The Issues
Highways and Public Transportation: Federal Responsibilities 101What Is SAFETEA-LU and Why Is It Important?On August 10, 2005, President Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). SAFETEA-LU authorized the federal surface transportation programs for highways, highway safety, and transit for a five year period. These federal programs expired on September 30, 2009, and have been operating on a series of extensions since. SAFETEA-LU guaranteed at least $223 billion for the federal highway program and $52.6 billion for the federal transit program through FY 2009. What Is the Highway Trust Fund?
The Highway Trust Fund (HTF) is the main source of federal funding for programs authorized by SAFETEA-LU. The HTF is composed of the Highway Account, which supports highway and intermodal programs, and the Mass Transit Account, which funds public transportation. The HTF is funded by a federal gasoline tax of 18.4 cents per gallon and a federal diesel tax of 24.4 cents per gallon, as well as other fees. What Caused the Recent Shortfall in the Highway Trust Fund?SAFETEA-LU established annual authorized funding levels for the highway and transit programs based on an estimate of the amount of annual revenue that would accrue to the HTF. When revenue did not meet expectations, Congress reinforced its commitment to the authorized investments and reimbursed the HTF for monies that had been taken out in earlier years for other purposes. What Is the Condition of the Nation's Transportation System?
By any measure, the U.S. transportation system is failing. According to the American Society of Civil Engineers (ASCE), nearly one-third of roads are in poor or mediocre condition and one-fourth of the nation's bridges are either structurally deficient or functionally obsolete. U.S. transit systems earned a D rating in the ASCE's annual Infrastructure Report Card. How Did the U.S. National Transportation System Fall Into Such Disrepair?
Chronic underinvestment in all modes of transportation by all levels of government is to blame. The 2005 federal highways and public transportation bill provided $90 billion less than the $375 billion that experts estimated was needed to repair, rebuild, and replace America's transportation infrastructure. (Source: U.S. Department of Transportation [USDOT]) User fees that paid for much of the nation's postwar Interstate system have failed to keep pace with inflation and the soaring costs of construction and materials. Federal motor fuel taxes (18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel) make up the majority of the resources for the HTF. These taxes, paid by transportation system users, have not been raised since 1993 and have not kept up with the rate of inflation. To accommodate the nation's growing population and recovering economy, the federal government needs to step up investment levels to address deteriorating infrastructure and inadequate capacity. What Is the Effect of a Deteriorating, Overburdened National Transportation System?
The impact is enormous. The condition of the nation's transportation system is a threat to safety, quality of life, economic growth, and the environment.
Are there Economic Benefits to Investing in Surface Transportation Networks?Absolutely. Transportation is the platform of the U.S. economy. In the long term, transportation improvements lead to economic development locally and regionally and ultimately facilitate the economic growth of the entire country. In the near term, each dollar invested in highway construction generates $1.80 of GDP. (Source: Standard & Poor's DRI) According to the USDOT, each $1 billion in federal highway investment plus the state match supports 34,000 jobs, and every dollar that taxpayers invest in public transportation generates about $6 in economic returns. (Source: Cambridge Systematics) How Does the U.S. Transportation System Affect Businesses and the Economy?Businesses depend on a transportation network that is reliable, fast, safe and cost effective. Unfortunately, increasing congestion due to crumbling transportation infrastructure and insufficient capacity disrupts these important connections and imposes additional costs on workers and employers. As congestion increases systemwide, supply chains and cargo shipments are frequently disrupted and the cost of doing business increases. The U.S. Chamber of Commerce released its Transportation Performance Index in September 2010. The Index combines indicators of supply, quality of service, and utilization to show how well the U.S. transportation system is serving the needs of businesses and the overall U.S. economy. The TPI found that from 1990 to 2008, the effectiveness of the national transportation system increased by just 6%, while the U.S. population during that period grew by 22%, passenger travel by 39%, and freight traffic by 27%. Moreover, the macroeconomic analysis of the TPI revealed that every one-point increase in the TPI correlates to a 0.3% increase in U.S. Gross Domestic Product (GDP). Projections show that merely maintaining the status quo when it comes to U.S. transportation strategies and investments will result in an eight point drop in the TPI and a cost to the U.S. economy of $336 billion in GDP. How Will the Global Economic Competitiveness of American Businesses Be Affected if Needed Investments in Transportation Are Not Made?In 2010, in his State of the Union address, President Obama made the doubling of U.S. exports over the next five years a national priority. There are many things that need to happen to achieve this economic growth—not the least of which is having adequate transportation capacity to support the increase in trade volume. That means addressing crushing congestion in metropolitan areas and improving capacity to and from ports throughout the country. Competitors around the world understand the challenge and are building and rebuilding their infrastructure at a staggering pace while American infrastructure development stands still. China spends 9% of its GDP on infrastructure investment, including transportation, telecommunications and power networks. India spends 5% and that number is rising. The United States, in contrast, budgets only $112 billion or 0.93% of its GDP. (Source: Urban Land Institute) We cannot expect to remain competitive with such a low level of investment. It is simple: If we fail to address our transportation infrastructure challenges, we will continue to lose jobs and industries to other nations. How Do We Pay For All of the Needed Transportation Investment in this Fiscally Constrained Environment?
What is needed are more public and private dollars in infrastructure. There is no single answer to solve the funding problem. All options must be on the table. The consequences of inaction are clear. The United States can either invest now or pay later. Reform Congress should do more to ensure that money invested in transportation is spent wisely. That means ending waste and targeting funding for the highest priority projects. It means focusing on a sensible mix of projects based on actual need and not on politics or ideology—for example, more road construction in some areas, more investment in public transportation in others. It also means that Congress must stop diverting money intended for transportation to nontransportation projects. Dedicated transportation funds should not be used to pay for other, unrelated projects. It hurts businesses that rely on these projects and breaks trust with the taxpayers, who expect their money to go toward the intended purposes. Private Investment Public dollars should be leveraged by tapping the growing interest in public-private partnerships and other innovative financing arrangements. Public-private partnerships have the potential to not only drive critical projects forward but also improve the economy by supporting businesses and communities. However, it is important to note that these private investments are not a substitute for systemic public resources. Increased Systemic Investment Even with significant reform and additional private dollars, existing resources cannot address expanding needs. Historically, user fees deposited into the Highway Trust Fund have been the simplest, most transparent, and effective way of providing systemic revenue for the federal highway and public transportation programs. But without an infusion of new revenue, Congress must choose to
|