A Window of Opportunity to Get Transportation Funding Right

January 16th, 2015 by 2 Comments

By Kelly McCutchen

KELLY McCUTCHEN President, Georgia Public Policy Foundation
KELLY McCUTCHEN
President, Georgia Public Policy Foundation

In politics, you must take advantage of windows of opportunity. Sometimes good ideas are sidetracked by unfortunate events, a bad economy or even personality conflicts among political leaders. Given the risk of delaying decisions, Georgia needs to address its transportation shortfall quickly and practically.

The Georgia Public Policy Foundation rarely promotes more government spending. But transportation funding is due for an adjustment. The Georgia Department of Transportation consistently wins awards for getting projects done on time and on budget, but it can’t complete projects that aren’t funded.

Georgia’s motor fuel excise tax hasn’t changed in 44 years, while fuel efficiency and inflation have steadily eroded the tax base and its purchasing power. The sales tax on motor fuel moves in lockstep with volatile gas prices, making long-term planning difficult. Meanwhile, billions of dollars of motor fuel taxes have been diverted to other capital projects.

In its final report, the Joint Study Committee on Critical Infrastructure Funding proposes several funding options to address these challenges. Below are four recommendations that would form the basis of a strong initial plan of action.

Convert the current sales tax on motor fuel to an excise tax. Georgia has the 23rd highest gas tax in the nation, but less than 60 percent of these funds are dedicated to transportation. An excise tax of 27.5 cents per gallon – equivalent to the current tax – would stabilize revenue and dedicate an additional $650 million a year to transportation projects once phased in.

The arcane way the tax on diesel fuel is calculated and collected by state and local governments discourages truckers from buying fuel in Georgia. Converting to an excise tax is estimated to boost revenues from diesel fuel taxes by another $60 million a year.

Establish an annual road usage charge/fee for alternative fuel vehicles. Under the “user pays” principle, all vehicles should pay for the use of the roads, regardless of what fuel they use. An annual fee of $200 for non-commercial, alternative fuel vehicles would raise $1 million a year. 

Specific attention should be given to the development of new toll lanes/facilities and the creation and expansion of managed lane networks. Managed lanes with tolls that automatically rise and fall to balance supply and demand and keep traffic moving have several benefits:

1) They have double the capacity of a regular lane during rush hour, benefiting everyone, including those who aren’t paying tolls.

2) They allow buses to escape traffic. That means predictable trip times and a much higher quality of service for transit.

3) They provide “congestion insurance” for everyone. Most people won’t pay the toll every day, but when you urgently need to be somewhere on time, it is well worth the price.

4) They are projected to raise more than $350 million a year in tolls and private financing.

Implement a one-cent statewide sales tax. We would modify this recommendation to read: “Provide flexibility for existing sales taxes.” Three regions have already passed a 1 percent transportation sales tax, and all indications are they are pleased they did. In some regions that did not approve the tax, the mix of priorities in the region were not in sync, making it hard to find consensus on projects. In others, tax revenues exceeded the cost of priority projects, allowing room for low-priority projects to make the list and causing a backlash from voters.

Added flexibility would enable smaller, more homogeneous tax regions and the option of a lower tax rate (also referred to as a “fractional SPLOST”) for local governments. Even subtracting the three regions that have already passed the tax, the potential revenue is more than $1.2 billion. We will assume $900 million a year as a more realistic number; the idea is that voters are more likely to approve a smaller, more targeted project list.

These recommendations add up to $2 billion a year in potential new funding for roads, bridges and transit, tripling the state’s annual investment in transportation.

These policy proposals have broad support; all the more reason for lawmakers to hammer out the details and get them passed quickly. As has happened before, the risk is allowing the legislative clock to run out without any progress – something Georgia’s political leaders and we believe would be unacceptable.

Kelly McCutchen is president of the Georgia Public Policy Foundation.

 

2 thoughts on “A Window of Opportunity to Get Transportation Funding Right

  1. No sympathy here for these proposals. GDOT/GOVT will never have enough $$$$! Look first at encouraging compliance. Antipathy is rampant for many reasons. Biased taxation tops my list. Committee/You can’t see the wood for the trees.

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