Congress and the States Each Face Challenges in Transportation Funding

As Georgia’s legislators consider how to fund the construction, maintenance and repair of the state’s roads and bridges, a similar conversation is going on in Washington, DC, as Congress tries to determine how to keep the nation’s highway trust fund solvent. The issue is not new. Originally set up as a way to fund the nation’s interstate highway system, the Highway Trust Fund is nominally funded by an 18.3 cent excise tax per gallon of gasoline and 24.4 cents excise tax on diesel fuel.

And just as in the Peach State, revenues from the excise tax have been declining due to increased fuel efficiency in the nation’s automobile fleet, and growing usage of electric vehicles. The shortfall has been made up in recent years through contributions from general government revenues, but that requires repeated off-budget appropriations by Congress. Money allocated from the last round of appropriations is running out, and the fund is expected to run dry by the end of May, 2015.

While some in the Senate have talked about raising the federal gasoline excise tax, others, including President Obama, have taken a raise in the gas tax off the table. Meanwhile state transportation departments are concerned that a short term fix to make the highway trust fund solvent will leave them unable to execute some projects requiring long lead or construction times, since there is no guarantee the federal money will be there when needed.

One of the people who will have a voice in how the imbroglio around the Highway Trust Fund is resolved in Georgia’s Seventh District Congressman Rob Woodall, who was named to the House Transportation and Infrastructure Committee this year. The AJC’s Daniel Malloy caught up with Woodall in a weekend interview to discuss the issue. In it, Woodall took an increase in the gas tax off the table.

“No, we actually don’t need to raise the gas tax,” Woodall said. “We have plenty of money coming in. What we have to do is reorient the responsibilities that we have.”

Woodall is a fan of reducing the amount of money spent on Amtrak, especially the longer “tourist trains” that cost more to operate than they collect in fares. He also supports the Transportation Empowerment Act proposed by fellow Georgia Congressman Tom Graves. This “devolution” would give more power to the states to spend with fewer federal restrictions. Whatever happens, any solution to solve the issues of the Highway Trust Fund shouldn’t be expected to provide a bailout for Georgia’s transportation needs.

Governor Deal’s proposed 2016 budget allocates $876 million of state money and $1.7 billion in federal money to transportation. That’s two thirds of the money being spent on transportation expected to be paid for by federal dollars. Contrast that with our neighboring state of Florida, which uses state money to pay for around 75% of its road construction and maintenance. Florida’s use of state money, especially for new projects, means that many federal permits and mandates can be bypassed.

The key concept behind Graves’ Transportation Empowerment Act was that the states would assume more responsibility for funding their own transportation needs, which would result in more flexibility and savings in how the money was being spent. In a sense, the declining revenue from the federal gas tax and reduced purchasing power of the Highway Trust Fund is already accomplishing some of that goal, and is a reason the gas tax should not be raised at the federal level.

And while it makes sense for Woodall and his committee to make the most efficient use of the Highway Trust Fund, it’s also incumbent on the states, including Georgia, to make up for the reduced federal revenue bu funding more of their own transportation needs.

10 comments

  1. Dave Bearse says:

    Amtrak’s operating deficit outside of the NEC is about $700M annually, about 0.9% of federal transportation spending. Georgia’s cut would be about $35M annually.

    With big saving like this, and Graves plan, our funding worries are over. No need to increase state taxes for transportation.

    • Harry says:

      Put teachers on social security and partial 401-k matching like in the private sector, and transportation is fixed with the savings. Sure it’s a great political challenge to undertake it – cooperation is needed.

      • Jon Richards says:

        Harry, care to define where those savings would be? If you put teachers on SS and match their 401K, that would be 7.5% salary (the “employer contribution”) to SS, and then typically a 3% of salary employer match on the 401K.

        Sure, in the long run it might save money, as the retirement system wouldn’t be covering as many people who reach an advanced age. But short term, I just don’t see the savings.

        • Harry says:

          For one thing, social security doesn’t kick in until typically age 67. Most teachers are pensioned off 10 or 15 years earlier than that at full pension that has to be paid until they die. If a teacher can no longer teach at some point in their fifties, there would still be plenty of opportunities in administration, school security, and maintenance etc. until they become of normal retirement age. Typically, the 401-k style employer contribution is only a rather small part of the total contribution.

          • Jon Richards says:

            This does not explain how we might be able to save money within the next several years in such a manner transportation could be paid for. If you apply this to new hires, they are likely nowhere near retirement. If you try to switch people on the existing plan over to SS/401K, you would need to pay out the NPV of their existing plan, which would cost a fortune in the short term.

            • saltycracker says:

              Don’t many systems now offer SS on top of the defined program now if the employee contributes ?
              I agree that the immediate savings for the school system are not there as they would be providing a fully funded, portable plan vs. One that corporations long deemed unsustainable over time and the taxpayer is guaranteeing annual 7.5% returns in the market way out into the future. Today the future risk is transferred to the taxpayer in return for underfunding.

              Example for a teacher to retire on $40k before SS a financial advisor would suggest a pot of about $1.0 million. Don’t think you would see many retirement parties at 52. Then there is medical.
              You can’t afford to keep doing that as now either.

              • saltycracker says:

                We will have to in return pay new teachers a lot more. The reason is with a portable plan turnover after 10-15 years will increase. The way we approach education causes burn out in about that time and the good ones will leave. Right now the plan holds them and the bad ones for 30 years.

            • Harry says:

              Jon, the fair market value of investments in the state schoolteachers pension fund is north of $54 billion, probably more like $58 billion at this time. According to my rough calculations, that is more than enough available to transfer the NPV of each active and retired teacher’s account into individual plans. In any case, why are we continuing this defined benefit pension plan for new hires? This thing is pulling funds from where they could be better spent in education and transportation.

              I think you and I both know the real reason….the PAGE.

  2. blakeage80 says:

    None of this matters as of this morning. The I-75 bridge collapse in Cincinnati ensures that the federal gas tax will go up tremendously, because we need to act now! All rational debate will be put aside. This is my pessimist feeling this morning.

    • Dave Bearse says:

      My prediction is that the I-75 bridge collapse will result in an increase in the federal motor fuel tax equal to the increase that occurred after the Minneapolis I-35 bridge collapse.

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