The Aug. 1 collapse of the Interstate 35 bridge over the Mississippi River in Minneapolis, Minn., was a deadly surprise to 13 commuters who rode the falling structure to the ground and waters below. Much more predictable was the aftermath of the tragedy: calls to spend more money on bridge construction and repair, and to increase fuel taxes to pay for the work. The bridge crisis has spawned a national conversation about how to fund much-needed highway infrastructure projects across the country.
Minnesota Congressman Jim Oberstar is leading the charge to channel more funding to bridges even as he deplores government’s tardiness in doing so. The chairman of the House Committee on Transportation and Infrastructure said a week after the bridge fell that public officials seem to operate with a “tombstone mentality.” Said Oberstar: “We react to tragedy, when lives are lost, but we fail to take preemptive action that could prevent these tragic events.”
Janet Kavinoky, director of transportation at the U.S. Chamber of Commerce, exemplified the reaction. In a Wall Street Journal interview two days after the bridge crashed down, Kavinoky directly linked the tragedy to new funding for infrastructure.
“We owe it to the memories of those who died,” she said, “to react productively and thoughtfully to this tragedy by renewing our roads, rails, waterways, ports and aviation systems.”
So the stage is set for Congress to do something following a crisis. Just what it will do is uncertain. One option always is a special emergency appropriation from the general fund; indeed, some $250 million in federal aid already has been authorized. But over a long term, the usual revenue source for highway and bridge construction and repair is the fuel tax, as well as related user fees. Numerous elected officials and transportation executives now want increases in those taxes and fees.
Some Highway History
The history of federal financial involvement in building and maintaining public roadways dates back more than 100 years. In 1893, an Office of Road Inquiry was established in the U.S. Department of Agriculture. The office was given $10,000 to promote better rural roads.
Fifteen years later, the level of investment soared after Henry Ford introduced the Model T to America and the country’s relatively primitive network of roads began to take on new economic and cultural significance. In response to the growing popularity of motorized transportation — and to complaints about the condition of America’s roads — Congress in 1916 passed the Federal Aid Road Act. That law assured state capitals that Washington would systematically send money to them for road improvement projects; the initial appropriation divided among the states was $5 million.
The act also required each state to establish a commission and office to oversee expenditure of the funds, the beginning of state departments of transportation.
In 1921, Congress authorized federal highway officials in a renamed Bureau of Public Roads to team up with states and start building two-lane paved highways. Funding of the designated highways was to be 50/50 state and federal venture; the first federal installment in 1922 was $75 million. With generous new funding authority in place, the 1920s became a boom time for highway construction with some $10 billion in federal and state money spent on projects across the country.
After World War II, Congress was ready to go even further and authorized a “National System of Interstate Highways.” Though that proposal was enacted and signed into law by President Franklin D. Roosevelt, funding never was forthcoming. It wasn’t until 1956, during the administration of President Dwight Eisenhower, that Congress finally passed appropriations mechanism for the huge program.
With Washington now fully involved in highway construction, a federal Department of Transportation was created in 1966 and a chief component of the department was the Federal Highway Administration. Under the guidance of the administration, tens of thousands of miles of connecting four-lane roadways came into being over the next 20 years — the Dwight D. Eisenhower National System of Interstate and Defense Highways.
The Gas Tax
Federal money for all this highway work at first came from the general fund. When gasoline began to be taxed by Washington in 1932 — a penny-per-gallon excise tax was authorized — the revenue was directed to the general fund.
By 1956, the tax had increased to 3 cents a gallon. Congress at that point diverted the entire stream of gasoline tax revenue to a newly created Highway Trust Fund for exclusive expenditure on highway work, particularly the construction of the new interstate system. The gasoline tax was upped to 4 cents a gallon in 1959 and stayed at that level for more than two decades with 100 percent of the money spent on highway projects.
But the pattern of spending changed in 1983. That was the year Congress decided to start funding mass transit projects and diverted approximately 10 percent of the fund to transit development.
The funding process changed again in 1990. That year, Congress skimmed the pool of gas tax revenue and applied it to budget needs other than transportation, including deficit reduction. By 1993, the gas tax had risen to 18.4 cents (where it remains in 2007) but more than a third of the revenue was directed to the general fund, with just slightly more than half of it reserved for highway projects. Not until 1997 was the flow of tax revenue fully restored to the Highway Trust Fund, and by that time mass transit development claimed 15 percent of the funding.
So the percentage of gas tax money dedicated to highways and bridges has ebbed and flowed over the last century, though the amount of revenue from the tax has grown incrementally. America’s fascination with motorized vehicles has been a reliable bonanza for revenuers. With its gas tax money, Washington contributes approximately 45 percent of capital for infrastructure projects; state and local governments pick up the rest.
While revenue is up, so is spending from the Highway Trust Fund, even though there is a built-in spending damper: The Trust Fund balance dictates how many projects in a federal highway bill actually are contracted. User fees deposited in the fund include, besides fuel taxes (gasoline and diesel), a tire tax, a truck sales tax and a heavy vehicle use tax. When authorized projects obligate the last available dollar from these taxes, additional project work stops, at least in theory.
In 2005, the current transportation law was enacted and given the unwieldy name of the Safe, Accountable, Flexible and Efficient Transportation Equity Act, A Legacy for Users. The law authorizes spending of $286.4 billion — $228 billion for highways, $52 billion for transit projects and $6 billion for highway safety programs. The act is to expire in 2009. The problem is that fuel tax collections funding the bill will run out first.
“When the transportation program was passed in 2005,” said John Horsley, executive director of the American Association of State Highway and Transportation Officials, “we knew we would chew through all the reserves in the trust fund. However, the rate of spending will run the program into the red at the beginning of 2009 instead of at the end of ’09.”
The solution, said Horsley and other AASHTO officials, is to raise the gas tax by three cents a gallon to complete projects authorized in 2005. Yet even if that extra revenue is approved and spent, general deterioration of transportation infrastructure will continue.
Estimates vary about the rate of spending and taxation to offset deterioration. Some construction industry observers contend that $10 billion to $20 billion more must be spent each year just to keep America’s highways and bridges in functioning condition. The American Society of Civil Engineers estimates that $1.6 trillion must be raised and spent in the next five years to thoroughly rehabilitate highways and replace obsolete bridges.
The reason for this is obvious: age. Highways and bridges built during the nation’s major highway expansion are 30 years old or older. The fallen Minneapolis bridge, for example, was set in place over the Mississippi 40 years ago.
Consequently, the civil engineering society believes 150,000 highway bridges — approximately a quarter of the bridge stock in the country — are “deficient” in one respect or another. To be labeled “deficient,” a structure is deemed to have experienced some degree of loss of strength or surface integrity, but it does not necessarily mean the structure is unsafe.
Oberstar proposes to ramp up federal funding to repair approximately 75,000 “structurally deficient” bridges. His proposal would raise $25 billion over the next three years and deposit it in a Bridge Reconstruction Trust Fund patterned on the Highway Trust Fund. This would appeal to states because currently bridge projects are 80 percent funded by federal dollars. To raise the money, Oberstar will ask Congress to boost the gas tax a nickel to 23.4 cents a gallon.
“We support the chairman’s initiative,” Horsley said. “What he recognizes is that we have been under-investing in national infrastructure. He is trying to put together the ability for the federal government to increase its investment.”
Tax Opposition
Washington officials who oppose any increase in the gas tax — including President George W. Bush — say the problem isn’t that too little money is being spent but that it is not being spent wisely. The president suggested congressional inability to prioritize has led to funding of projects less critical than, say, bridges.
Americans seem generally sympathetic with this view. A CNN poll following the Minneapolis incident reported that 65 percent of U.S. residents oppose higher gas taxes to pay for inspection and repair of the nation’s bridges.
Critics of gas tax increases point to numerous examples of errant spending, much of it driven by congressional “earmarking” of money for favorite constituents rather than for priority needs. They note that the 1981 transportation bill contained 10 earmarks, the 1991 bill more than 1,800 earmarks and the 2005 bill about 6,300.
Yet such observations are not well received in some places.
“Those are just red herrings to divert attention from philosophical and ideological differences,” said Matt Jeanneret, senior vice president of communications and marketing for the American Road and Transportation Builders Association. “The fact is the earmarks in the last highway bill constituted less than 8 percent of the total bill. There certainly were projects that were for bridge improvement.”
ARTBA supports Oberstar’s raise-the-tax initiative for bridges, which Jeanneret describes as a “surgical strike approach, strategic and targeted.” He also notes that it authorizes the Department of Transportation to identify where new bridge revenue would be spent, thus removing the temptation of individual congressmen to funnel money to home districts.
The gas tax “should be used as an investment tool,” concluded Jeanneret, “not a political wedge issue.”
However, Horsley acknowledged that federal earmarks can be a problem, especially when they run counter to a state’s identified list of infrastructure needs. “Congressional earmarks that don’t relate to projects that have qualified for a state transportation improvement plan are not helpful,” he said. “When you get projects earmarked that aren’t on the list, you either have to bump higher priorities or fund projects not even deemed essential.
“So it really is more helpful if Congress would do its earmarking from the list that already has been approved, if it has to do its earmarking.”
Some of the debate about raising the gas tax to save bridges and highways pits traditional tax antagonists — those who believe taxes already are too high against those who believe programs and agencies need more tax money to function well. But some of the arguments for and against a higher gas tax are specific to it.
For instance, with manufacturers being induced to put vehicles on the road that consume less fuel per mile, higher gas taxes still could lead to stagnant Trust Fund levels because of lower gas consumption. To offset that, some states and programs are evaluating an entirely different user fee — a mileage tax. It would be pegged to the miles traveled by a car on a public roadway rather than to gallons consumed in the course of a trip. One of the concerns raised about this taxing mechanism is its invasion of privacy.
Another user fee option being studied is a congestion tax, which would more dearly cost drivers who steer their vehicles onto highways at busier traffic times. Tolls also are being eyed anew as a greater source of revenue for road construction and maintenance. However, relatively low levels of revenue are produced by highway and bridge tolls compared to the enormous infrastructure funding needs across the country.
Yet another aspect of the funding debate is the gasoline tax structure itself. Some critics of the present system argue that Congress should get out of the loop entirely other than authorizing gas tax rates. These proponents believe that devolving to individual states the entire responsibility for identifying projects to be funded by the Highway Trust Fund would produce smarter, less wasteful, spending of tax revenue.
“At least a serious debate is under way about the future of the national infrastructure program,” said Jeanneret about the national conversation. “At the end of the day, this is about political will. That is what it is going to come down to. It is time for Congress to stand up and show political courage and do what is right for the nation.”
Some who doubt that selfless courage will mark the eventual decision cite none other than Oberstar, the Minnesota congressman who now decries the “tombstone mentality,” the inability of elected officials to anticipate need before crises expose it.
Despite the fact that engineers in Minnesota have warned for more than a decade that bridges in the state are structurally deficient, a news release from Oberstar one week before the Minneapolis bridge collapsed did not reflect any of that concern. The release announced that the congressman had secured about $12 million in funding for his state in a transportation and housing bill.
“We are investing in America with this bill,” he said.
The new money funneled to the state included $10 million for a commuter rail line serving downtown Minneapolis and $250,000 for a biking and walking trail. Not a dollar was earmarked for bridge repair.
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