Look down the road in transportation funding debate

By MIKE NICHOLS | July 19, 2017

There’s a reason our legislators can’t get it in gear when it comes to transportation funding. The few realistic short-term options are pretty much akin to sucking a little more exhaust out of a tailpipe.

Which is why even as they suck it up, they need to look a little further down the road and prepare for tolling.   

Right now, three major sources of revenue — the state gas tax, the federal government and bonding — are problematic and unsustainable.

Ever-rising federal entitlement spending (especially now that Republicans apparently have bailed on reform of Obamacare) along with ever-growing debt payments will mean less and less federal cash for transportation and other needs in the future.1

Burying ourselves in more debt through additional bonding isn’t a sustainable solution, either — not unless our kids are all going to be benevolent billionaires glad to pay for the sins of their profligate parents. Twenty cents of every buck collected through the state gas tax already goes to debt service.

By the way, revenue from that 31-cent-per-gallon gas tax has been stagnant for a decade and not just because we stopped indexing. Fuel-efficent cars already burn less gas. In another decade or two, as the price of electric vehicles plummet, many Wisconsinites won’t be buying gas at all. Wisconsin needs to find a way to wean itself off of gas taxes — not increase the addiction.

“We need to start thinking about replacing fuel taxes,” said Robert W. Poole Jr., director of transportation policy at Reason Foundation. “There’s a national conversation going on that (Wisconsin) needs to enter because of electric cars and other hybrid cars and so forth. Over the next 25 years or so, there are going to be a lot fewer cars and trucks fueled by petroleum products, and this is very likely going to devastate our current highway funding system, which is based on per-gallon fuel taxes.”

So, whatever happens with the current budget in Madison in the coming days — cutting back on investment in our roads or relying on problematic funding sources — you have to hope that legislators and the governor try to avoid all the hand-wringing and wincing in the future. They need to give themselves another option and seek permission from the federal government to toll in future years.

There are plenty of skeptics — some of whom still think of change baskets and booths with overpaid government workers inside counting dimes and quarters when they think of tolling. They need to travel more.

Nowadays, we have “all electronic tolling, which is very different from old-fashioned, 20th-century tolling with toll booths and huge staff costs,” said Poole in a recent WPRI webinar. “If Wisconsin were to do this, there would not be any toll plazas, any toll booths, or any cash tolling on the road.”

Wisconsin could use something like the E-ZPass transponder already used by 16 other states. Those states also have a backup system that takes a picture of the license plates of anyone without a transponder and bills them later.

There are, of course, lots of other objections, many of which Poole addressed in the webinar.

Question: But what about technology and administrative costs?

Poole: The cost of electronic toll collection is now as low as 5 percent of the revenue.

Question: But you’re still talking about taxing me twice, once through the gas tax and once through tolling.

Poole: It is possible to issue rebates electronically. After all, the system knows whose car is passing by, the number of miles driven on the toll road, the vehicle type and the EPA miles-per-gallon rating. It can use all that to determine gas usage — and, ergo, the size of the rebate. 

Question: Would tolling produce the revenue needed?

Poole: We did a study for WPRI in 2011 estimating (in 2010 dollars) that cost would be $26 billion to reconstruct and widen where necessary the whole system. Last year, an HNTB study funded by the Wisconsin Legislature estimated the potential toll revenue would be $29 billion over 30 years.

Question: Yeah, but what about all the other roads in the state? Highways only make up a sliver of what we drive on.

Poole: Using toll revenue for work on the Interstates would free up other funding for use elsewhere.

Question: But isn’t there a history of using toll revenues elsewhere for stuff that has nothing to do with transportation?

Poole: We favor what we call “value-added tolling” that would limit the use of revenues to new lanes or bridges. We also advocate beginning tolling only after construction is finished.

Question: Would the feds allow all this?  

Poole: The federal law that was enacted when they created the Interstate System basically prohibited tolling in most places. But there are several ways to seek approval nowadays, including a three-state pilot program that allows one corridor in each of the states to be rebuilt with toll financing. The other option is to apply to the Federal Highway Administration's Value Pricing Program, which allows tolling all lanes for the purpose of managing traffic congestion. There are currently slots open in both programs. My recommendation is that before this legislative session ends, the Legislature should do what Indiana’s legislature has already done: Authorize the governor to apply on behalf of Wisconsin DOT to one or both of the two existing federal pilot programs. There are five or six other states that may apply sometime this year and a limited number of slots. 

In other words, Wisconsin legislators need to get it in gear and plan for the future even while they  decide which other untenable solution to choose in the interim.  

Mike Nichols is WPRI president.

View Robert Poole’s tolling webinar here. Read Poole’s paper, Rebuilding and Modernizing Wisconsin's Interstates with Toll Financing.

1 According to the Congressional Budget Office’s January 2017 publication, “The Budget and Economic Outlook: 2017 to 2027,” projected spending for people age 65 or older in five large programs — Social Security, Medicare, Medicaid and military and federal civilian retirement — increases from about 37 percent of all federal non-interest spending in 2017 to about 45 percent in 2027. In addition, health care costs per beneficiary (after adjusting for the aging of the population) are projected to grow faster than the economy over the long term, contributing to growth in spending for Medicare and Medicaid in particular. The effects on the federal budget of the aging population and rapidly growing health care costs are already apparent over the 10-year horizon — especially for Social Security and Medicare — and will grow in size beyond the baseline period. Unless laws governing fiscal policy were changed — that is, spending for large benefit programs was reduced, increases in revenues were implemented or some combination of those approaches was adopted — debt would rise sharply relative to GDP after 2027.