How Will We Pay for Roads, Transit as People Drive Less in More Fuel Efficient Cars?

March 22, 2012
By

How are we going to maintain and rebuild an aging transportation infrastructure in an era when gasoline consumption is down, fuel efficiency is up and the largest cohort in the population – the Baby Boom – is entering its drive-less years?  Don’t look for answers from this dysfunctional Congress. Reauthorization of the gasoline tax, which supports the bankrupt highway and mass transit trust fund, is more than two years overdue, yet the Republican House and Democratic Senate refuse to budge from their respective positions, neither of which even begins to address the core problem.

At the end of this month, the temporary reauthorization of the federal gasoline tax expires. The 18.4 cents-per-gallon tax, which is distributed to states and has been the backbone of road construction and maintenance since the 1950s, hasn’t been raised since 1997. It is now worth a mere 75 percent of its 1990s value in inflation-adjusted dollars.

That means the tax generates less than 90 percent of the money spent by the federal government on roads and mass transit each year, with the rest of the $51 billion program coming from the equally tax-starved general fund. As a result, cash-strapped states, local governments and local mass transit agencies are increasingly on the hook for maintaining how the nation moves its goods, services and people. According to the Federal Highway Administration, the federal government spent $37.8 billion on highways in 2008 compared to $53.3 billion by state and local governments, which cut back sharply during the recession.
 
The warnings started well before an interstate highway bridge in Minneapolis fell into the Mississippi River, and they have only become more alarming.  The American Society of Civil Engineers in its 2009 survey gave the nation’s roads a D- grade, slightly below the D grade given the nation’s infrastructure as a whole. Mass transit, which is guaranteed 20 percent of the highway trust fund in a deal reached during the Reagan administration, received the class average of D.

The original House solution, which Speaker John Boehner (R-Ohio) has postponed considering until next week at the earliest, would shore up the highway fund by throwing mass transit off the train. The Republican bill would then guarantee the current level of highway funding for the next five years by opening offshore land to oil drilling and funneling all royalties into road building. Capitol Hill sources say the postponement was due to the fact that even many Republicans are balking at making mass transit dependent on the annual budgeting process. 
 
The Senate hardly came up with a more generous or more sustainable bill. Its two-year stopgap measure, which passed last week with bipartisan support, would keep mass transit in the fund but finance the shortfall with a series of one-time fixes like channeling a special fund for cleaning up underground storage tanks – also funded by the gas tax – into infrastructure reconstruction.

Politics at the Pump
The Obama administration has ruled out any increase in the gasoline tax, especially with prices soaring at the pump. “There’s no way before the election that they were going to discuss putting a new revenue source on the table,” said Donna Cooper, a senior fellow at the Center for American Progress, who previously ran Pennsylvania Gov. Edward Rendell’s policy shop. She recently wrote a report analyzing the nation’s roads and mass transit needs that concluded transportation infrastructure spending needed to double if the U.S. was going to remain competitive.

There’s no way that level of funding – or even the current level – is going to come from the gasoline tax. The recovery from the Great Recession has broken a long-term trend that saw gasoline usage rise with economic growth. The sharp downturn of 2008-09 sent daily gasoline consumption plummeting from 9.3 million barrels per day to 9 million barrels a day.

That is expected during recessions. People without jobs don’t drive to work, and those with reduced incomes drive less.

But with the economy moving from reverse into first gear in 2010 and 2011, there was a sharp break with historic patterns. Despite a larger population and more jobs, daily consumption of gasoline continued falling – to 8.8 million barrels a day in 2011 on average, according to the Energy Information Agency. By the holiday shopping season – a good one, by most accounts – it had fallen to 8.7 million barrels a day, 7 percent below where it had been in December 2010.

Fuel Efficiency Takes a Toll
Part of it was more fuel efficient cars, and part of it was due to increased use of mass transit as people look for ways to save money. The outlook calls for even less fuel consumption per person in the years ahead, according to EIA.

The driving-age population is experiencing a major shift,” the agency noted in its most recent outlook. “The total population between the ages of 15 and 64 is projected to grow at an average rate of only 0.7 percent over the next two years, compared with an average 1.3-percent annual growth rate during the period of 1991-2000. In contrast, the total population of drivers 65 years old and over, who drive substantially less than those between 15 and 64 years of age, is projected to increase at an average rate of 3.5 percent, up significantly from the annual average growth rate of 1.2 percent during the period of 1991-2000,” the outlook said.

So what are the alternatives to a per-gallon gasoline tax to fund road repair and support mass transit? Department of Transportation-funded pilot projects, including one in Oregon, tried collecting road maintenance taxes based on how many miles each vehicle travels. While that would offset some of the gas tax collections lost due to better fuel efficiency, it could penalize people who purchased smaller cars while rewarding people with gas-guzzlers.

Cooper of CAP, which is closely aligned with liberal elements of the Democratic Party, prefers a new surtax on imported oil to support infrastructure spending in the short-run. In the long run, she prefers a switch to a carbon tax, some of which could be earmarked for infrastructure and some for debt reduction.

“All production is dependent on a solid infrastructure so a carbon tax, which falls on the entire economy, makes sense,” she said. “Unless we adopt a European model of higher prices at the pump, we need a new revenue source.”

(A version of this story first appeared in The Fiscal Times.)

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3 Responses to How Will We Pay for Roads, Transit as People Drive Less in More Fuel Efficient Cars?

  1. tk on March 23, 2012 at 10:32 pm

    It is called privatizing the roads as it used to be here in the states. ANd it has been going on since roads where 1st created. Even Romans had private roads and their still around today. Government is the problem and not the solution.

  2. David Shapiro on March 26, 2012 at 1:12 pm

    Privatizing the roads brings with it a problem similar to that of privatizing the mails: government, but not private industry, tries to serve everybody, rather than cherry-picking the profitable and leaving other customers stranded.

  3. Byard Pidgeon on March 26, 2012 at 4:58 pm

    “Privatizing the roads”, “Government is the problem” blah blah…I suppose it’s easy to blabber like that if one has a well, an outhouse or other non-sewer system, and raises all one’s own food, clothing material and so on…oh, and never needs the services of the police or fire department or has any need to leave one’s own property.
    TK, we live in a society, not isolated in caves. These problems affect us all, and all will need to participate in solutions that benefit, and are affordable to, all.

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