US House budget to cut transport grants 20% - what for tolls?

April 6, 2011

The US House Budget chairman Paul Ryan proposes some serious reductions in federal transportation spending in his budget released today. US spending - mostly grants to the states is to drop by nearly a quarter $21b in 2012 from $85b in authorizations and in 2015 would be $25b or 30% lower than this year (see table nearby). Cuts like these are essential to ending the ballooning of federal debt with all the potential that carries for new financial crises, flight of capital, and crippling new taxes.

US road and transit spending along with "livability" grants and other fringe transportation programs has seriously outrun stagnant gas/diesel tax revenues and the program increasingly adds to the general Federal deficit, being funded with unfunded grants.

The days are long gone of US transportation spending being funded by highway 'user' taxes in a self-balancing so-called Trust Fund.

USGAO scathing about waste in US transportation spending

The bipartisan US Government Accountability Office (USGAO) recently wrote in scathing fashion on the wastefulness of US surface transportation spending.

Beginning half a century ago with the clear objective of building the interstate highway network based on the federal gasoline/diesel tax it has since sprawled ineffectually into scores of disparate handout programs:

"(F)ederal surface transportation programs grew in number and complexity to encompass broader goals, more programs, and a variety of program approaches and grant structures. This variety of approaches and structures did not result from a specific rationale or plan, but rather an agglomeration of policies and programs established over half a century without a well-defined overall vision of the national interest and federal role in our surface transportation system. This has resulted in a fragmented approach as five DOT agencies with 6,000 employees administer over 100 separate programs with separate funding streams for highways, transit, rail, and safety functions. This fragmented approach impedes effective decision making and limits the ability of decision makers to devise comprehensive solutions to complex challenges."

USGAO continued:

"The largest highway, transit, and safety grant programs distribute funds through formulas that are typically not linked to performance and, in many cases, have only an indirect relationship to needs. As a result, it is difficult to assess the impact of funding on achieving transportation goals.

"The federal aid highway program, in particular, distributes about $40 billion a year to the states through complicated formulas that are ultimately overridden by provisions that return federal fuel excise tax revenues to their state of origin.

"Once DOT apportions funds, states have wide latitude to select their own projects and considerable flexibility to reallocate their funds among highway and transit programs. While these provisions give states the discretion to pursue their own priorities, the provisions may impede the targeting of federal funds toward specific national goals and objectives.

"To some extent, the federal aid highway program functions as a cash-transfer general-purpose grant program, rather than as a tool for pursuing a cohesive national transportation policy."

It went on to say that the goals of the various surface transportation programs are "unclear."

Crude favor trading goals not mentioned in polite company

In fact the goals are crystal clear.

They are to pay off with grants of taxpayer money an ever-growing host of political constituencies  that have formed around the country to live off federal handouts. In return for these handouts US congressmen gain leverage with which to extract deference, political support and campaign funds.

Earmarking is only the most blatant form of quasi-corrupt favor-trading that these "transportation" programs represent.

How far House budget chairman Paul Ryan succeeds in cutting federal surface transportation spending is unclear, but it seems certain they will be substantial.

Also unclear is the future of the gasoline tax.

Almost no one thinks the federal gasoline tax can be increased. House transportation committee chairman John Mica (Repub) is adamant on that and all his Republican colleagues. So are most Democrats. The Obama administration too.

Outside the corridors of the Washington DC road builder lobby ARTBA there is almost no support for a higher fuel tax.

There could be a reduction in the federal gas tax. Some have suggested zeroing it out to take the sting out of rising fuel prices for motorists. Or to let state governments have some leeway to raise their gas taxes to make up for some of the shortfall in federal grants.

Tolling's prospects

The prospects for tolling should be improved with the decline in federal grants. After all if there isn't grant money from the federal government, tolls are an obvious potential substitute. And a larger role for tolls is being discussed in a variety of states including ones without any recent tradition of tolling such as Alabama, Connecticut, South Carolina and Nevada.

Transportation Committee chairman John Mica however seems strongly opposed to allowing the state to toll any interstate capacity presently free. Yet it may be difficult to maintain that federal restriction at a time the Feds are cutting back their grants to the states.

State governments may not be prepared to raise their gas taxes sufficiently to rebuild interstates. And if they aren't allowed to toll them, they may just be allowed to deteriorate.

Take I-95 in South Carolina, which carries around 80% out-of-state traffic. With local gas tax money spread increasingly thin it is unlikely to be used on a project mostly for the benefit of pass-through traffic. Tolling SC/I-95 is obviously the fairest and most politically viable way to improve it.


Chairman Mica and other congressmen say they want to make greater use of private sector funding to improve infrastructure. But the private sector must be able to collect tolls to get a return on their investment. The more Mica and his colleagues limit tolling the less opportunity will there be for public-private partnerships.

Toll-financing of new capacity alongside existing free lanes can work in a few extremely heavily trafficked corridors, but not in many. Most of the viable toll lanes projects involve conversion from HOV, restriping for extra lanes, not financing significant new capacity.

Maybe a compromise acceptable to Mica can be reached in which tolls can be used to to finance rebuild and improvement of presently untolled interstates, and continuing maintenance and improvements.

Maybe as in Texas there could be an effort to ensure some free capacity although in the form of signalized/surface lanes - frontage roads.

And maybe the tolling of existing capacity for rebuild/modernization could coexist with a prohibition on toll surpluses being used outside the tolled corridor.

Value pricing

There was a Los Angeles Times report of Chairman Mica being opposed to the conversion of HOV lanes to HOT lanes in Los Angeles (the I-10, I-110 Express Lanes). But it would be surprising if he moved to end the  value-pricing program under which the Feds have encouraged such toll conversions and market based pricing.

Unlike the many indiscriminate handouts of the much larger highway and transit programs criticized by USGAO the value pricing program has been precisely targeted, generally well-managed, successful, and cost-effective.

Indeed that program could well be enlarged with the clear objective of helping states become more self-sufficient in funding their highways - to help them get weaned off federal handouts and making the most of limited dollars with price-managed highways.

House budget:

GAO report p48 on

TOLLROADSnews 2011-04-05

Further Reading

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