By Kenneth Orski
President Obama’s Fiscal Year 2014 budget request includes $77 billion for the Department of Transportation and an additional $50 billion “for immediate transportation investments.” His next transportation bill calls for a 25 percent increase in funding over current levels and assumes a transfer of $214 billion to the Highway Trust Fund over six years, “to maintain trust fund solvency and pay for increased outlays.”
To offset this spending, the Administration proposes using the “savings” or “peace dividend” from winding down the war in Afghanistan.
House Transportation Committee Chairman Bill Shuster (R-Pa.) wasn’t impressed. “The President’s budget,” he said, “repeats his call to increase spending without identifying a viable means to pay for it. … You can’t just keep on spending money that you don’t have.”
Bill Graves, president of the American Trucking Association, spoke for many stakeholders when he remarked, “For five years, we’ve waited for President Obama to clearly state how we should pay for these critical needs and, I’m sad to say, we continue to get lip service about the importance of roads and bridges with no real road map to real funding solutions.”
As for the “peace dividend,” the idea has been dismissed as “budgetary gimmickry” by congressional Democrats and Republicans alike.
In sum, a large segment of congressional and public opinion judges the White House proposals as vague, repetitive, unrealistic and politically unachievable. Even the president’s most loyal supporters in the transportation community, the liberal advocacy groups, seemed disappointed and circumspect in their comments.
No one disputes President Obama’s and the infrastructure advocates’ claim that some of America’s transportation facilities are reaching the limit of their useful life and need reconstruction. Nor does anyone disagree about the need to expand infrastructure to meet the needs of a growing population.
But fiscal conservatives among infrastructure advocates (and we count ourselves among them) contend that this does not rise to the level of a national crisis requiring a massive $50 billion federal crash program as proposed in the President’s budget message, or the expenditure of more than $100 billion per year as recommended by the American Society of Civil Engineers (ASCE) in its latest “Report Card.”
The challenge can be met if each state did its part to progressively bring up its transportation facilities (including its Interstate highway segments) to a “state of good repair,” using its own tax revenues and its formula allocation of the Highway Trust fund dollars. As numerous news dispatches attest, that’s precisely what is happening.
A large number of states are not waiting for the federal government to come to the rescue. They are using their own resources and raising additional revenue to pay for reconstruction of their aging facilities and maintain their transportation systems in good working condition. “Governors and state legislatures realize that the level of federal assistance beyond 2014 is highly uncertain and they are acting on a credible assumption that federal funding will remain at current levels or may even be cut back,” an association executive who is familiar with the thinking of senior-level state officials, told us.
What about large-scale reconstruction and system-expansion projects that require billions of dollars – transportation investments that are beyond the states’ fiscal capacity to fund on a pay-as-you-go basis? Those investments, provided they are credit-worthy (i.e. are revenue-producing or backed by dedicated tax revenue), will be mostly financed through long-term credit instruments and public-private partnerships.
The future of infrastructure megaprojects is intimately tied to the financial involvement of the private sector and to a wider use of tolling, “availability payments,” and innovative credit instruments such as TIFIA and private activity bonds (PABs), according to one veteran facilitator of public-private partnerships.
Lending credibility to the above funding scenario and accelerating its adoption are the new realities underlying the federal role in transportation: (1) a federal program that no longer has a clearly defined mission or purpose and many of whose functions are properly a state and local responsibility; (2) a Highway Trust Fund that has lost its capacity to support large-scale transportation investments and that has come to depend on periodic injections of general funds to remain solvent; (3) an absence of political will to raise the federal gas tax and (4) continued inability to identify another credible revenue source to supplement or replace the gas tax.
In sum, having the states assume financial responsibility for fixing their aging transportation facilities and preserving them in a state of good repair, while employing public and private financing for major infrastructure investments, offers the best chance to solve the current federal funding dilemma.
Kenneth Orski, editor and publisher of Innovation NewsBriefs transportation newsletter, has worked in the transportation field for nearly 40 years. The Georgia Public Policy Foundation is an independent, state-focused think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
©Georgia Public Policy Foundation (May 10, 2013). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.