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Transportation-Policy Crossroads

by Samuel R. Staley
There is indeed a right way

Is U.S. transportation policy beyond salvation? A quick glance at the last two years suggests redemption is unlikely. But a nuanced reading of the current political environment reveals that a path forward exists, particularly if the new Congress takes a balanced and realistic approach to the issue.

This is no small task. Federal transportation policy is in disarray. A politically sensitive White House is fixated on short-term job creation, not the long-term investments needed to ensure that the nation’s transportation backbone is healthy enough to support productivity and investment. One of the top priorities of the Obama administration is an expensive but inconsequential high-speed-rail initiative, at a time when the steady erosion of our nation’s primary source of federal transportation funding — the per-gallon gas tax, whose revenue is dwindling as vehicles become more fuel-efficient — is about to throw the Highway Trust Fund into insolvency. Compounding these challenges is the leadership at the U.S. Department of Transportation (DOT), which includes a cabinet-level secretary, Ray LaHood, known more for legislative dealmaking than for an understanding of the nation’s transportation needs and challenges. Finally, the U.S. DOT is trying to make up for decades of policy abdication by state departments of transportation — even though it lacks the resources and constitutional mandate to buy and deliver everything on the smorgasbord of transportation improvements that analysts and politicos say we need.

Nearly half a dozen national commissions and transportation-policy organizations have published reports calculating shortfalls of hundreds of billions of dollars and outlining potential solutions. The Federal Highway Administration provided one of the more useful analyses in 2008. State, local, and federal capital spending on roads, bridges, and streets amounted to $78.7 billion in 2006. Just to maintain current roads, the nation needs to be spending $105.6 billion. To improve them — to begin to make headway against congestion and upgrade bridges and streets — we would need to spend $137.4 to $174.6 billion each year, depending on how we prioritize projects.

Complicating the picture is our abandonment of a sound principle of public finance: Those who benefit from a public investment should, to the extent feasible, pay for it. That was the principle on which the federal government’s foray into national transportation policy rested when President Eisenhower shepherded legislation through Congress creating the interstate highways in 1956. The network’s construction and maintenance depended on a federal gas tax, whose proceeds went into the Highway Trust Fund.

But we turned away from the user-pays principle soon thereafter, as my colleagues at the Reason Foundation document in a recent report, “Restoring Trust in the Highway Trust Fund.” In 1970, Congress allowed trust-fund monies to be diverted to bus lanes and park-and-ride lots. A mass-transit account was created in the Surface Transportation Assistance Act of 1982, diverting one-ninth of gas- and diesel-tax revenues to public-transit operations and projects. In 1991, the Intermodal Surface Transportation Efficiency Act added bike paths, sidewalks, recreational trails, and historic preservation to the growing list of projects that could be funded by gas taxes. By 2009, 27 percent of spending out of the Highway Trust Fund was dedicated to non-highway expenditures.

In short, the fund started out as a federal commitment to linking the nation together with a series of European-style autobahns, but today pays for just about anything that can be called transportation.

And the Highway Trust Fund is not the only element of federal transportation policy that has lost direction. The extent of the problem was apparent in the Obama administration’s 2009 stimulus, which pumped $48 billion into transportation-infrastructure projects ranging from repaving local streets to funding intercity passenger rail.

DOT’s second-quarter 2010 progress report revealed that only 57 percent of the total discretionary transportation spending through the stimulus program was allocated to the Federal Highway Administration for road and street improvements. Nineteen percent went to the Federal Railroad Administration, mostly for high-speed-rail projects. Another 17 percent went to the Federal Transit Administration for various transit-capital improvements, including streetcars and bike paths.

What’s notable about this distribution is how out of sync it is with the way the American public gets around. The 2009 National Household Transportation Survey revealed that 84 percent of all trips and 88 percent of all distance traveled is by personal vehicle. Amtrak, intercity trains, and commuter trains account for 0.5 percent of all travel. Walking makes up about 10 percent of trips but less than 1 percent of miles traveled. The rest is made up largely of various forms of public transit, including bus and subway.

Performance criteria and cost-benefit analyses are unlikely to align funding priorities with actual travel. Within the Recovery Act was a DOT discretionary-grant program called Transportation Investment Generating Economic Recovery, or TIGER. The program has obligated over $2 billion in federal spending on a variety of projects, from bike paths to major investments in critical national freight corridors.

Initially, TIGER was widely lauded by analysts (including me) for its rigorous evaluative criteria. Projects were subjected to cost-benefit analysis and professional peer review, and were scored on their ability to meet public-policy objectives. Projects with significant local-funding matches and private investment were given priority. Projects of national significance were also given preference. Almost 100 physical-infrastructure projects received funding during two phases of the TIGER program.

Yet a detailed look at the projects awarded would leave more than a few advocates of federal transportation projects scratching their heads. Local funding matches are common, but user fees are hard to find, and many projects are too small or frivolous to warrant federal attention. While innovative, the Indianapolis regional bike path hardly rises to the level of national significance. A widely heralded Atlanta streetcar line that would provide a downtown link to an outer regional rail line will do little to alleviate the congestion that slows interstate commerce and travel through the corridor. These are luxury projects for a federal government facing a budget crisis and a national transportation network facing severe capacity challenges at major transshipment points in places such as Southern California, Chicago, and Houston.

This approach to federal transportation funding no longer fits fiscal reality, or, judging by the rise of the Tea Party movement, the political sensibilities of the American public.

We should go back to basics. Federal policy should be defined by constitutional principles and the concept that was the cornerstone of the justification for federal funding of the Interstate Highway System: interstate commerce.

Congress should narrow the scope of federal transportation-policy priorities to four core principles:

  • Fund only projects that have true interstate-commerce ramifications;
  •  Fund only projects that have a significant impact on the national transportation network;
  •  Enable state and private-sector financing for transportation projects to leverage and, in some cases, substitute for national taxpayer funding; and
  •  Fund research into safety and technology that is beyond the scope and capability of state departments of transportation.

These principles should not be too hard to implement.

First, even though state governments have ceded much of their authority over transportation policy to the federal government, they still control the vast majority of the road network. The federal government funds a little more than a quarter of all spending on the nation’s roads, highways, and bridges. Aviation is largely self-sufficient (funded through landing fees and various aviation user taxes). Most operating costs for transit agencies are also funded by user fees and local and state governments. Thus, with the exception of rural states with large sections of interstate highways, most states already control the spending on their transportation networks.

Second, states own most of the assets that make up the transportation network. Interstate highways make up just 2.5 percent of the 8.5 million lane-miles of roadway in the U.S. Nearly two-thirds comprises small local roads. Even the interstate highways are state-owned and -controlled, though the states receive federal funds to manage and maintain them.

Third, the federal government simply doesn’t have the money to fund projects much beyond upgrading, filling in, and maintaining the 213,588 existing lane-miles of interstate highway, including key bridges and tunnels, especially given the declining revenues of the gas tax. The integrity of the Highway Trust Fund needs to be maintained, and that means limiting the scope of federal involvement to projects we can actually fund. In the aforementioned report, Robert Poole and Adrian Moore of the Reason Foundation coined the term “Interstate 2.0” to describe this goal.

Fourth, private investors are willing to step up and fill funding gaps if governments let them. As open-road tolling (electronic tolling at highway speeds) becomes more popular, incremental enhancements to the road network through innovations like High Occupancy Toll (HOT) lanes will provide sustainable revenue streams that can leverage private capital. HOT lanes already exist in seven states, and six additional states are either building them or seriously studying them.

While U.S. transportation policy is facing serious challenges, its problems are not insurmountable. Many of them are, in fact, political. By simply narrowing the scope of federal transportation policy to clearly defined national interests, encouraging states to become more creative and innovative in managing their networks, and enabling greater private-sector involvement in financing these projects as well as managing them, the U.S. transportation network can remain the envy of the world and a foundation of our global competitiveness.

– Mr. Staley is the Robert W. Galvin Fellow at the Reason Foundation and co-author of Mobility First: A New Vision for Transportation in a Globally Competitive Twenty-First Century.

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