This Labor Day, many Americans are enjoying their last summer weekend at the beach or mountains and the traffic jams that accompany these holiday weekends.
Yet with cars becoming more fuel efficient, and miles driven declining 2.938 trillion miles traveled in 2012 compared with 3.031 trillion in 2007 federal and state fuel tax revenues are increasingly insufficient to build new roads and maintain existing ones. Electric cars, a favorite of President Obama, use no gasoline at all, so their drivers do not pay for road use.
In the future, roads will need another stream of funding. Although residents don’t like tax increases, some states are taking matters into their own hands and creating their own sources of revenues for roads.
Federal gasoline taxes are now 18.4 cents per gallon (24.4 cents for diesel). Unfortunately, current fuel and vehicle-related excise taxes, with 2011 collections of $36.9 billion, are not yielding sufficient revenues for maintaining or improving the road network, and Congress does not want to raise fuel taxes. On many roads the road damage costs per mile driven are greater than the fuel tax revenue.
The Highway Trust Fund has been running deficits since 2008, and, especially with sequester, the federal government is short on general revenues to make up the difference. A 2012 CBO report stated that Congress had transferred nearly $35 billion over the past few years to keep the Trust Fund positive.
In 2011, the latest data available, the Highway Trust Fund income totaled $36.9 billion, while expenditures totaled $44.5 billion, a deficit of $7.6 billion. The 1956 legislation setting up the Highway Trust Fund provided for federal highway expenditures to be funded only out of the trust fund, and made no provision for replenishing it from general revenues.
In the future, the most obvious substitute for fuel taxes is to charge road users directly for vehicle miles traveled (VMT), enabling them to get the roads they are prepared to pay for. Each vehicle could have an on-board meter to pay for VMT. These could also be adapted to pay for street parking and tolls, find a vacant parking space in the city center, and get discounts at parking garages.
Such technology is available from a variety of companies, including Siemens, Continental Automotive Systems, Satellic, eROADS Technology, and Octo Telematics. Payment on the basis of VMT has been successfully carried out in pilot projects in Oregon.
Seven states, Oregon, Arkansas, Illinois, Maryland, Vermont, Virginia, and Wyoming, are raising the fuel tax to fund infrastructure.
Oregon
Oregon, the U.S. leader in transportation funding, is laying the groundwork for drivers to pay a mileage-based user fee rather than the traditional gas tax. In 2012 the state successfully completed a Road Usage Charge Pilot Program. It found that providing users options for recording the number of miles travelled (including at least one option that did not use GPS technology so as to assuage drivers’ fears that their privacy could be invaded) contributed to the success of the program. Reaction has been positive.
With the passage of S.B. 810, signed into law by Gov. John Kitzhaber (D), on Aug. 14, the Oregon Department of Transportation has been charged with setting up a system for 5,000 volunteer motorists to pay 1.5 cents per mile state tax rather than the current 30 cents per gallon tax. These volunteers would be refunded for any gas taxes paid. The program would start July 1, 2015. The purpose is to provide a different stream of transportation funding at a time when gas tax revenues are declining due to the recession, increased fuel efficiency and use of hybrid and electric cars.
Arkansas
Arkansas passed a ballot measure last November to temporarily increase the state sales tax from 6% to 6.5% in order to fund a bond which will pay for $1.8 billion in highway construction and improvement. The project includes plans to alleviate congestion through widening existing highways and bridges throughout the state.
The tax is set to revert to the previous 6% once all bonds are paid off, which is due to happen by 2023. The Arkansas State Highway and Transportation Department estimates that cities and counties will receive $700 million in revenue due to the tax increase.
Illinois
In 2009, Illinois passed the Illinois Jobs Now! program. It was meant to invest $31 billion in the Illinois economy, $13 billion of which come from Illinois spending. The Illinois share of spending is funded by a 20-year bond issue, which is funded by several different tax increases. The remaining $18 billion comes from state debt, and federal and local matching funds. The project will spend $14.3 billion on roads and bridges, $7 billion on airport and rail improvements, and the remaining $9.7 billion on education, economic development, and environmental projects.
In spite of the program, the number of miles of roads in need of repair has increased since 2010 by almost 50% and is only expected to get worse. A press release from the governor’s office said the bill would create or retain 439,000 jobs in the six years following its July 2009 passage, but Labor Department data show that Illinois has added only 162,000 jobs since the bill’s passage four years ago.
Maryland
Last March, Maryland passed into law HB 1515 to spend $4.4 billion on transportation over the next six years. Governor Martin O’Malley claimed the tax increases were necessary because the 23.5 cents-per-gallon gas tax has not been raised since 1992, resulting in a 70% loss in purchasing power. The tax increases are phased in over the course of two years from July 1, 2013 to July 1, 2015.
Vermont
Vermont has increased gas taxes to fund road and bridge repair. A 2% assessment was introduced, while the tax decreased by 0.8 cents per gallon. This translates to an effective increase of 5.9 cents per gallon over the existing gas tax of 19 cents per gallon. Governing reports that Vermont House Transportation Committee chair Patrick Brennan stated the tax could amount to a net hike of 6.5 cents per gallon by fiscal 2016.
The law also raised the tax on diesel by 2 cents per gallon starting on July 1, 2015 and an additional 1 cent per gallon next year. The increase went into effect almost immediately on May 1, 2013 (the law was signed by Governor Shumlin on April 29.) The additional tax revenues are expected to be combined with $11.7 million in bonds to provide approximately $32 million in transportation funding next year.
Virginia
Earlier this year, Virginia passed HB 2313 in an attempt to raise funds for transportation. The bill was designed to provide an additional $4 billion over six years from 2014-2019 for transportation projects, including light rail, mass transit, bridge, and highway projects bringing the total to $15.4 billion. Of the $4 billion increase, $2.1 billion will go towards highways and bridges, while the Hampton Roads region alone gets $1.3 billion. Finally, $600 million will go towards rail and public transportation. Americans for Tax Reform, a conservative think tank, called it the Largest tax hike in Virginia’s history.
Wyoming
For the first time since 1998, Wyoming has raised the gasoline tax. The state legislature passed HB 0069, increasing the gas and diesel tax by 10 cents a gallon to 24 cents a gallon. The tax increase is expected to increase revenue by $70 million annually, two-thirds of which will be used by the Wyoming Department of Transportation for highway maintenance. The remaining third of revenues will be distributed to cities and counties.
There is no longer any logical reason why the federal government should be responsible for funding state roads. The federal Highway Trust Fund was set up in 1956 so that road users would pay for the new, continent-spanning network of roadways we know as the interstate highway system. The legislation contemplated that the interstate highway system would be completed in 1972, at which point the fund would be terminated.
In the 21st century, charging for roads and deciding where they should go should be the responsibility of state or private providers. The interstate highway system is complete, and the technology for pricing roads without stopping vehicles is readily available. As the Highway Trust Fund revenues shrink, those states that are raising funds for their own roads especially Oregon, with its mileage-based user fee are the wave of the future.
Original Source: http://www.marketwatch.com/story/road-rage-states-get-creative-to-fund-highways-2013-08-30/print?guid=764A57DE-10C3-11E3-B648-002128040CF6
