Moving Beyond Fuel Taxes to Fund the U.S. Transportation System
Motor-vehicle fuel taxes have been the primary source of revenue supporting the construction and operation of the nation's highways for over half a century. But because it is politically difficult to raise such taxes to account for inflation and improved fuel economy, they no longer provide enough revenue to maintain—let alone expand—the transportation system. Many see direct usage-based charges—such as vehicle miles traveled (VMT) fees—as a potentially viable way to replace or augment fuel taxes, but most VMT proposals would require a prolonged transition period of many years.
At the request of the American Association of State Highway and Transportation Officials (AASHTO), a team led by RAND researchers explored mechanisms for implementing VMT fees that might be developed and instituted more quickly, possibly enabling the adoption of direct usage-based charges by 2015.
The researchers identified and evaluated nine options, finding that three offered the most promise: estimating mileage based on fuel consumption and vehicle fuel economy, metering mileage with a device that combines cellular service and a connection to an onboard diagnostics port, and metering mileage with a device featuring a global positioning system receiver. Systems that rely on self-reported odometer readings were found to be unreliable, while requiring annual odometer inspections would place a significant burden on drivers and states.
While each of the three promising options has distinct advantages and disadvantages, significant uncertainties make it difficult to determine the optimal configuration at this time. Also, it is not clear that the public yet understands or supports the concept of VMT fees.
The report concludes, however, that the pending reauthorization of the federal transportation bill provides an opportunity to further examine the costs, feasibility, and potential benefits of transitioning from fuel taxes to VMT fees. In particular, the authors suggest funding a set of activities—encompassing planning, analysis, technical research and development, expanded trials of promising options, and education and outreach—that could help resolve remaining financial, technical, institutional, and political uncertainties and set the stage for implementing VMT fees beginning in 2015.
Are We Moving Toward Performance-Based Assessment in Transportation?
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Martin Wachs is director of the Transportation, Space and Technology Program in RAND Infrastructure, Safety, and Environment. Prior to joining RAND in 2005, he was a professor of civil and environmental engineering and a professor of city and regional planning at the University of California, Berkeley, where was also director of the Institute of Transportation Studies. He earlier spent 25 years at UCLA, where he was chairman of the Department of Urban Planning. His research addresses equity in transportation policy, problems of crime in public transit systems, and the response of transportation systems to natural disasters, including earthquakes. Wachs has a Ph.D. and M.S. in urban and regional planning from Northwestern University.
There is much discussion about heightening the focus on performance in the next transportation bill. Why?
Transportation funds have been distributed to states and among programs based on formulas written into each transportation bill that use such factors as population or miles of highway. But recommendations from three national commissions and model programs in several states suggest that it would be far better to use funds to address measured needs or to reward the attainment of desirable outcomes. In principle, linking federal spending to performance makes sense.
How could a greater emphasis on performance be embedded in the next bill?
Performance-based planning and performance-based accountability are two ways. That is, long-term regional transportation plans could be guided more directly by performance-based goals, and, in some programmatic areas, direct financial rewards and penalties could be crafted based on performance; that would constitute what most think of as "accountability."
Is some form of restructuring necessary to incorporate performance-based measures?
At the moment, the transportation system is too complex, with well over a hundred different funding categories, and too focused on a rigid adherence to formulas—all of which leads members of Congress to try to get around the system by "earmarking" projects they see as worthy but hard to fit into the boxes created by the programs. Most transportation experts believe it is essential to revise the fundamental program structure, regardless of whether we move to a system of performance-based measurement and accountability. But the two ideas are naturally complementary.
Where are some of the greatest opportunities for performance-oriented reforms?
Similar efforts in education and health care show that performance-based measurement and accountability work best where there are clear goals and where measures of performance are obvious and widely agreed upon. So, for example, reducing annual deaths in traffic accidents is a performance goal worth rewarding that is likely to be implemented, while improving "metropolitan mobility and accessibility"—a goal often stated for federal transportation spending—will, I predict, be difficult to translate into a useful performance measure.
Thomas Light joined the RAND Corporation as an associate economist in 2007. Prior to joining RAND, he worked as an economist at ECONorthwest, specializing in energy, transportation, and environmental policy evaluation and analysis. His research uses modeling and econometric techniques to identify ways of better managing energy use, structuring electricity markets, addressing urban highway congestion, and assessing climate change policies. Light is the developer of the Toll Optimization Model, a special tool for calculating economic and traffic impacts for high-occupancy toll (HOT) lanes projects. He has conducted modeling and analysis using the Toll Optimization Model on more than a dozen road pricing projects in California, Colorado, Minnesota, North Carolina, Oregon, Utah, and Washington. Light also teaches public finance and mentors students at the Pardee RAND Graduate School.
Read more about Thomas Light »
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