Driving Home The Need For Transportation Funding
[EDITOR’S NOTE: The following was originally published in the newsletter from INdiana Connections, a partnership between Conexus Indiana and Inside INdiana Business. Each month, INdiana Connections features news, opinions and resources from the advanced manufacturing and logistics industries. To subscribe to the newsletter, click here.]
Being the “Crossroads of America” comes at a cost, and transportation leaders are currently scratching their heads about how to effectively pay the bill for the long haul. While it’s unlikely there will be any significant movement in funding the state’s long-term transportation needs during this session of the Indiana General Assembly, some leaders are striving to keep it front of mind for legislators to prevent problems down the road.
“We have incredible opportunities to deal with this without it being a crisis,” says Indiana Department of Transportation (INDOT) Commissioner Karl Browning.
A funding gap is the primary concern; locating the dollars to both maintain Indiana roads and pay for future transportation infrastructure have left a big question mark surrounding financing.
Indiana Chamber of Commerce Vice President of Economic Development and Federal Affairs Cam Carter says, of every dollar the state spends on roads and highways, the federal highway gas tax provides 40 cents, and state gasoline and diesel taxes provide the remainder. The problem, say critics, is those taxes have not been adjusted in as many as 22 years.
“There’s a big gap; estimates are between $750 million annually to as high as $900 million,” says Carter. “We’ve seen an erosion over time of the purchasing power of those tax revenues. In 1993, the [federal gas tax of] 18.4 cents was 18.4 cents. Today, it’s about 11 cents of purchasing power. For the state gas tax, the 18 cents of purchasing power in 2003 dollars is only 14 cents today.”
Gas tax revenues have also been dwindling due to cars’ increased fuel efficiency and the growing prevalence of alternative fuel vehicles and electric models. Carter believes “a small and reasonable step” would be to adjust taxes to inflation or consumer price indexes.
Browning, however, believes the entire system needs to re-examined—perhaps even overhauled to ensure funding mechanisms are able to meet future transportation infrastructure needs.
“Patting ourselves on the back and passing a three-cent tax increase on fuel is not a good answer,” says Browning. “There are several pockets of need that aren’t easily addressed by simply saying, ‘Let’s add money to the fuel tax.’ I think it’s critically important that we don’t overreact, and we do a good, strategic view of how we’re going to fund this system for the long haul.”
INDOT has hired a Massachusetts-based transportation consulting company to conduct a study to identify various funding options and their applicability in Indiana. Due out late summer, the report will examine how various methods align with the state’s future transportation needs. These options include tolling, sales tax on gasoline, gas tax, fees on vehicle miles travelled and indexing gas taxes.
“It would shock me if there are any new funding ideas [from the report] that haven’t been thought of or entertained someplace in the U.S.,” says Browning. “On the other hand, these ideas need to be attuned to the needs and culture of Indiana, and I think that’s what will come out of the study.”
With the current legislative session ending months before the report is released, Carter expects lawmakers will take only “modest steps” to address transportation funding.
“The more progress we can make on those issues in the 2015 Indiana General Assembly session, the better,” says Carter, “but I’m starting to sense a lot of reluctance on the part of transportation experts and fiscal leaders in the General Assembly to get out ahead of the INDOT study.”
Carter emphasizes the state’s focus extends beyond just Hoosier highways and includes re-examining funding mechanisms for rail, air and water.
“Multi-modal transportation infrastructure has a profound impact on our economy,” says Carter. “The logistics and supply chain management sector in the state is very robust and very, very important to the state’s economic health.”
Browning says by focusing on “getting people interested in the subject” this legislative session, he’s hopeful the state will soon solidify a roadmap for funding the future of Indiana’s transportation infrastructure.
Source: Inside INdiana Business