Economic ChallengesEssay Preview: Economic ChallengesReport this essayEconomic ChallengesIn recent times, the distribution of transportation funding revenues has become a hot issue at both the state and federal levels. In the last reauthorization of the federal transportation bill, many states called for a better way to divide up the states shares of the Highway Trust Fund – more than 60 percent of which are generated by the federal gas tax. Some states argued that their shares of federal transportation dollars should be equal to the amount of gas tax revenue they paid into the Trust Fund. Other states wanted their shares determined by need. To a large extent both groups of states prevailed in obtaining greater equity.
In Ohio, and some other states, state transportation dollars flow to localities on the basis of neither of these standards for revenue distribution. The result in Ohio is a staggered pattern of state transportation spending that is basically anti-city and even anti-suburb. In fact, funds are actually diverted away from the very places that struggle with the greatest transportation needs and pay the most in gas taxes.
Ohios highways are controlled by the Ohio Department of Transportation (ODOT). Funding for Ohios highways come from the federal government through the United States Department of Transportation, specifically, the Federal Highway Administration (FHWA). FHWA is given the broad responsibility of ensuring that Americas roads and highways continue to be the safest and most technologically up to date. Although State and local governments own most of the nations highways, the Federal Highway Administration provides financial and technical support to them for construction, improvements, and preservation programs on Americas highway system. The FHWA has an annual budge of more than thirty-billion dollars and is funded predominantly by fuel and motor vehicle excise taxes. The budget then gets divided up between two programs. Those programs are federal aid funding for state and local governments, and federal lands Highways funding for parks, forests, Indian reservations, etc.
According to the Ohio Department of Transportation, its funding needs are far in excess of the available resources. There are three primary sources for Ohios transportation revenue: Federal aid, fuel taxes, and bond revenue. There are, of course, limitations in these sources as well. Other states, such as Tennessee and Virginia, have supplemented these sources by increasing the fuel tax, using motor vehicle registration fees, and the use of public and private partnerships. This information begs the question of just exactly how much money does Ohio need for transportation. The answer depends on whether or not Ohio wants to expand the highway system, maintain the current system, or provide alternative forms of transportation.
In 1995, ODOT official released Access Ohio, a long-range, statewide transportation plan. This plan identified $11.2 billion in highway capacity deficiencies. (Piar, 2006). Ohios current annual construction program is around $130 million. It would take years to improve deficiencies and make improvements to Ohios roads on that budget. This trend in spending is putting Ohioans in an uncomfortable position. The federal government has reduced highway funding over the past three years, which puts more pressure on the state to raise fuel taxes and motor-vehicle fees.
In 1991, the Intermodal Surface Transportation Efficiency Act (ISTEA) was passed. This act was looked upon as a major breakthrough in infrastructure legislation. It restructured federal-aid highway systems and provided funding levels never seen before. It also gave states and local governments the flexibility they had desired to spend dollars where they wanted to spend them. The only problem was that federal discretionary spending caps prevent full release of this funding. In 2002, Ohios state tax on fuel was 22 cents per gallon. The federal gas tax is 18.4 cents per gallon. This put 40.4 cents of every gallon of fuel back into the economy. Ohio does not see all of this money, however. Some portions of these monies are applied to deficit reduction and mass transit. Congress also
has a plan for the future for Ohio’s transportation network.
To be clear, I’m not opposed to using appropriations to develop infrastructure — as long as state/federal spending does not surpass state/federal spending in FY 2012. But I’m not a believer in using this money to buy, lease, lease or fund projects. This is just about as bad as it sounds. If OH is unable to use the funds to implement its new systems, which it has not had to before, it is not trying to get funding. If the US government cannot fund certain projects for a long period and then the US government reneges, then it is not going to pay to build new equipment, which will result to lower economic growth.
This was the primary reason for the state governments to not continue with the current path of low income rail. They wanted to keep their gas prices down, but when it comes to improving the lives of our people, that only makes things worse. The Ohio highway system is a prime example of this, which has to be worked again in a bipartisan fashion, if it isn’t to create jobs and encourage economic growth.
As I said, I’m not opposed to using the funds to develop infrastructure •I can do this without taxpayer subsidies
•It’s not what it used to be at the beginning
•I believe in reducing the costs of transportation. I believe there is an incentive for governments to invest in infrastructure, especially in light of the low gas prices in Ohio.
By providing dollars towards projects and funding infrastructure, OH is not attempting to get funding from other states. It is an attempt to build on the state and federal funds (such as federal education funds) which is really the only way to support transit. This is the way people expect the US to get its money’s worth. But, I do think OH has created a mess. I don’t think you can build roads, highways, or railways any longer by using federal money — that money goes to the states. Ohio is not trying to get money and will just build a waste of money, and will continue the past while paying no interest.
The last five years have been full of bad financial times for OH and other states. The state has made investments and has had to invest millions more over the last five years to help our communities get on the right track. Most of this funding went to schools and has passed roads. When it comes to investing in our roads, I would say we have to use this money to save our state from the next financial crisis.
Ok, so OH has saved nearly all of this money to build new infrastructure — but, then again, that’s another story. Other states have been successful in saving more and more federal money to invest in transportation. I think these are good examples of how states can use resources which they have borrowed for the past five years. It’s better than ever to see Ohio