America's highways and bridges are in desperate need of repair. According to the National Transportation Research Group, 33 percent of the major roads are in poor or mediocre condition, 36 percent of major urban highways are congested and 26 percent of bridges are structurally deficient or functionally obsolete. The estimated cost of bringing our road and bridge infrastructure up to standards exceeds $3 trillion.
At the same time, revenues from the federal gasoline tax — 18.4 cents per gallon and the primary federal source of highway funding — have been declining as miles driven have plateaued while cars and light trucks have become more fuel-efficient. For the past several years it's been necessary to transfer sizable general revenues into the Federal Highway Trust Fund to keep it functioning.
In response, proposals have been put forward to either raise the federal gasoline tax, change it from a unit to an ad valorem tax, or replace the current tax with one based on the number of miles driven. But with higher personal taxes going into force this year, and rising premiums for Medicare and other health insurance plans on the horizon, voters are likely to resist any of these proposed changes.
Fifteen years ago, gasoline outlays consumed only 2 percent of the average American's pre-tax income. Today, it's closer to 4 percent. With gasoline prices likely to increase further because of proposed hikes in state fuel taxes, as well as the expanding ethanol mandate and new Environmental Protection Agency sulfur regulations, most drivers can ill afford to bear the additional burden of a higher federal gas tax.
To make matters worse, the Trust Fund no longer fulfills its original mission. Today, every state gets as much or more money in transportation grants as it pays in federal gas taxes. Because of all the red tape and mandates inherent in the use of Trust Fund money, many voters think their federal gas taxes are being wasted and don't want to pony up more for Uncle Sam. Still, Americans say they're willing to pay for improvement to roads and bridges as long as they can see results.
Texas can provide a model for the nation in terms of how to fund upgrades to transportation infrastructure. Though Texas has a 20-cent gasoline tax, it hasn't been increased since 1991, though the state's population has grown 50 percent and automobile registrations even more. Instead, the state relies on bonding and tolling to fund all new highway construction as well as major upgrades to existing roads and bridges. In some cases, the state itself bids against private operators to hold down construction costs.
The result is that new highways and road improvements appear relatively quickly. And guess what? With improved mobility in cities like Houston, Dallas and Austin, where hundreds of miles of toll roads have been constructed in recent years, drivers don't grouse about the fees they have to pay. Importantly, all of Texas' tolls are collected electronically, further improving mobility by eliminating queuing.
As with other functions, highway and bridge funding is becoming more and more a responsibility of state and local governments. The federal government isn't getting out of the highway business, but states that go hat-in-hand to Washington hoping for a big transportation payday are likely to be disappointed. Fortunately, state and local governments have funding alternatives such as bonding power and user fees that can provide the collateral for road improvements.
Bernard L. Weinstein is associate director of the Maguire Energy Institute in the Cox School of Business at Southern Methodist University in Dallas and a fellow with the George W. Bush Institute.