportation.

That context also explains the most radical element of all: the House proposal to shift transit funding out of the Highway Trust Fund. There are several reasons for this proposal.

First, given the miniscule growth in highway user-tax revenue, House budgeteers are seeking to make those limited funds do as much as possible for our under-resourced highway system. (This also explains their emphasis on the National Highway System, rather than scenic byways and bike paths.)

Second, with the Federal Transit Administration’s increased emphasis on justifying projects in terms of sustainability, smart growth, and economic development, the idea that transit investment helps motorists by reducing traffic congestion is less and less credible.

Third, in order to insulate the Highway Trust Fund from future across-the-board spending cuts, the Budget Control Act requires that at least 90% of a trust fund’s revenue come from user taxes. Going back to the original concept of a highway trust fund makes it easier to meet that test.

While that shift may end up being too radical this time around, it’s a sign of the times, indicating that business-as-usual in federal transportation funding is no longer an option. However the current bills turn out, the process of creating them offers us a preview of the transportation future that’s staring us in the face. It’s a future in which state and local governments will be taking on more of the burden, with non-federal user taxes and user fees (tolls and other mileage-based user fees) becoming a far more important part of the funding picture.

Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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