» States already generate the majority of transportation revenues locally, so perhaps the imperative for increased spending should come from them rather than Washington.
One of the frequently undermentioned aspects of the transportation funding debate is that while the federal government’s Highway Trust Fund is the source of a significant percentage of overall highway and transit expenditures in the United States, state departments of transportation raise most of their money from local sources. For advocates of alternative transportation, whose focus has been almost exclusively on policy in Washington, this fact should serve as a wake-up call. In order to produce truly effective change in the way Americans get around, it will be necessary to promote changes in the way states collect revenue for and spend on transportation.
An examination of the taxation sources used by states to fund transportation is in order. I’ve taken Oregon and Illinois as examples here; further comparisons with other states may be useful in the future. I’ve also excluded from this brief review municipal, county, and regional expenditures, which typically constitute the majority of public transit spending.
As the chart above demonstrates, these two states have very different transportation funding structures in addition to the revenue each receives based on formula grants from the U.S. Department of Transportation. Whereas Oregon relies on a diverse portfolio of funds, including a state fuel tax, a vehicle registration fee, bonds, and a weight mile tax, Illinois relies mostly on vehicle registration fees, with only about 12% of funds coming from a state fuel tax.
In each of those states, as in almost every state, the majority of overall transportation spending goes towards roads projects.
If the federal government were to completely alter the manner in which it collects funds in reaction to a slow decline in gas tax revenues into the Highway Trust Fund, then, it would only affect a minority of overall national transportation spending.
A movement towards a more progressive General Fund-sourced transportation system at the national level may well encourage an increasing effort by federal officials to promote transit and other elements of a transportation portfolio aimed towards “livable cities.” But if states continue to collect their own taxes with an emphasis on user fees, the vast majority of spending will continue to be on highways, since there is little political support to divert the majority of automobile user fee revenues to public transportation.
Indeed, this is one reason why it might be a good reason to funnel roads user fees into the General Fund, and then use the General Fund to pay for infrastructure through the Highway Trust Fund. The direct connection between user fees and transportation spending keeps the country dependent on automobiles, so cutting the umbilical cord could be a politically beneficial solution.
Eliminating that relationship could also paradoxically provide motivation for the gas tax increases that are desperately needed both to provide funding for new investments and to keep the negative environmental consequences of car use in check. Last year, at least fifteen states were seriously considering fuel fee increases, but only three were able to pass the expansions through their respective legislatures. By making the argument that the gas tax can fulfill government-wide needs, states facing desperate budget situations may find raising the fuel tax less difficult than increasing income tax collections, for instance.
Another point to emphasize here is this: Both Oregon and Illinois get only about half their transportation revenues from fuel taxes. The same is true of a number of other states, from North Carolina to Nevada. Other states, like Wyoming, are much more reliant on state and federal gas taxes. There are a wide variety of funding devices being used across the country, and state governments should make an effort to adopt successful taxation strategies from their peers.
Most states, however, get the majority of their funds from user fees of some sort: If not gas taxes, then vehicle registration fees or drivers’ license fees, which require everyone using a car to pay their part. This connection between direct “use” of the roads and spending — a link that ignores the fact that everyone, car driver or not, is a direct beneficiary of transportation spending — prevents state legislatures from investing fully in their rail and public transit systems.
The widespread adoption of public transportation in the United States is dependent on increasing spending for new investments; if the federal government cannot find an adequate source of new funds for transportation financing, the states — which already raise most money for their respective highway projects — may be able to. But without a strong push at the state level to make public transportation a priority, it won’t happen. And in a country where states are too often dominated by rural and suburban interest groups, it’s unsurprising that we haven’t many serious efforts in that direction.