Time to end the federal government’s role in highway funding

Once again, Congress has failed to pass a comprehensive transportation funding bill. Instead, it approved — and sent to the president — a funding extension that expires at the end of July. House Transportation Committee Chairman Bill Shuster (R-Pa.) is not optimistic that a satisfactory bill can be pieced together by the new deadline and expects yet another temporary extension to pass before the August recess. Our elected officials in Washington appear incapable of playing a constructive role in transportation funding. It’s time to end the federal government’s role in highway financing by shifting the responsibility back to the states.

Members of Congress and the president have failed to agree on a long term transportation funding bill since the last one expired in 2009. This type of policy uncertainty harms the economy. It makes it hard for states and cities to carry out transportation planning. Without firm commitments of future funding, construction companies are less likely to make permanent hires or capital investments. Compounding the highway financing problem is the fact that, instead of focusing on highway construction and maintenance, Congress allocated about a quarter of the highway fund revenues to finance non-highway projects, including recreation trails, scenic overlooks, and bike trails. These are decisions local governments should make. With all this in mind, it seems clear that it is time to put an end to Washington’s role in financing highways by phasing out the federal gasoline tax. State and local governments could then decide on an appropriate gasoline tax based on their transportation needs. 

{mosads}With the completion of the interstate highway system nearly two decades ago, the impact of current transportation investments are felt most at the state and local level. Because recipients of federal funds don’t have to bear the full costs of transportation projects, scarce taxpayer dollars are spent on projects that provide low benefits relative to costs, reducing the potential impact of highway construction on economic activity. 

A shift of financial responsibility to the state or local level would give politicians an incentive to consider the total costs of a project before moving forward. With state or local funding, closer scrutiny of projects would eliminate many of the wasteful expenditures of the current federal funding system. We can reduce the incentives to move forward on high cost, low benefit projects if we stop waving federal dollars in front of state and local officials. 

Federal transportation dollars often come with strings attached. For example, some funds for road repair are tied to the addition of bike lanes. Local officials have an incentive to go after these funds whether it makes sense or not. Reducing the federal role in transportation funding would introduce a higher degree of accountability and flexibility in spending. If Jackson, Wyoming, wants to spend its tax dollars to build bike trails to attract tourists, it can. If fast-growing Houston, Texas, wants to focus transportation spending on expanding highway traffic capacity, it can, without having the funding tied to unwanted bike lanes. 

Another reform the federal government could put in place to improve the efficiency of transportation infrastructure system would be to end the prohibition against tolls on interstate highways. Congestion tolls reduce travel time delays that plague many urban interstate highways. The magnitude of tolls required to reduce peak travel time congestion would provide urban transportation planners with valuable information on the amount and location of additional transportation infrastructure investments, improving the return on highway construction spending. 

The Highway Trust Fund has served its purpose. It has financed the construction of the national interstate highway system. Moving forward, In order to improve the nation’s transportation infrastructure, it is time to shift construction, maintenance, and financing decisions back to the states. Greater flexibility and paying the full cost of a project will ensure a wiser use of transportation dollars.

Krol is a professor of economics at California State University, Northridge, and the author of forthcoming research on “Political Incentives and Transportation Funding” to be published by the Mercatus Center at George Mason University.