By Bob Williams | State Budget Solutions
Most of us utilize some kind of government-funded transportation in our daily lives. Whether it’s riding a bus or the subway, taking a ferry or driving on roads, we are all touched by transportation dollars spent in our states. In the face of this high demand for transportation, states today are pressed to find more revenue sources to fix potholes and bridges, or to keep up with modern safety standards. That is why eight states this year have passed measures to raise additional transportation funds through higher fees and gas taxes; and fifteen other states have considered legislation to do the same. Nearly half the nation’s states are struggling to find enough revenue for their transportation needs – and the federal government isn’t helping.
Transportation is one of those things that is funded by all levels of government: federal, state and local. The breakdown is approximately 25 percent federal, 40 percent state and 35 percent local. If one of these funding sources doesn’t come through, there would be major consequences, and that unfortunately happens routinely with the federal Highway Trust Fund (HTF).
Earlier this year, projections for the HTF showed there would be insufficient funds to meet all of its obligations for 2015. At the time, the federal Department of Transportation forecasted that it would need to delay some payments to states to prevent the HTF’s balance from going below its minimum required threshold. The situation has only deteriorated since then, and in May states received a formal warning that “the Federal Highway Administration will be unable to make new obligations of Federal-aid funds for your department’s highway projects…”
To the states’ collective relief, Congress usually averts true crises through last-minute extensions – as it did just last month. These are, however, temporary solutions to a permanent problem. Based on current revenue and spending trends, the HTF faces a cumulative shortfall of roughly $169 billion over the next ten years. So states must be concerned about not receiving timely payments for the next decade unless something changes – or until they stop relying so heavily on the federal government for their transportation funding needs.
While the federal government funds roughly a quarter of states’ transportation needs, it needlessly inflates the cost of those projects. The feds have imposed a variety of costly mandates on states, in the form of study requirements and project labor agreements. If transportation was left entirely to states and localities, projects might be done a lot more efficiently.
One thing is for sure: states today expend considerable time and money navigating the federal bureaucracy, with no guarantee they will even receive federal highway grants in return. If states were less reliant on the federal government, they could focus instead on how to locally address their own transportation needs.
Constantly raising fees and taxes at the state level to compensate for promised-yet-undelivered federal dollars is no way to efficiently run a government. The current transportation shortfall has been resolved for now, but this problem will continue to be a thorn in states’ sides until they either remove the federal government’s footprint from their transportation budgets, or significant reform occurs at the federal level.
Bob Williams is president of State Budget Solutions.