Financing the Transportation System
Investing in transportation is unlike any other federal government spending. Transportation dollars are converted to physical assets that will last 50 to 100 years to provide future generations with a modern, globally competitive system. At the same time, such investments create and maintain well-paying “Made-in-America” jobs.
According to FHWA, every $1 billion of federal investment in highways supports 35,000 jobs. For the long-term, increased transportation investment can help sustain economic recovery, keep the U.S. globally competitive, reduce congestion, and save lives.
Who Is Affected?
- The 18.4 cent federal gasoline tax has not been adjusted by Congress since 1993.
- Between 1993 and 2015 the purchasing power of the federal fuel tax will have eroded by 80 percent because of inflation.
- According to the National Surface Transportation Policy and Revenue Study Commission 2008 Report Transportation for Tomorrow, at least $225 billion per year is required through 2055 in highways, transit, freight, and passenger rail to meet our national needs.
- Today the country is investing at less than 40 percent of what is needed.
- A five cent per gallon tax increase would cost the average driver $1.50 per week, less than the cost of a cup of coffee.
- The American public pays for poor road conditions twice – first through additional vehicle operating costs and then in higher repair and reconstruction costs. For the average driver, rough roads add $335 annually to typical vehicle operating costs. In urban areas with high concentrations of rough roads, extra vehicle operating costs can be as high as $746 annually.
- Sustaining deteriorating roads costs significantly more over time than regularly maintaining a road in good condition. Costs per lane mile for reconstruction after 25 years can be more than three times the cost of preservation treatments over the same 25-year period. Rough Roads Ahead
- Maintaining a road in good condition is easier and less expensive than repairing one in poor condition. Spending $1 to keep a road in good condition precludes spending $7 to reconstruct it once it has fallen into poor condition. In addition to ride quality, smooth roads improve fuel efficiency, reduce vehicle wear and tear, improve driver safety, and last longer.
- An annual investment of $46 billion for public transportation is necessary to improve system performance and condition given an expected 2.4% annual growth rate in ridership. Addressing the public transportation needs associated with the projected growth in ridership over the next 20 years will require significant capital investment in system expansion, in addition to the investments needed just to replace existing assets. The Bottom Line
- If transit ridership growth rises to 3.5% annually, ridership levels would double over 20 years. This would be helpful in reducing greenhouse-gas emissions. Investment in public transportation would have to increase to $59 billion per year. (In 2006, transit capital investment from all levels of government totaled $13.3 billion, according to the American Public Transportation Association.)
AASHTO Recommendations
Basic Funding Principles
- The Federal government must continue to play a strong role in investing and maintaining an integrated and multimodal national surface transportation system.
- States and local governments should be provided with maximum flexibility to use federal revenues from existing core sources to meet systemic transportation needs.
- Strong accountability measures must accompany substantially increased funding to ensure resources are spent as efficiently and effectively as possible..
- We need to restore purchasing power.
- Investment levels over the long-term need to correlate with documented needs.
- Investments in safety and research remain a compelling need.
- The impact of inflation on commodities and construction costs must be addressed in setting investment levels.
AASHTO Authorization Recommendations
- Between 2010 and 2015, Congress should fund a $567 billion multimodal program comprised of:
- Highway program funded at $375 billion (2015 level = $75 billion)
- Transit program funded at $99.8 billion (2015 level = $18.5 billion)
- Freight program funded at $42 billion (2015 level = $9 billion)
- Intercity passenger rail program funded at $50 billion (2015 level = $6.5 billion)
- Create a Commission to recommend to Congress periodic adjustments for revenues necessary to meet program needs.
- Adopt a long-range approach to funding the surface transportation system that gradually moves away from dependence on the current motor fuels tax to a distance-based direct user fee such as a fee on vehicle miles traveled.
- Assure that any climate change legislation that creates a new revenue source, either through a carbon tax or cap-and-trade, provides substantial funding for transportation.
- Maintain the current federal and state shares for highway and transit capital programs.
- Eliminate or drastically limit earmarking in federal transportation programs.
- Develop policies that support maximum flexibility to allow for use of both conventional and innovative funding and financing tools.
Menu of Revenue Options
- Annual highway miles traveled fee
- Container tax
- Customs fees
- Gas tax increase plus indexing
- Sales tax on motor fuels
- Various freight-related charges
Reports and Resources
New Report Offers Practical Transportation Investment and Revenue Case Studies
Making the Case for Transportation Investment and Revenue offers 10 in-depth case studies of transportation revenue campaigns, including what worked and what didn't. From a roadmap to creating winning strategies to identifying the issues that can undermine success, Making the Case is a comprehensive guide to aid state revenue initiatives. More...How Transportation Projects Are Funded With Federal Dollars
Surface Transportation Policy Recommendations
Webcast on the National Surface Transportation Policy and Revenue Study Commission Report
AASHTO Surface Transportation Authorization Policies
Center for Financial Excellence
For more on Financing the System
National Surface Transportation Policy and Revenue Study Commission
