Performance-Based Transportation Spending and Policy

“U.S. transportation policy needs to be more performance-driven, more directly linked to a set of clearly articulated goals, and more accountable for results.” It’s hard to disagree with these bold opening lines of the report from the Bipartisan Policy Center (BPC) National Transportation Policy Project, released earlier this week. “Performance Driven: A New Vision for U.S. Transportation Policy,” (.pdf) was released June 9th at a news conference in Washington.

Much of the case it makes is unarguable—the existing federal policy has no focus, our infrastructure is inadequate, the funding is insufficient, there is little or no attempt to achieve positive returns on investment, and there is little or no accountability for results. So I agree that a better approach is called for. Only I don’t think the entire BPC package is it.

Yes, I’m all for thorough streamlining of the sprawling federal program, for greater competition for funds, and for focusing on both preserving/rebuilding the existing system and adding capacity where it makes sense to do so. And I also agree that “the performance of the transportation system can be directly influenced by how users pay for it” and that we should “link revenue collection to system use and impacts.”

But a key recommendation of BPC’s package of recommendations is “mode neutrality.” Instead of highway user taxes being used just for highways, these funds would become general-purpose surface transportation money, usable for highways, freeways, urban transit, intercity passenger rail, freight rail, and even short-sea shipping (“all forms of freight transportation”). One of the two major programs would provide mode-neutral funding for urban transportation and the other for long-haul transportation. So the net result of all this is that highway users would be the ones paying the bills for federal funding of all the other modes.

The other problem with mode neutrality is that it is at odds with all BPC’s fine words about pricing and user-pays. The original federal highway program was, indeed, a true user-pays/user-benefits program. In principle, highway users could demand whatever level of highway services they were willing to pay for, via their fuel taxes—which could only be spent, by law, on highways. Thus, both the state and the federal highway programs operated somewhat like network utilities, albeit with indirect user charges rather than direct ones like electricity, gas, phone, and water bills. But once the fuel tax becomes a generalized funding source for all manner of things (as it is gradually turning into at the federal level, with only 60% of federal highway taxes actually spent on highways), the connection between use and payment becomes increasingly tenuous. Opening that pot of money to all forms of freight and passenger transportation would be the coup de grace for the user-pays/user-benefits system. And as a practical matter, without a massive increase in the fuel tax level, allocating the relatively fixed pot of fuel tax money among many additional claimants virtually guarantees that much less would be left to rebuild and modernize our vitally important highways.

And that is true regardless of how many clever ideas BPC and other advocates of performance-based transportation put forward—benefit/cost analysis, new performance measures, etc.

In the last reauthorization, Congress passed a number of programs that were supposed to fund strategically important projects—and then promptly earmarked every single dollar in those programs to projects of their own political choosing. And how they screamed when the US DOT under Mary Peters scrounged up close to $1 billion (from 13 existing programs) for truly competitive, performance-based Urban Partnership grants!

Needless to say, I am all in favor of performance-based funding, wherever this can possibly be done. But throwing out—rather than strengthening—the user-pays/user-benefits principle is too high a price to pay. A better course would be to shame Congress into creating accountable, performance-based funding within existing modal programs.