Fixing The Massive Leak In America’s Transportation Funding System

Imagine you discovered your salary was going to be steadily declining in the coming years, making it impossible for you to fund future needs. Would you shrug off this news, and passively accept the associated damage, or shift to a more stable source of income?

When it comes to the funding needed to build and maintain the nation’s roads and bridges, policymakers are facing a similar threat, and most of them are shrugging it off.

The Problem

Currently, we finance much of our transportation infrastructure with a state and federal gasoline tax, where the more gasoline we use, the more we contribute to building and maintaining the transportation infrastructure.  For a long time, the gas tax has served us well.

Cursor_and_hqdefault_jpg__480×360_But the gas tax is becoming obsolete. Here’s why:  Between 2008 and 2014, the average fuel efficiency of new cars increased by 22%. In coming years, new fuel efficiency regulations and technological improvements will accelerate that progress. As as result, by 2040 the U.S. Energy Information Administration (EIA) projects that fuel sales will decrease by between 34% and 45%.  The less gasoline we use, the less we have for building and maintaining our transportation infrastructure.

“Just raise the gas tax,” you say?  Well, a paper recently written by transportation finance expert Ed Regan estimates:

“If governments want to still generate equivalent revenue to keep up with future travel levels, gas tax rates will need to be increased to as much as $1.16 per gallon to overcome the effect of future fuel efficiency.”

Given how politically difficult it has proven over the years to increase the gas tax by even a few pennies, an increase of that magnitude would seem to be politically impossible.

Even if passing such a huge increase were somehow politically feasible, we would be left with a grossly unfair system where some can avoid, quite legally, paying their fair share for funding roads and bridges.  (By the way, as someone who has driven a gas-electric hybrid for a decade, I’m one of those people unfairly benefiting from the gas tax status quo.)

If we don’t enact a steep gas tax, Regan has alarming numbers for policymakers and citizens to ponder:

By 2025, just 8 years from now, increasing fuel efficiency may cost state and federal coffers as much as $20.8 billion per year in fuel tax revenues.

Twenty-one billion dollars is a lot of road and bridge projects.  Clearly, stubbornly clinging to the gasoline tax status quo would dramatically impact our safety, global competitiveness and quality-of-life.

Yes, the Trump administration is proposing to roll back fuel efficiency standards. But many experts believe this will have only a limited effect on the trend toward greater fuel efficiency and use of non-gasoline powered vehicles. CNBC reports:

Trump’s bid to ease fuel efficiency rules will be tough and likely limited, experts say:

The White House’s attempts to alter the Obama administration’s plan to raise federal automobile fuel standards could be a slog and ultimately yield little change, experts say.

The Department of Transportation and the Environmental Protection Agency will revisit rules finalized under President Barack Obama that would keep automakers on pace to manufacture vehicles that get more miles per gallon. But experts say it will be difficult for President Donald Trump to meaningfully relax the rules under the Corporate Average Fuel Economy standards, or CAFE.

Whether driven by consumer demand, regulations or both, the march towards greater fuel efficiency seems inevitable.  The Trump fuel efficiency changes may slow the march, but they won’t stop or reverse it.

The Solution

The most logical solution to this increasingly urgent problem is to charge users based on distance traveled rather than gasoline used. Under such an approach, transportation funding would be much more adequate and stable than it is with the gas tax.

Cursor_and_410132__1600×1067_But in the stodgy world of transportation finance, old habits die hard. Charging based on distance requires a very different type of revenue collection system, and such a change is proving to be mind-bending for many policymakers.

Fortunately, at the state level various approaches are being piloted, evaluated and refined. For instance, one approach being tested with 5,000 volunteers in California gives users a range of choices for collecting a “Road User Charge.”  Volunteers can choose to track distance by using 1) a small electronic device, called a “dongle,” plugged into their vehicle, 2) a smart phone photo of their odometer sent to authorities on a monthly basis, or 3) other more low-tech tracking methods.

Moving to this type of distance-based system won’t come without headaches or expense. But everything is relative, and accepting the hassles associated with this transition is a small price to pay for avoiding a transportation infrastructure meltdown.  With as much as $21 billion in transportation funding about to disappear over just the next eight years, and much more about to disappear in the coming decades, policymakers can no longer afford to shrug off this problem.

Note:  I have done public relations work on this issue for an academic client, but the views expressed are my own.

Dear DFLers: This is Minnesota, Not MinneSweden

These are very heady times for Minnesota DFLers. Governor Mark Dayton and DFL legislators had the courage to raise taxes, increase long-term investments, and raise the minimum wage.  In the process, Minnesota Republicans were proven wrong, because the economic sky did not fall as they predicted it would.   In fact, liberally governed Minnesota, with an unemployment rate of just 3.7 percent, has one of the stronger economies in the nation.

And the subsequent coverage from the liberal echo chamber has been positively intoxicating for DFLers:

“This Billionaire Governor Taxed the Rich and Increased the Minimum Wage — Now, His State’s Economy Is One of the Best in the Country” (Huffington Post)

“The Unnatural: How Mark Dayton Bested Scott Walker—and Became the Most Successful Governor in the Country”  (Mother Jones)

“What happens when you tax the rich and raise the minimum wage? Meet one of USA’s best economies” (Daily Kos)

Comparative_Economic_Systems__SwedenHigh as a kite from these clippings and the vindication they represent, DFLers run the risk of over-stepping, of pushing Minnesotans further than it they are comfortable going. As much as DFL politicians fantasize about bringing the social welfare model of a Scandinavian nation to a state populated with so many Scandinavian immigrants, a recent survey in the Star Tribune provides a harsh reminder that Minnesota, politically speaking, is not MinneSweden.

In the wake of a $2 billion budget surplus, only one out of five (19 percent) Minnesotans wants to “spend most to improve services.” Among the Independent voters that DFLers need to persuade in order to win elections and legislative power, only one out of four (24 percent) supports spending the entire surplus.

At the same time, two times as many Minnesotans support the predictable Republican proposal to “refund most to taxpayers” (38 percent support). Their refund proposal is also the most popular option among the Independent voters that Republicans need to win over in order to have electoral success in 2016.

The Star Tribune also reported that their survey found that Minnesotans are not too wild about the gas tax increase the DFLers propose.  A slim majority (52 percent) oppose “Governor Dayton’s proposal to raise the wholesale tax on gasoline to increase spending on road and bridge projects?”  A healthier majority (62 percent) of Minnesota’s’s Independents oppose the gas tax increase.

I happen to agree with the DFL on the merits.  Minnesota has a lot of hard work to do in order to remain competitive into the future, so I personally support investing almost all of the budget surplus, with a healthy amount for the rainy day fund, and a gas tax increase. However at the same time, I’m enough of a realist to recognize that sustainable progressive change won’t happen if Daily Kos-drunk DFLers overstep and lose the confidence of swing voters in the process.

DFLers who want to win back the trust of a majority of the Minnesota electorate would be wise to enact a mix of sensibly targeted investments, a resilient rainy day fund and targeted tax relief.  That kind of pragmatic, balanced approach won’t turn into St. Paul into Stockholm, but it might just put more DFLers in power, so that the DFL can ensure Republicans don’t turn Minnesota into South Dakota or Wisconsin.