Promising new proposals for solving the fiscal shortfall
Ken Orski, editor and publisher of the transportation e-newsletter Innovation NewsBriefs, notes that two new attempts to redefine the federal responsibility for surface transportation “are attracting growing attention and provoking lively discussion within the transportation community,” Orski says in his report.
Both proposals, he says, stem from a conclusion that the obstacles standing in the way of enacting a new multi-year federal surface transportation program are of a long-term nature and will not be overcome any time soon.
“These obstacles include the inability of Congress to come up with a meaningful way to pay for the program; the increasingly shaky and uncertain status of the Highway Trust Fund; the pressure for deficit reduction in the fiscal and budgetary actions of the next Congress, especially in the likely event of a Republican takeover; and a low priority given to the reauthorization by the Obama White House,” Orski points out.
The two initiatives, as analyzed by Orski in his Innovation NewsBriefs follow:
The Los Angeles 30/10 Initiative
The first attempt to redefine the federal responsibility is seen in a proposal embodied in the Los Angeles County Measure R and the so-called “30/10 plan” advocated by Los Angeles’ Mayor Villaraigosa. Measure R, a dedicated half-cent local sales tax, is expected to generate up to $40 billion for local transportation projects over 30-years. By using the sales tax revenue as collateral for long-term bonds and a federal loan, Los Angeles could accelerate completion of 12 key transportation projects in just 10 years rather than the projected 30 years (hence the “30/10″ moniker). Local authorities would repay the federal loan over 20 years with a portion of the proceeds from the sales tax.
The 30/10 plan is not just a job-creation initiative and an antidote to the current recession, as some advocates have portrayed it. It is a fundamentally fresh attempt to make states more independent of the increasingly unreliable federal aid and reduce the problematic reliance on the gas tax.
Already today, 60 percent of spending on transportation comes from state, county and local governments. The question before the states and local governments is whether they should continue to rely for the remaining 40 percent on the increasingly uncertain federal largesse or whether they should free themselves from federal dependence and embark on a more independent course of action that would offer more control over their own transportation destiny.
Mayor Villaraigosa’s initiative would have the city of Los Angeles take a first step toward that fiscal independence. His proposal could be a harbinger of new thinking of how states and local governments could be empowered to fund local transportation infrastructure. If widely adopted, this approach would shift the federal role from one of directly funding local transportation infrastructure to one of merely facilitating its financing (it would also provide a powerful argument for a well-financed National Infrastructure Bank or a large expansion of the federal TIFIA loan program). We think the Villaraigosa initiative is a fiscal policy innovation of potentially far-reaching significance –and one that U.S. DOT officials and the Congress must not ignore as they ponder how to address the long-term shortfall in highway investment.
The Reason Foundation Proposal
The second proposal comes from the Reason Foundation, always a source of bold and innovative thinking. The authors of that proposal (Robert Poole and Adrian Moore) think that we should confine the future federal responsibility to funding programs that are of the greatest federal interest and refocus the Highway Trust Fund on expanding, modernizing, and rebuilding the Interstate Highway System.
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