Paying for Our Transportation Needs


Oct 25, 2006

This commentary originally appeared in San Diego Union-Tribune on October 25, 2006.

Just about every Californian agrees that the state's aging and overcrowded roads are badly in need of upgrading and that its transit systems need improvement. On Election Day, voters across the state will be presented with two very different choices on how to foot the bill.

If approved by voters, Proposition 1A would strengthen the state's commitment to using sales taxes on gasoline exclusively for transportation purposes. Proposition 1B would authorize the state to issue $19.9 billion in general obligation bonds to improve the transportation system.

Under Proposition 1B, the state would borrow the money and repay it over the next 30 years from general state revenues, which come primarily from income taxes and sales taxes. Borrowing would get the state needed cash for transportation improvements, but the state legislative analyst puts the repayment cost at $38.9 billion including interest. Proponents say the state needs the money for transportation projects now, while opponents say the measure is just too expensive.

Neither advocates nor opponents of the propositions focus on the real choice Californians face: whether to fund transportation improvements through user fees – which would be protected by Proposition 1A – or through general taxes, which would be increased by Proposition 1B.

For the past 90 years, Californians have supported transportation investments mostly through user fees such as gasoline taxes, tolls, vehicle registration fees and truck weight fees. Many supporters of transportation investments continue to believe that the best way to raise more money to maintain and expand roads and highways would be to raise those user fees rather than to turn to general taxes, which we rely on to fund many other critical programs.

User fees have been kept separate from the general state budget and in principle they have been committed to build, operate and maintain transportation systems to benefit the motorists who paid the fees. Proposition 1A would make it harder for the governor and Legislature to divert revenues from sales taxes on gasoline to non-transportation purposes.

Most countries fund transportation infrastructure from general revenues, rather than from dedicated user fees as is now done in California and most states in America. Gas taxes in most countries are used to fund health care and education and do not go into a special fund for transportation.

Americans, however, have long felt that motorists should pay more directly to build and maintain the roads they use. User fee funding also collects money from visitors and truck drivers passing through the state every time they fill up at the gas station pump or pay a toll on a road.

Despite the many advantages of user fees, federal and state gasoline taxes – a major source of transportation system support – have not been raised since the early 1990s. This is largely because the rising price of gasoline has made legislators reluctant to charge drivers more for road improvements.

Besides losing value due to inflation, gasoline tax revenues are falling because of improved vehicle fuel economy. Better fuel economy means motorists drive more miles per gallon and actually pay less in fuel taxes than we did in past years. Since 1990, vehicle miles traveled in California have grown by more than 30 percent – but inflation-adjusted gas tax revenues have grown by less than 3 percent.

Gradually, faced with a genuine shortage of funds for transportation infrastructure because gas taxes and tolls have not kept pace with costs, California voters already have approved more than 20 county measures to increase sales taxes that fill the growing gap between transportation needs and the revenues available from user fees. Defeating Proposition 1A or passing Proposition 1B would be giant steps away from California's historical reliance on user fees for transportation.

Elected officials and voters may prefer to rely on sales taxes and income taxes to fund roads and transit because those taxes fall very broadly on all citizens and the small proportion used for transportation projects is hardly noticed. It amounts to a few pennies per dollar on a sale, or a slightly higher annual income tax obligation.

On the other hand, because income and sales taxes pay for roads and transit systems regardless of how much we use them or what kind of vehicles we drive, raising these taxes has little effect on our choices about how to travel or the fuel efficiency of the vehicles we buy. User fees – such as tolls, parking fees, and gasoline and diesel fuel taxes – charge more to those who use the roads the most or use the biggest gas guzzlers.

Whatever the fate of Propositions 1A and 1B, money to fund transportation improvements will come out of Californians' wallets. If you drive thousands of miles a year in California, higher user fees will probably cost you more than increases in general taxes. If you only drive a little, higher general state taxes to pay off borrowed money and interest will likely cost you more than higher tolls and gas taxes.

And if no action is taken to increase spending on our transportation infrastructure, just about every Californian can expect to spend a lot more time stuck in traffic jams in the years ahead on roads that will be crumbling from neglect.

Wachs is director of Transportation, Space and Technology at the RAND Corporation, a nonprofit research organization.

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