State lawmakers find themselves at a critical juncture for making decisions about investments in the nation's surface transportation system. By many standards, U.S. transportation needs are growing. On the nation's highways, more people are traveling more miles-vehicle miles traveled have grown by more than 35 percent since 1990-than at any point in the history of the country. Freight shipments through the United States are expected to double in volume by 2020, and truck travel connected to international trade should double by 2015. The demand for public transportation services has increased by 23 percent since 1995 and is at its highest point since World War II. Since 1993, urban traffic has increased 45 percent, while rural highway traffic has increased 23 percent. Traffic congestion on U.S. highways is now estimated to cost Americans nearly $65 billion each year in wasted time and fuel. In addition, in the aftermath of the events of September 11, 2001, Hurricane Katrina and other natural disasters, many states are confronted with billions of dollars of new and unexpected costs for security and the replacement of damaged transportation infrastructure.
Undeniably, state investment in the nation's surface transportation system can help address these growing needs. With an unlimited budget, state lawmakers could build more highways, use the latest technologies to improve the capacity of existing roads, promote and support greater use of public transportation, and provide money to meet all transportation demands. Of course, no state has an unlimited budget and, in fact, in most jurisdictions the resources available for transportation projects are gradually shrinking.
Transportation costs are rising for both consumers and states. Gas tax revenues, which provide more than one-third of all highway funding, are not growing sufficiently to match inflation rates. With gasoline prices in some communities at more than $3.50 a gallon in May 2006, gas tax increases are clearly not a popular option in any jurisdiction.
State general fund money, which could help offset the diminished purchasing power of the gas tax, are being increasingly consumed by Medicaid, corrections and education, leaving little for transportation projects. In 2005, less than one-third of state budgets were not dedicated to those three major items. By comparison, 41 percent of state general fund budgets were not dedicated to education, corrections and Medicaid in 1995.
In this environment of apparent need, state lawmakers are confronted with the stark reality that less money is available for transportation projects. Is this an accurate assessment and, if so, what-if anything-can be done?
Surface Transportation Funding: Options for States attempts to answer these questions by analyzing current transportation funding needs and providing options for state legislators. It makes the case that significant investment is needed from all levels of government not only to maintain the current transportation network but also to enhance and improve the system to meet growing demands. The report cites several studies that indicate the funding gap is widening, including one recent survey that predicted a $1 trillion cumulative national transportation funding deficit by 2015.
To assist state lawmakers, Surface Transportation Funding explains the basics of transportation funding. It details federal, state and local revenue and funding sources and provides information about specific highway and public transportation expenditures. Beyond funding mechanics, the report explores potential obstacles to surface transportation funding decisions, including economic conditions, changing consumer preferences, political concerns and legal considerations. The report finds that many challenges-including the declining value of the gas tax against inflation, opposition to tax and fee increases, citizen initiatives, constitutional and statutory restrictions on the use of gas tax revenues, and federal lawmaking-significantly affect state transportation resources.
Surface Transportation Funding provides a menu of options for legislators to consider to improve transportation funding in their state. Although many new or previously untapped transportation revenue sources may be available to state lawmakers, the report finds that a variety of other options can be used to provide a more balanced approach to transportation funding. Some may be as simple as eliminating the diversion of transportation-derived revenues to non-transportation purposes. Other options can include the use of different procurement tools to speed project delivery or lower projects costs, tapping private investment through public-private partnerships, using different bond and financing mechanisms, and utilizing different matching options to better leverage funds used on federal-aid transportation projects. The report closely examines three long-term state transportation funding trends: greater use of public-private partnerships, greater reliance on financing, and exploration of funding innovations such as the vehicle mileage fee. It also provides a case study of the trend-setting deal to privatize the Chicago Skyway toll road and examines recent state legislative initiatives.