DALLAS – The passage of a five-year, $302 billion transportation bill in early December sets the stage in 2016 for serious consideration by Congress of a funding source, or maybe several of them, to supplement and possibly someday replace the federal gasoline tax.
Rep. Bill Shuster, R-Pa., chairman of the House Transportation and Infrastructure Committee and of the congressional conference committee that resolved differences between House and Senate versions of the infrastructure funding measure, pledged immediately following passage of the bill to involve trucking and other transportation groups in the revenue hunt.
"As soon as the president signs this, we've got to bring the stakeholder community to the table," Shuster said on the House floor after the bill was adopted 359 to 65, with all the "no" votes coming from Republican lawmakers.
"We really need to think outside the box," he said. "We've got to find a way to improve out transit system. Our economy depends on it."
Rep. Peter DeFazio, D-Ore., the ranking Democrat on the transportation panel, said the funding law's main flaw is the lack of a link between allocations from the HTF and its main revenue sources.
"There's more work left to do," DeFazio said. "We need to restore the user-fee mechanism that built the interstate highway system but has been lost. This bill is a starting point, not the end of the road."
The Fixing America's Surface Transportation Act (P.L 114-94) that President Obama signed into law on Dec. 4 provides $43.1 billion for highways in fiscal 2016 from the Highway Trust Fund, up from $37.8 billion in fiscal 2015, and $9.3 billion out of the HTF for mass transit, from $8.6 billion in 2015. Over the next five years, the FAST Act allocates $225.2 billion to highways and $60.9 billion to transit projects from the HTF.
However, the Congressional Budget Office said the revenues through fiscal 2020 from taxes and fees dedicated to the HTF -- mostly the federal taxes of 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel -- will total only $208 billion. The funding in the FAST Act is accomplished with the transfer of $70 billion from the general fund offset with revenue provided by other sources not normally considered as transportation user fees.
It's never too soon for Congress to begin working on supplemental revenue for the HTF in the next multiyear highway bill, even though the current one does not expire until October 2020, said James Burnley, who was President Reagan's transportation secretary from 1987 to 1989.
He co-chairs the transportation law practice at Venable LLP in Washington.
"The FAST Act gives them five years to get it right," Burnley said. "There are a lot of serious issues that need to be discussed, and Congress doesn't make big decisions quickly, especially big tax decisions. The time to focus on it is now."
The biggest decisions over the next five years are going to be what is the appropriate level of federal transportation funding, and where the revenue will come from, Burnley said.
"The federal gasoline tax is just not a viable solution by itself, but it can be part of the answer," he said. "Restoring the purchasing power of the gasoline tax lost since the last increase in 1993 would require an increase that would almost double it. There's no political support by either side for that."
By the time the FAST Act expires in 2020, Congress will have transferred more than $140 billion into the HTF since 2008 to support the gasoline tax, said Peter Nonis, senior manager for federal relations at the American Society of Civil Engineers.
The current $15 billion per-year revenue gap in the HTF could have been covered by a 10-cent-per-gallon hike in the federal gasoline tax, but the $24 billion annual gap expected by fiscal 2020 would require a 20-cent-per-gallon increase, Nonis said.
"Gas taxes and other transportation-related revenues will only be providing half of the dollars necessary to support investment levels [by 2020]," Nonis said.
"This means that any attempt to fill the budget hole through an increase in the gas tax will require a bigger increase than has ever been needed," he said. "Beyond filling the budget hole, increased investment is needed to modernize our surface transportation network."
A potentially significant source for transportation revenue could be tolls on existing interstate highway lanes.
Tolling of existing interstate capacity has been prohibited since the highway program began in the 1950s, but the FAST Act retained a pilot program authorized by a 1998 funding bill that allows three states – Virginia, North Carolina, and Missouri – to toll interstate lanes with approval from the U.S. Transportation Department. None of the three have taken advantage of the program.
The FAST Act extended the Interstate System Reconstruction and Rehabilitation Pilot Program (ISRRPP) for another three years, but gives the three states only one more year to advance their plans before their slots will be offered to other states.
Doug Koelemay, director of Virginia's Office of Public-Private Partnerships, said state officials may move ahead in 2016 with a long-deferred proposal to levy tolls on Interstate 95.
"We're doing our due diligence, and we plan to aggressively pursue it," he said. "We don't want to lose our slots, and it's a use-it-or-lose-it situation with the new law."
The one-year deadline may stir up interest in interstate tolling by the three states, said Pat Jones, executive director of the International Bridge, Tunnel and Turnpike Association.
"Providing this type of flexibility to three states is an important and modest step to enable states to meet the growing funding needs of the aging interstate system," he said.
"I'm bullish on tolling," Jones said. "Even roads can wear out after 50 years, and sometimes you have to rebuild them from the ground up."
The Interstate tolling proposal should have been eliminated in the FAST Act rather than amended, said Stephanie Kane, director of communications for the Alliance for Toll-Free Interstates. The group's members include trucking companies, large shippers such as Federal Express, and motorist associations.
"We can fund highway and transit projects, without resorting to imposing tolls on existing interstates," she said. "The ISRRPP is an outdated pilot program that should ultimately be repealed in its entirety. The alliance will continue to oppose all efforts to toll existing interstates under this program."
A modified interstate tolling mechanism that accounts for highway costs could be part of the funding mix, said Ananth Prasad, transportation practice leader at infrastructure solutions firm HNTB and former Florida transportation secretary.
"We could determine how much a state spends on repair and rehabilitation of their interstate system from the revenues derived from the federal gasoline tax," Prasad said. "If it is 5 cents from the 18.4 cents, then the state could toll the existing lanes to provide that much revenue and lower the federal tax by the same 5 cents.
"We could change the revenue system and then discuss how much additional funding is needed," he said. "That would take a big burden off the federal gas tax."
The solution to the highway funding puzzle will come from the states, not the FAST Act, said Stephen Miller, chairman of the Missouri Highways and Transportation Commission.
"The FAST Act does not appreciably increase funding for Missouri, and its funding sources are not recurring or stable," Miller said. "The real work for funding transportation remains in the hands of Missourians."
Missouri needs an additional $160 million per year for the next 10 years to maintain its current highway system and to rebuild or replace 641 deficient bridges, he said.
The Missouri Legislature is expected to consider raising the state's gas tax by 1.5 cents per gallon and diesel tax by 3.5 cents per gallon to generate $56 million per year for transportation.
