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In Wisconsin, the state's road system is propped up by massive multi-billion dollar funding streams that don't come from drivers. Cross-subsidies to transit are tiny by comparison. Source: SSTI

We’ve said it before and we’ll say it again: Roads don’t pay for themselves.

But maybe they should.

The latest evidence comes from the State Smart Transportation Initiative at the University of Wisconsin-Madison. Along with the smart growth group 1,000 Friends of Wisconsin, SSTI published a study in October [PDF] showing that “between 41 and 55 percent of [Wisconsin’s] road money comes from non-users.” In other words, roughly half of the money going toward the state’s road system doesn’t come from gas taxes, license fees, or any other contribution from drivers. Its highways are massively subsidized.

“Taxpayers cover costs that should be borne by road users,” asserts the SSTI. “Road subsidies push up tax rates, squeeze government services, and skew the market for transportation.”

Between 2004 and 2008, roads in the state cost an average of $4.24 billion annually. Of this, $1.74 billion came from revenue sources unrelated to road use—primarily property and sales taxes—while another $600 million was borrowed…

The fact is, roads constitute one of the biggest tax burdens we face.

“Non-users” fork over $779 per household for roads — as opposed to $50 for transit. But most drivers still believe that transit eats a huge chunk of transportation funding while roads are self-supporting. SSTI wanted to dispel that notion, said study author Bill Holloway.

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At Rail~Volution yesterday, Rep. Earl Blumenauer (D-OR) — also known as the godfather of the “rail~volution” — said even he wouldn’t raise the gas tax right now.

Earl Blumenauer takes the podium at Rail~Volution, while moderator Grace Crunican of BART, APTA President Bill Millar, and Transportation Secretary Ray LaHood (not pictured) stand by. Photo by Clarence Eckerson, Jr.

“We should make some adjustments to a gas tax that hasn’t increased since 1993,” Blumenauer said. “Half the people think the gas tax goes up every year.”

He said he’d like to see it indexed to inflation:

In an ideal world, I would not raise the gas tax this year or next year. Come out of this recession, but put in place increases that are going to occur over the next 10 years; have that revenue stream. I would borrow against the revenue stream to take advantage of record low interest rates and a bidding climate like we’ve never seen, fund the president’s infrastructure bank to help move some of these forward, and work toward replacing the gas tax.

He reminded the audience that his state was the first to institute a gas tax, and now Oregon is working to get rid of it and replace it with a vehicle miles traveled fee.

Bill Millar, the outgoing president of the American Public Transit Association (“on Halloween, I turn into a pumpkin!”), said that before switching to a VMT fee, Congress needs to eliminate the federal guarantee, called “equity bonus,” that states will get back at least a certain percentage of what they pay in gas tax receipts. (The GAO recently found that every state actually gets back more than it puts in, thanks to infusions from the general fund, but that hasn’t stopped a lot of states from complaining that they don’t get their fair share.)

“States that encourage more travel get more money back [under the equity bonus system],” Millar said, “so we’ve got to break that cycle too, to make sure instead it’s an inverse relationship and states that give people more choice, more ways to travel, get more federal aid, not less federal aid.”

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Just days after a Senate committee asked the full chamber to consider a four-month extension of SAFETEA-LU, new negotiations have replaced that idea with a six-month extension at current spending levels. The bill also extends the gas tax.

Over the weekend, the House and Senate decided to combine the long-overdue FAA reauthorization with the pending surface transportation bill, considering them together as one uniform transportation extension [PDF]. The FAA bill will be extended for four months, while SAFETEA-LU will be extended for six, with an expiration date of March 31.

As an added bonus, combining the bill with the FAA means that Congress can’t keep us in suspense until the last possible moment, as they’ve been prone to do lately. (Remember the debt ceiling? Remember the narrowly-averted government shutdown last spring?) The FAA extension expires September 16, so if Congress is to extend them together, they’ll have to act by the end of this week, instead of waiting till the end of next week, when they leave for another recess. The House is tentatively planning to vote on the bill tomorrow.

The extension is a clean one, with no changes in policy. That means bike/ped funding, which has been under threat over the last week, will remain for the next six months, at least. And the extension will be funded by the same 18.4 cent federal gas tax the U.S. has had since 1993, which was also due to expire September 30 and which is also renewed by this action.

The extension will stick to current funding levels, authorizing $24.78 billion in spending from the Highway Trust Fund for the first half of FY2012 (which begins October 1). That’s almost $19.8 billion for highways and $4.2 billion for transit.

That’s far more than the FY2012 budget just passed by the Transportation and HUD Appropriations subcommittee in the House, which agreed to $27.7 billion for highways and $5.2 billion for transit for the entire year. Although this extension can authorize more spending than that, actual spending levels are up to the appropriators, according to Jeff Davis at Transportation Weekly. Experts say that at this level, most of the money would go to pay states back for projects already built, and new highway project funding could be cut by as much as 75 percent.

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Since the 112th Congress convened in January, the federal government almost shut down, the government almost defaulted on its debts, and the FAA was temporarily shuttered. It’s the Crisis Congress, thriving on the chaos of catastrophe. Next up: a bruising fight over funding the transportation system.

Grover Norquist wasn't content to just bring us to the brink of default. Photo by Gage Skidmore

A few weeks ago, Ben Smith at Politico mentioned in a short post that the gas tax was expiring September 30. If not extended, all but 4.3 cents of the 18.4-cent federal gas tax would disappear. Extending the gas tax has always been an easy, bipartisan move that happened more or less automatically. (Raising it to a reasonable level is another story entirely.)

When Smith first wrote about the gas tax expiration, it was the first some had heard of the issue. Others were monitoring it cautiously, just in case the Tea Party or other antitax crusaders decided to kick up a stir. But media reports confirm that those forces are preparing for battle.

House Transportation Committee Chair John Mica has proposed a bill based on the current gas tax, and his office has confirmed that he supports keeping it at 18.4 cents. But according to Platts news service, Republican members on key committees are “still deciding what to do about the federal gasoline tax.”

The demigod of the tax-haters, Grover Norquist, has decided to take up the banner, after enough news organizations asked if he was going to. “ATR will be urging people to look at ending the federal gas tax either cold turkey or phasing it out as soon as possible and allowing states to simply go raise their own taxes, rather than send the money to Washington and get it back with strings,” Norquist told Platts in an email.

Even other right-wing small-government types part company with Norquist there. Politico quotes Heritage Foundation and Reason Foundation experts as saying the gas tax “has to” be renewed and that a “cold turkey” end to the gas tax, as Norquist appears to be pondering, would be “chaotic.”

That seems to be fine by Rep. Joe Wilson (R-SC) of “You lie!” fame. (Chaos is sort of his thing.) His local TV network, WJBF, quotes Wilson as questioning the federal gas tax. “Sadly, it has been used in large cities to subside a transportation system, the subway systems of New York, Chicago, San Francisco. We need to look at this carefully. And, I believe the money should be spent where it is raised and that is by the drivers of Georgia and South Carolina.”

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Well, it’s unanimous – everyone agrees the country needs a significant hike in the gas tax. Everyone outside of Congress, that is. Last week, General Motors CEO Dan Akerson told The Detroit News that a higher gas tax would help solidify the market for more fuel-efficient cars.

GW CEO Dan Akerson wants the gas tax raised. Photo: The Detroit Bureau

Akerson told The Detroit News that, rather than have the government incrementally increase fuel efficiency standards over the next several years, “You know what I’d rather have them do — this will make my Republican friends puke — as gas is going to go down here now, we ought to just slap a 50-cent or a dollar tax on a gallon of gas.”

“People will start buying more Cruzes and they will start buying less Suburbans,” he said.

Akerson isn’t the first representative of a major U.S. automaker to come out in favor of a higher gas tax. Two years ago, as the automakers were being rescued from collapse by the U.S. government, Bill Ford, CEO of Ford, complained that demand shifted with gas prices.
“As a manufacturer, we don’t like that,” Ford said at a business conference. “Our ability to forecast has been just horrible,” said Ford. “If gas prices are gyrating wildly, we have no idea whether we’re planning right. We’d much rather have a fairly predictable level to shoot for in gas prices. That’s why I think a gas tax would work for us.”

Chrysler’s response to high gas prices in 2008 was quite the opposite – the company offered a guarantee of $3/gallon gas for three years for car buyers. Lee Iacocca championed a hike in the late eighties, before the last gas tax increase, but the company isn’t on record currently as supporting a raise.

The construction industry is a vocal supporter of an increase, since low revenues have hamstrung new development. Indeed, it’s hard to find anyone outside of Washington these days that doesn’t see the obvious need to raise the gas tax, which hasn’t been increased since 1993, when gas was just over a dollar a gallon.

Word went out in a press release early last month: The Missouri Department of Transportation would be eliminating 1,200 jobs, closing 135 facilities and selling 740 pieces of equipment.

“This is about survival,” said MoDOT spokesman Jorma Duran. “This is about making sure our roads and bridges continue to be maintained and operable.”

Drastic times call for drastic measures. And outdated gas tax rates, state operating shortfalls and a lack of forethought are combining to create a crisis for state DOTs in Missouri and beyond. In the last two years, Virginia DOT let go of 1,000 employees and New York DOT eliminated 100 positions.

The Virginia Department of Transportation made 1,000 layoffs in 2009, the biggest reduction in the history of the agency. Photo: Richmond Times-Dispatch

“We just ran out of money,” Reta Busher, VDOT’s chief financial officer, told the Richmond Times Dispatch.

State transportation agencies are adjusting to a “new reality,” said John Horsley, executive director of the American Association of State Highway and Transportation Officials. And there will be widely felt impacts.

“It’s terrible,” he said. “Because of these economic crises, you’ll see projects put off. States will not do as much as they recognize is absolutely essential.” Horsley said the most vulnerable employees are rural maintenance crews. And those job losses are likely to have a painful ripple effect across already recession-battered states, he said.

“If you go to rural Missouri and just about any rural place, the state maintenance facility is one of the most important employers,” Horsley said. “That’s a real blow to rural economies all over Missouri. Those paychecks were very important to those regions.”

How did states get into this mess? Well, stagnant gas taxes are a big part of it. States depend on gas taxes — federal and their own — for an average of 24 percent of their budgets, according to Smart Growth America. But since the gas tax was last raised in 1993, inflation and greater fuel efficiency have greatly diminished its purchasing power. In addition, many states have not had the political gumption to take on gas tax hikes themselves (Georgia and Connecticut being a few notable exceptions).

Rising fuel prices have also forced gas tax receipts downward, as consumers curb nonessential driving. Where in headier times, states might have subsidized their transportation agencies out of the general fund, few states are in the financial position to do so at the current time.

To make matters worse, many states have been pouring their increasingly scarce transportation resources into projects of dubious merit.

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Adriano Espaillat voted for a gas tax holiday -- which won't even help lower costs at the pump -- on the dime of the 70 percent of his constituents who don't own a car. Photo: Chu for Daily News

The New York State Senate voted for a “gas tax holiday” yesterday, moving to eliminate the three state taxes on fuel for the busy Memorial Day, Independence Day and Labor Day weekends this year. The estimated loss of revenue would be $60 million.

The 48 state senators who voted for the gas tax holiday wanted to ensure that drivers didn’t have to pay for the environmental and social costs of their actions — a misguided enough goal — but their desperate attempt to pander wouldn’t even have been a success on those grounds.

As economists from across the political spectrum have stated, a summertime gas tax holiday wouldn’t reduce the price at the pump. Oil companies would charge the same rate and pocket the difference. The libertarian Cato Institute, no friend of taxes, called gas tax holidays a “holiday from reality” in 2008. If we really must pander to motorists, surely we can all agree that New Yorkers deserve better panderers.

Those state senators, however, are savvy politicos. They can’t deliver the goods, but they know their audience. That’s where the gas tax vote is especially revealing.

Even if a gas tax holiday worked as promised, reducing the price at the pump instead of increasing Exxon’s profit margins, it’s a sure thing where the money comes from: the state’s transportation budget. If the gas tax holiday costs $60 million, that’s $60 million in new revenues needed for the MTA and state DOT, or $60 million more in cuts to things like education. While only drivers would even theoretically benefit, everyone else would pay the price.

Voting for a gas tax holiday means you’re worried about appeasing drivers in your district and not too concerned with sending everybody else the bill. That’s probably good politics if you’re Patrick Gallivan, the Western New York senator whose district has a 96 percent car ownership rate according to Streetsblog’s analysis of Census data. More outrageous is the fact that many New York City senators seem to agree.

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Connecticut state senators just voted to increase the state gas tax by three cents. The New Hampshire House Speaker has proposed cutting theirs by five cents – but only for two months, to help drivers bear the pain of high gas prices. In Georgia, the gas tax jumps every time gas prices go up by 25 cents. And at least one U.S. Senator is suggesting that more states start taking transportation funding into their own hands.

Sen. Lamar Alexander (R-TN) listens to mayors' concerns about federal funding for transportation. Photo: Alan Spearman / Commercial Appeal

After a meeting with mayors in his home state of Tennessee, where he listened as area mayors expressed concerns about the federal budget, Republican Senator Lamar Alexander said, “State and local governments will have to decide whether to have an increase in the gasoline tax.” He delivered the bitter news to the mayors that they may be getting even less money from the federal government over the next few years.

For many Republicans, that’s just as it should be. They think the federal bureaucracy is too big and more government functions should be left to the states. Alexander said that when he was governor in the eighties, he was able to fund and complete several state road projects without federal dollars.

But the mayors he spoke to were concerned. According to the Commercial Appeal, they explained that most transportation projects get 80 percent of their funding from the feds with just a 20 percent local match. They count on those federal dollars.

Alexander didn’t specify how much the state should raise the gas tax, but he indicated that tourists and truckers would “pay for a big share of it,” perhaps as a way to help local politicians sell the idea of a higher state gas tax to constituents.

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Gas prices are up to $3.23 a gallon this week, according to AAA. But before drivers complain about “pain at the pump,” they should compare U.S. gas prices to those in the rest of the developed world. A liter of gas costs about 80 cents. A liter of Fiji bottled water costs about $4.00.

According to Ryan Avent at the Economist, the low prices are “almost entirely due to the rock bottom level” of gas tax rates in the U.S. Avent goes on:

The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens. This dependence also impacts infrastructure investment choices, leading to substantially more spending on highways than transit alternatives. And this, in turn, reduces the ability of American households to substitute away from driving when oil prices rise.

The gas tax brings in far less than it did back in 1993, the last time it was raised, because of greater fuel economy in cars. And it’s a set price and not indexed to gas prices (which are three times higher than they were in 1993).

Avent concludes, “It’s hard to take any fiscal hawk seriously so long as this measure isn’t on the table. It’s as close to a win-win solution as one is likely to find.”

The idea may be finally gaining traction. Everyone from the deficit commission to some U.S. Senators are warming to the notion that a gas tax hike is the best way to pay for the ambitious transportation agenda that President Obama laid out and finally address some of the country’s backlogged infrastructure needs. The administration’s entire six-year, $556 billion proposal could be paid for by roughly doubling the federal gas tax. (Bringing it up to 39.3 cents a gallon for regular gas and 52.2 cents for diesel would be sufficient, according to our back-of-the-envelope calculation.) And it would still be puny compared to other developed nations.

Business Insider magazine has an editorial today called, “It’s Time For a Gas Tax.” Tom Friedman proposed a one-dollar gas tax hike in the New York Times this week. Indeed, you could add a dollar to our gas tax and gas would still be a bargain compared to some countries. But it could be just enough to encourage more sensible transportation options.

At an EPW hearing last month, a witness told Senators that to visualize the number of unemployed construction workers, they should picture the Dallas Cowboys stadium, which seats 100,000 people -- times 20. That point hit home with Sen. Boxer. Today, she helped her fellow Senators with the visual. Photo courtesy of the Senate EPW Committee.

Against all odds, in a time of high unemployment and Republican attacks on spending, momentum may finally be building for a gas tax increase.

Business and labor came together to make a rare show of unity today to push for a robust transportation reauthorization with adequate investment for infrastructure. And they spoke out loud and clear for a higher gas tax. Most surprising of all – it seemed that Senators were finally ready to have a mature discussion about it.

The gas tax has been a third rail issue lately. While finance and infrastructure experts roundly agree on the need to raise the tax – which hasn’t been increased since 1993 and whose purchasing power has been gutted by inflation and improved fuel efficiency – politicians have been unwilling to get behind a tax hike during a down economy.

Enter Tom Donohue and Richard Trumka, two towering figures in U.S. economic life. Donohue, the cantankerous chief of the U.S. Chamber of Commerce, and Trumka, the man’s man who heads the AFL-CIO, don’t agree on much. In fact, a favorite joke of today’s Senate hearing, where the two appeared together, centered on the strange-bedfellow nature of their joint push for infrastructure investment.

“The fact that Tom Donohue and I appear before you today does not mean that hell has frozen over or unicorns are now roaming the land,” Trumka joked in his opening statement at the Environment and Public Works Committee hearing. Delaware Democrat Tom Carper interjected, “When I walked up here from the train station this morning I did see a pig fly overhead.”

Carper noted that he was one of the only people on the Hill willing to support a modest increase in the gas tax to pay for infrastructure and deficit reduction. He has suggested raising it a penny a month for 25 months. The deficit commission has moderated that proposal, recommending a penny a quarter for three and a half years (resulting in a 15-cent increase), with all of the revenues going to infrastructure.

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