June 26, 2006
States Face Transportation Funding Crisis
New report lists policies to help states avert a $1 trillion transportation funding deficit
DENVER—Today's funding streams won't prepare America's roads and bridges for tomorrow's traffic, according to a new report by the National Conference of State Legislatures. Many states face widening gaps between transportation dollars and transportation needs, and they're looking for new ways to pay for roads and public transportation.
Surface Transportation Funding: Options for States outlines the challenges state legislatures must overcome in this policy area. The report explains why funding gaps are occurring. It discusses trends in transportation financing. And it suggests options legislators could consider to raise additional revenue or better leverage existing resources.
States could have a $1 trillion cumulative transportation funding deficit by 2015, according to the National Chamber Foundation. In 2005, NCF says the deficit was $42 billion to maintain roads, and $91 billion to improve them.
The U.S. Department of Transportation lists 18 percent of America's 912,000 of road in poor or mediocre condition. And approximately 27 percent of the nearly 594,000 U.S. bridges are structurally deficient or functionally obsolete. Add to this Sept. 11, 2001 and Hurricane Katrina, and many states face additional and unexpected costs for security and repairs.
At the same time, more people travel America's roadways than ever before. Vehicle miles have increased 35 percent since 1990. Freight shipments and truck travel are expected to double by 2020. Traffic congestion is now estimated to cost nearly $65 billion a year in wasted time and fuel.
"State lawmakers are at a critical juncture for investing in the nation's surface transportation system," said report co-author Matt Sundeen, an NCSL transportation policy analyst. "They're looking for the funding models of the future. Current mechanisms, including the gas tax, just aren't going to be dependable as gas prices rise and consumer preferences change."
Today, transportation is funded through a combination of state and federal dollars. The federal government contributes 42 percent of highway funds and 47 percent of public transportation funds. State and local governments cover the rest. Gas taxes are the primary source in more than half the states. Federal money is the primary source in 17 states. A few states mainly depend on motor vehicle taxes, tolls and bond revenue.
One of the hottest new approaches is privatization of toll roads, Sundeen said. Chicago and Indiana are paving the way. Chicago has leased its 7.8-mile Chicago Skyway bridge to a private firm for 99 years for $1.83 billion. Indiana just leased a 157-mile toll road to the same company for 75 years for $3.8 billion. Texas and Virginia have recently passed legislation enabling similar arrangements and they're working on implementing the new laws. Ten states—California, Colorado, Indiana, Maryland, North Carolina, South Carolina, Texas, Utah, Washington and Virginia—considered new toll roads or tolling authorization bills in 2006.
Oregon is another innovator. The state is several months into a year-long pilot program that charges drivers a mileage fee, rather than a gas tax. Special pumps at gas stations read special odometers installed in new cars to determine how much the driver owes. Global Positioning Satellite technology in these test cars assures that the driver is only charged for miles driven in Oregon.
"Oregon officials started this program because they recognized a shift in the dependability of federal and state motor fuel excise taxes," explained report co-author Jim Reed, director of NCSL's transportation program. "These taxes are fixed, per-gallon rates imposed on oil distributors or suppliers that presumably get passed on to consumers. They have not kept pace with inflation, and they could become an even less reliable revenue source as cars grow more fuel efficient. Raising them isn't really a viable option these days, with gas prices already so high."
Other states are looking at ways to better leverage existing funds through new financing tools and improved cooperation with the federal government. They are also exploring new procurement tools such as design-build statutes and special agencies that can improve efficiencies and speed project delivery. Still others are examining new financing options including bonds. As needs accumulate the dollars for pay-as-you-go road and transit projects aren't always available.
The report lists additional policies state legislators could consider. States could sell naming rights to roads, for example. They could increase fines for drivers who break traffic safety laws, or charge visitors to the state a road use fee, among many other ideas.
Electronic copies of the report are free to credentialed members of the media. Ask for one in an email to press-room@ncsl.org. Others can purchase the book online at www.ncsl.org/bookstore.
NCSL is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
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