Road Hogs

Will Congress cut back the transit pork?

Ed Carson from the May 1997 issue

(Page 2 of 2)

Carl Williams, deputy secretary of California's Business, Transportation, and Housing Agency, points out that over half the states have raised their gas tax in the past five years. He believes most states would have little difficulty convincing voters to replace the federal tax with the state tax. The Kasich-Mack plan also would lift the ban on tolls on Interstate highways. That could help states no longer subsidized by the rest of the country maintain their transportation networks and allow congested states like California to expand their highways.

State constitutions present another problem: Many state constitutions prohibit gas taxes from being used on anything but highways. Texas's constitution requires 25 percent of all revenues to be used for education, so the state would have to raise its gas tax (or other taxes) well above what it required for transportation. The Kasich-Mack bill gradually phases the federal gas tax out over a number of years to give states time to deal with the political and constitutional hurdles.

Republican governors from four states--Pete Wilson (Calif.), John Engler (Mich.), George Voinovich (Ohio), and David Beasley (S.C.)--have endorsed devolution. Kasich and Mack had hoped more lawmakers from donor states would swing over to their camp. That hasn't happened, perhaps because though turnback might be better for many states, those states' members of Congress would no longer get the credit from bringing home highway projects. Whatever the reason, Kasich concedes devolution is unlikely to pass this year.

The other major battle centers on how much Congress will allocate. The federal government currently spends about $20 billion on highways, with another $2 billion to $3 billion going for transit, congestion and air quality projects, and enhancements. Transportation boosters are looking for much more, which is why Shuster is eyeing the highway trust fund. The trust fund is supposed to be used only for transportation purposes, but it has built up to nearly $24 billion and is used to mask the size of the budget deficit.

Shuster wants to take the trust fund off-budget. "Americans pay steep transportation taxes and expect the money...to be used for critical infrastructure improvements, not to be hidden in some budgetary shell game,"Shuster says. There is a strong philosophical argument that dedicated funds should be used only for the intended purpose, but taking the trust fund off- budget would make balancing the budget even more difficult. (The Clinton balanced budget plan calls for transportation spending to decline slightly in nominal dollars. No one appears to be taking this plan seriously--not even the Department of Transportation.) And turning de facto control of the trust fund over to Shuster would be a "license to steal,"according to one transportation analyst.

Last Congress, the House passed Shuster's bill 284-143 over Kasich's strong objections, but the measure stalled in the Senate. The same scenario is likely to occur this year, so the issue won't be settled until it reaches the conference committee. Warner opposes putting the trust fund off-budget, but he and 58 other senators have asked Senate Budget Committee Chairman Pete Domenici (R-N.M.) to produce a budget plan that increases highway spending to $26 billion a year. New York Sens. Daniel Patrick Moynihan (D) and Al D'Amato (R) have asked Domenici for $5 billion for transit.

That would require drawing down the trust fund significantly, unless, of course, the 4.3 cents of the gas tax that currently go to general revenues are put into the trust fund. Shuster, a highway man to the core, has suggested dedicating a half cent to Amtrak-- which, after 25 years and $13 billion in taxpayer subsidies, was finally scheduled to be zeroed out by 2002--in exchange for having the remaining 3.8 cents go to the trust fund. Shuster hopes the offer will gain the support of Senate Finance Committee Chairman Bill Roth (R-Del.), a big Amtrak backer.

At this stage it's unclear how reauthorization will shake out, but most observers believe that the trust fund will not be taken off-budget and STEP-21 ultimately will be the basis for the final formula. If highway spending rises to around $26 billion, it will be relatively easy to make the formula more equitable for donor states without hurting donees. But if Kasich and other deficit hawks are successful in holding transportation spending to current levels, it becomes extremely difficult to achieve a consensus. In that scenario, it's possible turnback would suddenly gain support as a way to get more transportation bang for limited bucks. But more likely, devolution will serve the purpose of making STEP-21 look like a moderate reform.

On one level, STEP-21 doesn't represent fundamental change. It simply reworks the funding formula, this time to reflect the growing power of donor states. But while it maintains the federal role in transportation, STEP-21 may help undermine support for all federal programs.

"At the very crux of our union is the concept that resources are gathered, then distributed on need,"said Rep. Susan Molinari (R-N.Y.) at a news conference endorsing the current system. It's an unusual historical perspective on our nation's founding principles--life, liberty, and the redistribution of wealth?--but it carries an important contemporary point. New York and other Northeastern states receive more transportation funding than they contribute, but overall they pay more federal taxes than they receive in federal benefits. If states get back roughly what they pay for transportation, Molinari warns, "New York and the other states represented here will demand the money back that we contribute for other programs."

If federal taxes were returned to states on a 1-to-1 basis, why include the middleman? Who would have thought that the common sense prin ciple, you get what you pay for, could shake the federal government to its foundations?