WASHINGTON INSIGHT

National panel undertakes mission to address transportation financing challenges

Jim Fahey
Director of Government Affairs
APWA Washington Office

A new commission authorized by the federal highway and transit act, SAFETEA-LU, met for the first time late May to begin undertaking an important mission: to study the future of the nation's surface transportation system and recommend solutions to its growing funding and financing challenges.

Although SAFETEA-LU authorized record levels of funding for highways, bridges and public transportation—$286.4 billion over six years—deteriorating infrastructure and mounting demands on the system are contributing to a significant investment gap that threatens future productivity, mobility, safety and economic development.

Current financing systems and structures are unable to close the gap. Factors such as increasing fuel efficiency, wider use of alternative fuels and non-fuel-based technologies to power vehicles, plus the erosion of the purchasing power of fuel taxes over time and resistance to raising or indexing motor fuel taxes, are contributing to downward revenue pressures on the Highway Trust Fund.

Several studies and forecasts show this to be the case. A study by the U.S. Chamber of Commerce, released late last year, shows that Highway Trust Fund revenues will fall between this year and 2015 and that the Highway Trust Fund's highway account will have a zero-cash balance in 2008, a year before SAFETEA-LU expires.

Government sources also paint a bleak picture. U.S. Treasury Department forecasts released earlier this year predict that the highway account will have a negative balance in 2009, while the Congressional Budget Office anticipated a negative balance in 2010. U.S. Department of Transportation officials, meanwhile, have described the Trust Fund as essentially tapped out.

Congress was concerned about the unstable revenue outlook when it debated SAFETEA-LU last year, so it authorized two commissions in the legislation to study the way highway and transit programs are funded and to devise alternative ways to fund them. Soon after all its members had been appointed, the National Surface Transportation Policy and Revenue Study Commission met for the first time in May.

The Commission is charged with conducting a comprehensive study of the current condition and future needs of the surface transportation system, including short-term sources of Highway Trust Fund revenues and long-term alternatives to replace or supplement the fuel tax as the principal revenue source to support the Trust Fund.

In addition, the Commission is to develop a conceptual plan, with alternative approaches, to ensure that the surface transportation system will continue to serve the needs of the United States, including specific recommendations regarding design and operational standards, federal policies and legislative changes.

The second Commission, the National Surface Transportation Infrastructure Financing Commission, has a similar mission but was not funded, and its 15 members have yet to be named. The Bush Administration wished to combine the two Commissions, but no action has been taken.

Secretary of Transportation Norman Y. Mineta convened the first meeting of the National Surface Transportation Policy and Revenue Study Commission by pointing out that "changes in funding, traffic and business trends are posing serious challenges to the nation's transportation systems and offer a rare opportunity to make a 'historic transition' in how existing and new projects are funded."

Challenges cited by Mineta included public concern over the practice of earmarking, declining balances in the Highway Trust Fund and the emergence of innovative private sector funding streams.

The Commission will continue working through the end of this year into next year. It is required to submit a report of findings and recommendations to Congress by July 1, 2007.

The members of the Commission are Frank Busalacchi, Wisconsin Secretary of Transportation; Rick Geddes, Director of Undergraduate Studies, Cornell University Department of Policy Analysis and Management; Steve Heminger, Executive Director, Metropolitan Transportation Commission; Frank McArdle, General Contractors Association of New York; Steve Odland, Chairman and CEO, Office Depot; Mary Peters, National Director of Transportation Policy, HDR; Patrick Quinn, Chairman, American Trucking Association; Matt Rose, CEO, Burlington Northern Santa Fe Railroad; Jack Schenendorf, Of Counsel, Covington & Burling; Tom Skancke, CEO, The Skancke Company; and Paul Weyrich, Chairman and CEO, Free Congress Foundation.

Jim Fahey can be reached at (202) 218-6730 or jfahey@apwa.net.