POLITICS:Highway Trust Fund in Question - Tolls Securer Funding Source

The Republican leadership favored gas tax cuts as something tangible the Congress could do to relieve the burden of rapidly escalating fuel costs for truckers and others. But ARTBA seems to be winning the campaign to keep the gas tax intact . It waged a very vigorous lobbying campaign (See above right). Also timing was lucky for ARTBA. When it came to a vote in the Congress oil prices were dropping again and the need for government action was less compelling.

Now fuel taxes are a ‘highway user fee’ we’ve often been told by fuel tax enthusiasts in the Washington DC transport establishment. Baloney! They are just taxes like any other taxes, and the monies will be used for whatever politicians decide they want to use them for. And as it suits them they’ll simply redefine the purposes and rationale of the taxes. What’s an important ‘principle’ one day is readily junked the next.

To be sure when the federal gas tax was instituted in 1956 it was to fund the interstate highway system and other roads of supposed national importance. As a dedicated highway funding tax it lasted hardly a decade and by the time of President Nixon (aptly nicknamed Tricky Dick) highway money was being diverted in a major way into subsidizing rail transit. Honest legislators would have renamed it back then a Transport Trust Fund or somesuch, but both sides prefer to maintain the fiction that it is for highways (the highway lobbyists to invoke as a supposed ‘principle,’ and the enviros so they can whine about ‘subsidies’ to roads) while diverting a large of chunk of it to non-highway purposes.

Control over the purse strings of the so-called highway trust fund has subsequently been used by the US Govt to enforce a diverse federal agenda on the states – a nationwide speed limit, conformity with clear air dictates, favors for labor unions, a complex planning and public consultation process for new road projects, even the legal drinking age for young people. Withholding of fuel tax monies for highway construction in the states has become a major instrument by which the US Govt imposes its will on state and local government over a range of issues.

The 4.3c/gal tax being pushed for rollback was initially to “reduce the budget deficit” (so much for a highway user fee) but later it was linked to the highway trust funding and the spending on transit as well as highways that this misnamed fund now supports.

With the latest runup in oil prices another rationale for this fuel tax was advanced - that it should be used in a counter-cyclical fashion to help cushion the impact of higher fuel prices for motorists. In any case the pols are saying - whenever there is a big rise in fuel prices we should be free to reduce it to diminish the bite of the higher prices.

Shuster Firewall

Now, the gargantuan Six Year Plan for federal funding of US surface transport called TEA21 was said by its principal architect, Cong Bud Shuster (Repub PA) of the House Transp Committee, to have erected a “firewall” around the Highway Trust Fund, ending the old practice of annual appropriations being less than tax revenues coming into the fund. Standard practice had been to shortchange roads by allowing the paper year-end balance of the Fund grow while crediting the fuel tax revenues in the budget for other purposes.

Any fire marshal would laugh at this Shuster ‘firewall’ – typical of this shyster’s rhetorical cover for his opportunistic favor-trading enterprise. It is a firewall made of paperboard. Hardly had the TEA21 bill been posted to the USDOT website than there was argument over what it represented (among those who could download the monster without crashing their PCs.) And in two annual budgets since it was enacted the Clinton administration has found ways around the ‘firewall.’ Two budgets, two bypasses of TEA21!

And one very big thing TEA21 does not anywhere address is the gas/diesel tax rate! It just assumes it stays the same.

Bad assumption! It can be changed whenever there is a majority in the Congress to change it, and the President signs off.

In the longer term maybe the roadbuilders may see that their dependence on the whims of politicians like Shuster is unfortunate and unnecessary. They’d be better off with a more normal and commercial system for financing roads in which the role of politicians was much reduced - in which motorists paid for road use by toll payments to toll agencies or highway corporations, each of which independently of any politicians made decisions about where and how much to invest based on a singleminded financial assessment of motorists’ willingness to pay versus cost. That is how decisions are made to build the infrastructure of telecommunications, electricity, gas supply and freight railroads, and most other goods and services.

The present politically-dominated road financing system is a striking anomaly in a capitalist economy - a backwater of socialist-type tax-financed investments based in supposed Six Year Plans and 20 Year Plans, in fact highly politicized decisionmaking superimposed on top of command-&-control type state bureaucracies.

Unsatisfied demand for roadspace will manifest itself one way or another. To the extent the politicians won’t impose the taxes needed to provide it, there will be opportunities for toll road projects instead. ARTBA members don’t need to see their future depending entirely on Uncle Sam’s changing whims.

Tolls need defense too

Of course state politicians find it very difficult to leave tolls in the control of state toll agencies, even when the tollsters have a board of directors appointed to make such decisions. These boards are sometimes legally limited in their power. In New Jersey, for example, toll rates and bond issues are only recommended by the board of the NJ Turnpike and the final say is legally in the hands of the Governor. But even where the toll agency board has the legal power, it often declines to use it in the face of statements by a governor. That has been true in New York, Illinois and Pennsylvania. Some boards seem just to be composed of wimps - people who will accept appointment for social reasons but have no desire to actually do anything with their legal power. They serve as political embroidery.

Short-term, lobby groups like ARTBA could help their constituency by insisting on the independence of toll authority boards to set toll rates on a commercial basis, sufficient to pay costs and to support viable capital programs. When a state governor, to gain short-term popularity, prevents a toll increase needed to support a toll agency capital program, that is killing work for ARTBA members just as effectively as a budget reduction for a state DOT. ARTBA was conspicuous by its absence recently in Illinois and New York.

Gov Pataki in New York intervened to kill toll increases decided upon by New York State Thruway board. That has delayed bond issues for their capital program (see TRnl#47 Mar 00 p8). Ditto Illinois. In New Jersey the Turnpike has recently been successful in gaining political support for needed toll increases but in the mid-90s it defaulted in a financial plan and was downrated by the rating agencies because of deferral to Gov Whitman’s wishes for toll rate stability.

Longer term, it is in the interests of motorists and roadbuilders alike that we get the politicians out of controlling road tolls. It is accepted that we let markets set prices for goods and services generally in the economy. For good reason we don’t trust politicans with the power to set the prices of most goods and services. So it should be for road tolls.

In the end that probably requires that state and local governments divest themselves of ownership of toll roads. For as long as they formally own them, they will be portrayed as properly subject to political control. (Comment on this welcome. Please, indicate if for publication, or not. Reserve right to edit down. Send tollroads@aol.com)