New Brookings report suggests that highway funding formulas are not fair if money comes from the general fund.
In the United States, highway funding is primarily distributed to states through set formulas based on a variety of (sometimes arbitrary) factors such as the mileage of existing roads and per capita crash rates. These formulas don’t always produce fair outcomes, however: some states pay far more into the Highway Trust Fund through gas taxes than they receive back in federal highway funds. As a result, over time, Congress has ramped up the Equity Bonus Program, which ensures that most states that fit a certain set of criteria receive at least 92% of their respective fuel tax revenues in highway funds.
Problem is, fuel tax receipts are dropping and Congress is incapable of finding a new funding source; this means that in order to maintain existing spending on transportation, the U.S. government is likely going to have to dip into the income tax-based general fund, something it did last year as well. In the past, I’ve advocated shifting the burden of the majority of the transportation funding program to the income tax on equity grounds.
Here’s the thing: gas tax receipts don’t line up with income tax receipts, meaning that the “fairness” principal cited above doesn’t make much sense if transportation funds are coming from income taxes — a $20 billion transfer is likely this year alone. The Equity Bonus Program, which has been forcefully defended by senators like Kay Bailey Hutchison (R-TX), is not equitable if applied to the general fund.
That, with a bit of background, is the conclusion of a new Brookings report by Robert Puentes and Adie Tomer, who compared gas tax receipts with income tax revenues. Their chart demonstrates that states like New York, California, and Massachusetts deserve a significantly higher share of transportation spending based on income taxes, and that states like Texas, Florida, and Georgia deserve much less than they currently receive based on fuel taxes. Though the federal government took $8 billion from the general fund to shore up the Highway Trust Fund last year, these problems were not raised, and Equity Bonus money was distributed as if all transportation funds had come from the gas tax.
Will the equity issue be raised this year, or will senators like Ms. Hutchison, who has worked so hard for “fairness” for her state in the past, attempt to drown out the discussion? A reliance on the general fund for revenues should mean an equivalent shifting of priorities on spending, state-by-state.