News &
Events: Library
America's Highways Are Not Self-Financing
By Jim Furlong
Director of Media Outreach
The National Corridors Initiative
Despite a widespread impression to the contrary, the nation's
highway system does not support itself.
There is a large shortfall between highway-user revenues
-- generated by tolls, fuel taxes, excise levies, and other
charges -- and highway spending, on a combined federal-state-local
basis, interviews and document searches by Destination:
Freedom show.
In the year 2000, latest for which figures are available,
the gap amounted to 21%, or $26.87 billion, according to the
Federal Highway Administration. The FHWA document that lays
out these figures is Funding for Highways and Disposition
of Highway-User Revenues, all Units of Government, 2000.
The document, known as Table HF-10 for short, tracks highway
spending on federal, state and local levels.
Taxpayers subsidize a sizable portion of this difference
between highway user-generated revenues of $100.59 billion
and spending of $127.46 billion.
The revenue-to-spending figures take on special significance
now, when Amtrak is threatened with dismemberment because
it is not on track to break even. The figures raise the question
of whether Amtrak is being measured against an unattainable
standard that the nation's well-established highway system
does not meet.
The huge highway numbers place in dramatic perspective the
relatively small size of Amtrak's $1.2 billion budgetary request
for the year 2003, and the fact that the Bush administration's
tentatively proposed $521 million is less than half of even
that relatively small amount. An additional clarifying measurement:
the HF-10 lists the mere cost of collection of state highway
user revenues at nearly $3 billion in 2000, more than twice
the size of Amtrak's FY 2003 request.
The $26.87 billion highway funding gap in 2000 alone compares
with $22 billion in operating and capital subsidies that Amtrak
received in total during the first 26 years of its existence.
Congressional impatience with this level of passenger railroad
subsidy resulted in 1997 in the legal requirement that Amtrak
achieve operating self-sufficiency by December 2, 2002.
The 21% overall highway shortfall for the year 2000 is not
an exception attributable to temporary economic conditions
-- unlike the current shortfall in motor fuel tax receipts
that does result from recession. The 2000 gap is part of a
longstanding pattern. Here are some representative historical
revenue-to-spending percentages (with gaps shown in parentheses):
1981: 62.6% (37.4%)
1985: 73.4% (26.6%)
1989: 76.6% (23.4%)
1993: 82.6% (17.4%)
1996: 88.2% (11.8%)
1997: 88.8% (11.2%)
The figures are not controversial within the government,
even though the public myth persists that roads are self-funding.
In fact, the figures are taken from the Department of Transportation's
massive study, submitted to the Senate in May 2000, called
Status of the Nation's Highways, Bridges, and Transit:
Conditions and Performance Report.
A page-sized box in that report extracts the bottom line
from a potentially puzzling array of intergovernmental payments
and a mix of highway and non-highway deployments of revenues
generated by highway users. The box is headed:
Q. If all "highway-user revenues" collected were
used for highways, would they be sufficient to cover all highway
expenditures?
Of course, the answer, based on data current through 1997,
was "no."
Though a new edition of the Conditions and Performance Report
is not scheduled until later this year, an FHWA employee confirmed
that the corresponding revenue-to-spending figure for 2000
was 78.9%, leaving the previously mentioned 21% gap.
How was the gap filled? It was bridged using property taxes,
general fund appropriations by state and local governments,
other taxes and fees, investment income, and bond issues.
Most such bond issues are linked to future user revenues,
but a minority were tied to sales taxes and general revenues.
Creating a reasonable estimate of the additional bill footed
by taxpayers -- beyond what they pay in highway-related taxes
and fees -- requires that some "Kentucky windage,"
or informal adjustment, be applied to the published figures.
This produces a conservative unofficial estimate of the added
taxpayer tab at $9 billion to $12 billion. The estimate treats
all but $1 billion of the $11.2 billion raised with bonds
as ultimately deriving from highway-user revenues. It assumes
-- generously to those who would minimize the gap -- that
the investment income of $7.5 billion was built exclusively
on highway-user revenues. Adding this $17.7 billion sum to
the $100.6 billion of highway-user revenues produces a total
of $118.3 billion attributable to highways. That leaves an
adjusted $9.2 billion gap from the $127.5 billion of spending,
this gap to filled by the taxpayers. The chasm widens to more
than $12 billion if total user revenues are reduced by the
roughly $3 billion in state revenue collection costs. The
undoubtedly substantial federal collection costs are not included
on the HF-10 because they are paid from general funds. If
they were included, they would stretch the gap. (Local revenues
are reported net of collection expenses.)
The HF-10 covers an impressively spelled-out variety of revenues
and expenses. Though some significant factors defy quantification,
let's start by looking at what the numbers capture:
Revenues include the 18.4-cent-a-gallon federal tax on gasoline,
as well as the 24.4-cent tax on diesel and kerosene fuel.
Other federal taxes apply to liquefied petroleum gas, and
other special fuels, compressed natural gas and gasohol. Federal
money also is generated by taxes on tires, sales of trucks
and trailers, and use of heavy vehicles. This is paid into
the federal Highway Trust Fund (HTF). State and local highway-user
revenues come from such sources as state motor fuel taxes,
auto registration fees and tolls.
Main items on the expense side include capital expenditures
on road and bridge rehabilitation, widening and relocation
of roads, and new construction. Classed as non-capital spending
are routine maintenance of highways and associated equipment,
plowing, sanding, litter control, landscaping and beautification,
and similar activities. Also taken into account is at least
a portion of highway traffic law enforcement on state and
local levels, though highway law enforcement does not include
auto-theft investigations or court and jail expenses related
to traffic and criminal charges. (The HF-10 does offer figures
on the Highway Trust Fund's contribution to mass transit,
but that sum is accounted for in a way that avoids widening
the revenue-to-expenditure gap for highways.)
Not recorded in the figures are what might be called "underspending"
and "hidden subsidies" to autos and roads. These
have the effect of playing down the true gap between revenues
and expenditures.
Underspending is money that should be laid out but is not.
A poorly-illuminated, lightly-policed road with littered edges
and junk-cluttered lanes offers an example of underspending.
If money were spent to correct these unsafe or unsightly conditions,
the revenue/expenditure gap would widen.
Beyond this lie many environmental and social costs of highways
and cars that either are not paid for or are paid by non-highway
funds. Such costs include national losses of open space, geographic,
biological and architectural diversity and scenic beauty due
to highway fragmentation of land and its accompanying suburban
and commercial sprawl. Pain and suffering caused by crippling
or fatal accidents must be counted as an unpaid cost -- at
least that huge portion for which insurance payments cannot
compensate. Some researchers would even chalk up a portion
of the nation's military expenses to highways on grounds that
such layouts are necessary to assure enough fuel for our auto-dependent
society. Other costs that have been imputed to autos are health
effects of air pollution, work time and personal time lost
due to traffic congestion, and "free" parking that
gets bundled into prices of business establishments that operate
big parking lots.
Two researchers who have helped shine light on hidden subsidies
are Mark A. Delucchi, of the Institute of Transportation Studies
at the University of California/Davis, and Todd Litman, of
the Victoria [BC] Transport Policy Institute.
Even while recognizing the large and partially unpaid costs
of roads and autos, no sensible person would contend that
the nation can do without a highway system to promote mobility
and commerce. But a look at the costs reinforces two fundamental
points:
- Transportation systems do not pay for themselves,
and that includes highways.
- By encouraging transportation balance, government
subsidies to intercity rail and transit can mitigate the current
and future costs of autos and highways.
These fairly simple underlying ideas need to be kept firmly
in mind during the current complex debate over the future
of Amtrak.
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