Trump’s DOT Budget Uses Principle of Federalism in Making Funding Decisions

Commentary

Trump’s DOT Budget Uses Principle of Federalism in Making Funding Decisions

President Trump released a five-page fact sheet earlier this week on his 2018 budget. While the proposal returns the U.S. Department of Transportation to the principle of federalism and uses private sector financing to help stretch resources, certain Democrats could not wait to play politics.

According to Senate Minority Leader Chuck Schumer, “President Trump’s campaign promises on infrastructure are crumbling faster than our roads and bridges.” Oregon Representative Peter Defazio, who wakes up on the wrong side of the bed every morning, called it a “sham” and a recipe for “pushing the responsibility off federal balance sheets.”

But what the fact sheet proposes is an actual focus for infrastructure, something this country has long been lacking.

The USDOT was created in part to help build the Interstate system. But since the system’s completion 25 years ago we have been lacking a long-term focus. The closest thing we have to a focus is USDOT’s mission statement, which is to, “Serve the United States by ensuring a fast, safe, efficient, accessible and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future.”

Those 36 words don’t exactly roll off the tongue. Translated from bureaucratic speak our current focus is to spend federal money on anything and everything that could possibly have something to do with transportation. In fact, the statement is so general that the only unique word is “transportation”. Take out one word and it could be the mission statement for the department of Health and Human Services or Education, or the Post Office.

Focusing on anything and everything transportation is simply not a feasible goal. There have to be some things that are priorities. But how do you choose? A large part of Savannah’s economy is its port. Denver, in contrast is thousands of miles from a major port. We could focus on ports but then we would picking a clear winner, Savannah, and loser, Denver.

Trump proposes using federalism as the guide for what transportation areas the government should focus on. Federal modes such as highways, freight rail, aviation and ports should have a federal role while local and state issues such as transit and active transportation should be funded a the local or state level. Further, all modes should use public private partnerships and financing tools to stretch resources further.

The federalism approach can be seen in all facets of Trump’s budget:

  • Air Traffic Control (ATC) Corporatization: Spinning off the provision of air traffic services into a separate corporation has been supported by the Reagan and Clinton administrations. Almost every other developed country in the world separates their ATC provider from their safety regulator. Safety regulators are conservative in nature, which is vital for safety but acts as a roadblock for innovation. That’s one reason Next Gen and other vital improvements to the ATC sector are way behind schedule.
  • Reforming the Inland Waterways Fee: Currently the fee is set too low to provide the needed resources to maintain the waterways. As a result, locks or dams go out of service forcing lengthy detours or preventing goods from reaching their market by waterways. In 1986, Congress mandated that commercial traffic pay 50% of the capital costs of locks and dams. Enforcing this mechanism will help create a more dependable system.

The budget also focuses on expanding several existing users-pay/users-benefit based funding and financing tools. First, the administration funds the Transportation Infrastructure Finance and Innovation (TIFIA) Act at $1 billion. Congress had previously increased TIFIA resources to $1 billion in MAP-21 and then reduced it to $290 million per year during the FAST Act because few projects were being funded. Few projects were being funded because President Obama’s DOT changed TIFIA from a check the box program to a discretionary program that awarded funds to certain projects only. Assuming the Trump administration treats TIFIA as a true check the box program, the $1 billion in funding will be necessary.

The plan proposes lifting the cap on private activity bonds (PABs). PABs combined with TIFIA loans have been used to finance many P3s. Unfortunately, PABs have a lifetime cap of $15 billion and it is estimated more than $13 billion will have been used by the end of this year. Failing to lift the PAB cap will take away a vital financing tool.

The proposal also suggests incentivizing innovative approaches to congestion management. It mentions the Urban Partnership Agreement Program and the Congestion Reduction Demonstration Program, two Bush-era discretionary grant programs that helped six metro major areas reduce traffic congestion, improve transit service and better manage parking demand.

Trump’s plan liberalizes tolling policy by recommending elimination of the Interstate prohibition of tolling. States own Interstate highways and they should be able to choose how to fund and finance their roads within limits. The budget also recommends allowing the private sector to build and maintain rest areas. Current rest areas are depressing places with vending machines and if customers are lucky working bathrooms. The private sector would bring more food service options, gasoline and other services seen on Turnpikes. State DOTs put little funding into rest areas because offering such services is not a DOT’s core focus. The only reason most states have rest areas is because they are a prerequisite for a highway to be an Interstate.

The budget also has some much needed environmental review streamlining. Proposals focus on improving accountability, conducting review concurrently and reducing spurious court challenges. While both the Bush and Obama administration worked to speed up the project review timeline, more work is needed.

Not everybody is a fan of the President’s budget. It is up to Congress to craft a budget that can pass. Democrats are free to suggest their own ideas. But their suggestions have to be more realistic than the Progressive’s caucus $2 trillion plan that raises prevailing wages in all areas and is paid for through closing tax loopholes. If you think Congress can find $2 trillion through closing tax loopholes, I have some property with snow-covered mountains in Puerto Rico that I want to sell you.

Baruch Feigenbaum is assistant director of transportation policy at Reason Foundation a non-profit think tank advancing free minds and free markets.