Obama Renews Focus on Transportation Investment

President Obama used a Labor Day speech to unveil two new proposals to help rebuild the economy, including $50 billion of additional investment in transportation infrastructure. Long-term economic growth relies on strategic investments in transportation, energy, and water infrastructure, yet funding those investments through short-term deficit spending or new revenue sources (i.e. taxes) has been highly controversial, especially given the weak condition of the U.S. economy. The President’s proposed infusion of dollars would be concentrated over a 12-month period. Underlying the proposal, however, is a funding crisis facing transportation investment that has been building for years, long before the long economic recession began.

The last transportation bill authorized by Congress in 2004, known as SAFETEA-LU, officially expired in the fall of 2009. Transportation funding has been extended by Congress through continuing resolutions of the previous bill. However, due to rising costs and declining revenues to the Highway Trust Fund (HTF), which funds most federal investment in surface transportation, Congress has needed to divert general revenues to cover the shortfall in the HTF − approximately $8-10 billion in fiscal year 2010 alone.

The gap in funding for currently authorized federal transportation policy hides an even larger transportation funding challenge. Full funding of current policy is still widely regarded as grossly inadequate to maintain existing infrastructure, let alone fund new capacity initiatives such as high-speed rail, metropolitan transit, and congestion relief. In 2004, the American Society of Civil Engineers estimated that a minimum of $375 billion would be required just to bring federally-funded highways, bridges, and transit systems into a “state of good repair.” The subsequent bill passed by Congress allocated a total of $287 billion for 2004-2009. But the maintenance backlog has continued to grow, highlighted by incidents like the 2007 highway bridge collapse in Minneapolis.

Approximately 90 percent of HTF funding comes from federal taxes on gasoline and diesel fuels. In the absence of other innovative funding mechanisms, the default presumption among many Members of Congress is that a substantial increase in existing fuel taxes will be required, at least in the short-term. However, there is arguably nothing less popular among voters than a hike in the gas tax, and such a move may be deferred until after the 2012 election − which underscores the dilemma facing lawmakers. Voters want the federal government to help rebuild the economy and improve our transportation system, but they may not like the options on the table.

A report by the Mineta Transportation Institute and other polling research, though, indicates that public support for an increase in fuel taxes or other new revenue sources is strongly influenced by how additional revenues would be used—for example, support for a 10 cent increase in the federal gas tax rose from 23 to 42 percent if the revenues were purposed to transportation projects to reduce global warming. This suggests that public support for new transportation revenues will depend heavily on what policies are established to guide how new revenues are invested.