Indiana Chamber of Commerce President Kevin Brinegar, who is also the board chair for Hoosier Voices for I-69, comments on the state’s announcement today that the Indiana Finance Authority is taking over management of the I-69 section from Bloomington to Martinsville:
“It’s the absolute right thing for the state to do to ensure that this segment and the entire project is completed as quickly as possible.
“We must stay on course, because the ramifications are too important. When fully finished, the new I-69 – from Evansville to Fort Wayne – will help further Indiana’s position as the Crossroads of America.
“It will provide many more Hoosiers with better road access, leading to reduced travel time. And that also is very attractive for businesses, making Indiana an even more viable hub for companies and new jobs.”
The U.S. Congress voted last week to provide $10.9 billion to the U.S. Department of Transportation to fund the Highway Trust Fund in order to reimburse states for repairs and infrastructure improvements for roads, rails and airports.
The nearly $11 billion was cobbled together from general fund revenues by any number of budgetary gimmicks not rationally tied to the fuel (gasoline and diesel) excise taxes that normally go into the trust fund (e.g., an extension of customs fees as well as so-called “pension smoothing”).
Few lawmakers in the Indiana delegation (and the entire Congress for that matter) are happy that it is not a longer-term solution; those we spoke with were frustrated by the delay and the funding mechanisms. The Indiana Chamber agrees this is no way to conduct the people’s business, but it is better than the alternative of the highway fund going broke, work stoppages and the idling of hundreds of thousands of construction workers across the country. We will work with the delegation to secure a more rational bill and reauthorization of the multi-year surface transportation bill in coming months.
How to pay for current and future road repairs is a challenge for nearly all states. The federal Highway Trust Fund is not the answer, at least not in its current form. Governing magazine asked a Tax Foundation expert for his perspective on some alternatives. Governing reports:
Commute to work is a bit on the bumpy side, then you know the answer is road repairs. The follow up question is: Given how long this downturn has afflicted state and local budgets, who’s going to pay to repair potholes and the like?
Well, it’s not going to be the feds. The Highway Trust Fund, which finances an average 45 percent of a state’s highway and transit capital costs, is shrinking. One reason for that shrinkage is that the federal gas tax has been stuck at its current rate (18.4 cents per gallon) since 1993, which means it is not keeping up with inflation, to say nothing of state needs. Congress is not likely to raise the federal gas tax rate this year or next, so that leaves the states. In theory, they have a little room to raise or tinker with their gas tax formula — something most states have not done in years.
Given the importance of a healthy road system to economic development, what approaches could states take to raise revenue for road repair and building? I put that question to Mark Robyn, an economist with the Tax Foundation. Here’s an edited version of our conversation:
Is this a good time for states to raise their motor fuel taxes?
It’s difficult to raise most taxes. The gas tax — an excise tax — is interesting because it’s one of the few that states levy that really looks like a user fee. You pay it when you use a specific service, and the rate is set at a level to pay for the service you consume. It’s like an entrance charge to a state park. You wouldn’t call that a tax as long as that revenue is used to pay for upkeep of the park and the charge reflects what the costs are.
The gas tax, though not perfect, is an approximation of that relationship. Revenue received from gas taxes usually is used for road and highway maintenance; the fee you pay approximates how much road you consume. But different cars get different gas mileages; electric cars don’t even use gas but they also don’t cause less damage to the road. So the gas tax is not perfect but it is similar to a user fee. If states want to structure the gas tax like a user fee and if the state is not getting the money it needs for roads and repair, the next logical step would be to increase the gas tax. But people have to believe the money is being spent wisely. Not all states do that, and people say, "Well, I see this waste of money. If you increase my taxes, you’ll waste a portion of it." When I say states are wasting money, I mean they are using it for road projects that people don’t see as valuable — the "bridge to nowhere." If there are no "bridges to nowhere" and people are driving over potholes, they’ll be more willing to accept gas taxes to avoid potholes.