Solving the twin challenges of funding and congestion

The Highway Trust Fund is broke. Again. Groundhog Day may have come and gone already, but unfortunately we have seen this scene before. According to the Congressional Budget Office, dramatic increases in vehicle fuel efficiency have reduced gas tax revenues to the point that the trust fund faces a shortfall of $172 billion over the next ten years.

If Congress does not act before the summer, states will receive no new spending authority in FY15, resulting in an immediate drop in trust fund reimbursements to states of approximately $15 billion. Conservatively, this would cost the economy 186,000 heavy construction and related jobs next year – a big and unnecessary setback for an economy still struggling to reduce long-term unemployment.  

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The need for additional revenue is clear, though new money is only half the story.  We must use this opportunity to replace the ailing gas tax with a stable, long-term funding source and address the growing problem of congestion, which costs our economy more than $120 billion each year.

Yet, how we raise new revenue matters since the type of tax affects not only how much we build but also how well the system performs over time. At first pass, money and performance may seem disconnected, but they are deeply intertwined. 

Take, for example, three common forms of transportation revenue: vehicle fees, gas taxes, and tolling. Vehicle fees function like a property tax and are completely disconnected from how much or when you drive. Gas taxes are loosely connected to use although vehicles vary greatly in how far they travel on a gallon of gas. Moreover, gas taxes do not capture the strain on capacity from driving during the morning and evening rush when roads are the most clogged. Tolling allows states to finance the construction as well as manage demand since toll prices are often variable. However, tolling exist on only a small fraction of roadways and is not scalable nationwide. 

So why should we connect the fees we pay to how much we use the system? The answer is congestion. Between 1980 and 2012, total driving grew from 1.5 to 2.9 trillion miles and the number of registered vehicles increased by 90 million. During these same years, total lane miles grew by only 8.6 percent, resulting in a 192 percent increase in urban area congestion. Over the next fifty years, the problem will become even worse as the United States is projected to add 100 million people and 85 million more vehicles.

We will never be able to lay enough pavement to overcome rapidly growing travel demand. Attempts to expand urban highways and other major roadways confront the stark reality that land acquisition and property condemnation are often prohibitively expensive and political treacherous. Even thought people may favor expansion in the abstract, when it comes time to build actual projects, opposition to bulldozing homes and business is intense.  And while we may succeed in adding capacity at the far edges of large metropolitan areas, this does little or nothing to reduce economically damaging congestion in the rest of the region. 

In short, we cannot focus on supply alone. We must also take steps to manage demand and provide people with affordable transportation options.

The need for new revenues presents the perfect opportunity to begin the transition to a mileage-based user fee. Such a fee would finally make the connection between how much we drive and how much we pay completely transparent.  Moreover, the technology underlying a federal mileage fee would allow states and metropolitan regions facing the worst congestion to vary pricing to manage demand – also known as congestion pricing. States and regions could also leverage a mileage system to address vehicle weight, emissions profile, and social and geographic equity concerns. To be clear, the decision to implement variable pricing or other policy goals should be left to states and metropolitan regions. 

Beginning more than a decade ago, the state of Oregon started pilot testing alternative approaches to administering a mileage fee. Their fantastic work has shown that a mileage fee is not only feasible but can be implemented while respecting our essential privacy rights.

Fully implementing a mileage system will take time. The fiscal cliff facing the trust fund requires immediate action. The Simpson-Bowles commission called for a gas tax increase of 15 cents per gallon, which would provide solvency and allow states to plan for bigger projects that require long-term funding certainty. Congress should increase the gas tax and use a share of the proceeds to fund more state-based mileage pilot projects to work out the best path to full implementation.

The current surface transportation law Moving Ahead for Progress in the 21st Century (MAP-21) expires in September. Congress must seize the opportunity to save thousands of good construction jobs and lay the groundwork for long-term economic prosperity.

DeGood is the director of Infrastructure Policy at the Center for American Progress. He may be reached at kdegood@americanprogress.org