Virginia may have raised taxes and fees for transportation, and enabled its two most populated regions to raise even more, but we have not seen the end of travails for the state’s outmoded transportation financing model. In “The Next Transportation Crisis,” I outline how two developments will conspire to shrink federal transportation revenues paid to Virginia in coming years.
First, beginning in 2010, the federal highway trust fund won’t have as much money to give to the states. Congress goosed spending during the current six-year authorization period by telling the Department of Transportation to draw down the cash balance in the highway trust fund ($13 billion in 2004). That provides billions of dollars a year extra to spread around, but when the money runs out, it runs out. Worse, when there’s no cash balance in the till, DOT won’t be able to smooth out payments to the states — it will be forced to a pay-as-you-go system for dispursing funds, which could cause cash-management issues.
That brings us to the second problem: Federal receipts from the gasoline tax, which increased at 2.7 percent annual clip for more than two decades, actually showed a year-to-year decline in the early months of 2007. People are driving less. The downturn in vehicle miles driven may be temporary, but a case can be made that driving is entering a slower growth curve.
Meanwhile, a primary thrust of both the Bush adminstration and the Congress — one of the few things they can agree upon — is the necessity of cutting gasoline consumption. Over the long run, we will see motorists shift to vehicles that use less gasoline, or none at all. This, too, will cut into gasoline tax receipts.
The Virginia Department of Transportation is well aware of the impending downturn in aid from the federal government, so we shouldn’t be caught flat-footed when it happens. Even so, VDOT’s six-year transportation plan is built upon the assumption that gasoline receipts will continue to rise at the modest rate of one percent annually. That assumption is looking increasingly precarious.
It’s only a matter of time before Virginia’s pols come back wanting more money. Once again, we are reminded of the necessity to put our transportation system on a user-pays system relying upon congestion fees and a road-maintenance fee based on vehicle miles driven.
