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Highway funding system is running out of gas

Americans are traveling more — causing more wear and tear — and paying less to maintain the system.
Creative Commons/Sonny Step Up
Americans are traveling more — causing more wear and tear to the roads — and paying less to maintain the system.

If you just swapped your gas-guzzling SUV for a hybrid or a fuel-efficient subcompact car, you’re doing your part to save the planet and reduce our nation’s dependence on foreign oil.

But you’re killing our fuel-based system for funding highway construction and maintenance!

A growing number of transportation researchers and advocates are recommending a change to a mileage-based system of highway user fees. Their conclusions are summarized and amplified upon in a report completed in August by the University of Minnesota’s Center for Transportation Studies (CTS).

The CTS report notes that between 1987 and 2008, vehicle miles traveled increased nationwide by approximately 55 percent while fuel consumption rose by just 34 percent. That means Americans are traveling more — causing more wear and tear — and paying less to maintain the system.

And this gap is likely to widen. The U.S Energy Information Administration estimates that the average fuel efficiency for all light-duty vehicles on the road will grow from 20.4 miles per gallon in 2008 to 28.9 mpg by 2030.

With the projected growth in the number fuel-efficient vehicles, “fuel taxes are not sustainable for funding surface transportation,” the CTS report concludes.

Funding crisis?
Former state Rep. Bernie Lieder, DFL-Crookston, longtime chair of the House Transportation Finance Committee, first proposed studying mileage-based user fees some 20 years ago and believes the time for theoretical discussion is nearing an end.

Bernie Lieder
Bernie Lieder

Is a crisis on the horizon? “There’s no question about it,” says Lieder. Every year, he says, there are more and more alternative-fuel vehicles on the road — not to mention bicycles and ATVs — that “aren’t paying their way.”

Of course, one reason is the great reluctance of legislators at both the federal and state levels to increase fuel tax rates and keep pace with the inflationary cost of road construction.

The federal gasoline tax — now 18.4 cents a gallon — has not been raised by Congress since 1993. In 2008 and 2009, the federal Highway Trust Fund required $15 billion in transfers from the general fund just to remain solvent. The federal tax is now set to expire Sept. 30 unless the politically divided Congress reauthorizes the surface transportation funding law.

Minnesota’s 20-cent a gallon gasoline tax was raised by 8 cents as part of the 2008 transportation funding bill enacted over Gov. Tim Pawlenty’s veto. It was the first increase in this tax in nearly two decades.

Contrary to popular belief, fuel taxes “do not come close to requiring users to bear the full cost of their travel,” the CTS report says. In 2009, a national commission estimated that fuel taxes and other users fees account for less than 60 percent of transportation system revenues.

The CTS report also says fuel taxes:

•    Aren’t sufficiently visible to system users, with daily swings in fuel prices masking the taxes and blunting their impact on system demand.

•    Don’t provide clear incentives for users to avoid major highways during periods of congestion, leaving highways clogged while public transit and freight rail systems are underutilized.

•    Don’t recover the cost of repairing road damage caused by heavier vehicles.

•    Contribute to urban sprawl because of the low per-mile cost of commuting to and from more distant, lower-density locations.

The CTS report says mileage-based user fees (MBUFs) could address most of these problems. Fees could be set to recover the full cost of the highway system, and vary based by the miles driven, vehicle weight, time of travel and the type of roads used.

As a result, the report says, pricing strategies could be employed “that more closely reflect the cost of congestion” and encourage greater use of alternative transportation modes — such as transit, biking, walking and (in the case of shippers) freight rail.

Other approaches
The CTS report looks at eight different approaches that could be used to implement mileage-based user fees. They range from relatively simple methods for odometer checks to sophisticated technologies employing global positioning systems (GPS), digital maps and wireless communications.

The Minnesota Department of Transportation (MnDOT) currently is testing an approach using commercially available smartphones with built-in GPS devices. The phones are programmed for 500 volunteers to submit information that MnDOT will use to evaluate whether the device provides timely, reliable travel data from that specific trip.

MnDOT also has established a policy task force, headed by Lieder and Edina Mayor Jim Hovland, to examine the implications of implementing mileage-based user fees at some time in the future.

No matter what kind of system is developed, it is likely to be significantly more expensive that the present system of collecting fuel taxes at the pump.

Margaret Donahoe, executive director of the Minnesota Transportation Alliance and a member of the MnDOT task force, notes that 99 cents of every fuel-tax dollar goes for improved transportation. “Nothing is going to be as cost-effective as the current system,” she says.

Privacy issue
Then there’s the concern about creating a system in which government could track the movement of every citizen.

Lee Munnich, principal investigator for the CTS study, says that while there are ways to protect people’s privacy, “it is not a trivial issue. And it’s the first issue that people raise.”

Lee Munnich
Lee Munnich

The CTS report recommends a phased approach for change that might include base fuel taxes at the federal and state levels, perhaps reset at lower rates, accompanied by a mileage-based component.

It suggests that the federal government take the lead in developing a system that states could opt into. “You don’t want 50 different MBUFs around the country,” Munnich says.

Steven Dornfeld, a former newspaper reporter and editor and former public affairs director of the Metropolitan Council, writes about public policy. He can be reached at sdornfeld[at]minnpost[dot]com.

Comments (18)

  1. Submitted by Paul Udstrand on 09/01/2011 - 08:55 am.

    Just raise the fuel tax. You’re never gonna get any kind of tax monitoring device in American cars… are you kidding?

  2. Submitted by Bob Spaulding on 09/01/2011 - 09:55 am.

    Given the gravity of the state of our climate, one could easily argue this report doesn’t explore impacts on carbon emissions and pollution generally nearly enough, and instead relies too much on generalizations that don’t get at the specifics of real-world choices and implications faced by policymakers in today’s political environment. I see the possibility the authors outline that taxing vehicle miles traveled would raise the consciousness of how much we drive among consumers, and think that offers a possible measure of hope. But I would hope the environmental tradeoffs in particular would be studied and scrutinized far more carefully before it is ever seriously considered by policymakers, as it seems that the environmental impacts are a potentially defining consequence (positive or negative) of this policy direction.

    If raising the gas tax is hard, would structuring a fee on miles travelled to be tiered, and penalize SUVs while rewarding hybrids and electric vehicles be politically any easier? Even before prominent politicians were turning into climate skeptics and undermining the EPA’s work, my gut said that’s pretty doubtful. If this is enacted, wouldn’t it be harder still in the future to raise the gas tax, which means that it would eventually lose its potency to inflation? And if either of those eventualities are the case, then we’re left with a policy solution that promises more than realistically it could seriously deliver in the long term. Others are more politically attuned than I, but it seems a serious question worthy of deep and serious consideration.

    The status quo is quite unacceptable as well, which is why I’m glad this is being considered, but until we really get our heads around the environmental impacts, based on careful study of how such fees work elsewhere, and until we can be quite certain that such a fee would represent a net environmental benefit, I don’t think we should be moving toward imposing a fee on miles traveled at any scale of significance.

  3. Submitted by John Deters on 09/01/2011 - 10:16 am.

    This is a very bad idea.

    Fuel based approaches to taxation are already fair, because they more accurately reflect the source of the wear and tear on the roads. Damage is primarily caused by the axle weight of the vehicles traveling over it, compounded by the distance they drive. Other contributors of damage include chemicals, snowplowing, ice, and heat, and we all should share in that burden, but it’s the weight of the vehicles that amplifies tiny weaknesses into damaging potholes, and the miles they drive that cause them to make more potholes.

    The heavier the vehicle, the more fuel required to propel it. The more miles driven, the more fuel required to drive them. So the system is already set up to fairly tax those who cause more damage, and drive more miles.

    A mileage based tax would penalize scooter users the same as a two-ton truck. I would say that one of these vehicles causes more damage to the roads than the other. And if you try to structure the mileage based taxes based on vehicle class, aren’t you just creating a very complex system to mimic the simple system we already have in place?

    Also, consider the tremendous cost and waste of setting up a mileage based tax. Would you propose installing hundred dollar GPS tracking units in everyone’s cars? Toll roads? Self-reporting of mileage, with all the probable fraud cases and investigations, and the corresponding mountains of data to collect on every vehicle? Not to mention the privacy implications of having to periodically report to the government every mile you drive. You’d have to build an entire government agency to deal with mileage reports. That’s not cost effective.

    Also consider the environmental implications. If you charge people per mile instead of encouraging vehicles that conserve fuel, there will be reduced incentives to own a fuel-efficient vehicle, wasting more fuel.

    If we don’t have enough money today, then raise the tax, don’t invent a new taxation structure. Our problem is lack of money, not that the taxes and government aren’t complex enough!

  4. Submitted by Leslie Lamp on 09/01/2011 - 10:37 am.

    I agree with Paul. Raise the fuel tax high enough to pay for the road system (and law enforcement!) that it requires. Higher cost of fuel will force people to slow down and reconsider frivolous driving.

  5. Submitted by Jim Camery on 09/01/2011 - 11:01 am.

    There isn’t any chance of instituting a milage tax, and probably wasn’t in the more progressive 90’s, either. The only alternative is an indexed gas tax or just general revenues. The indexed fuel tax at least ties the behavior to the funding.

  6. Submitted by craig furguson on 09/01/2011 - 11:16 am.

    I wonder how any new system will account for the fact that heavier loads cause more damage. I hope they don’t treat an electric car the same as a garbage truck in any new system. The other option is to shift transportation funding to property or sales tax. That is already happening on the local level.

  7. Submitted by James Crue on 09/01/2011 - 11:31 am.

    Just raise the gas tax factored to inflation. No way you are going to put a mileage monitoring device in my car. And think of the bureaucratic mess it would be.
    All the nice suburban folks who make their living in Minneapolis and drive to the city in their oversize vehicles deserve a higher gas tax.

  8. Submitted by Ron Gotzman on 09/01/2011 - 11:32 am.

    What percent of the fuel tax is actually used for road construction and maintenance?

  9. Submitted by Jim Halonen on 09/01/2011 - 11:50 am.

    I hear that some of our gasoline tax revenue is siphoned off to fund projects other than roads. If this is true, we need no increase in gas tax, just use the gas tax for funding roads and let other projects fund themselves.

  10. Submitted by David Greene on 09/01/2011 - 11:58 am.

    And how would a fuel tax work when we have vehicles like the Chevy Volt can can quite easily be driven their entire vehicle life without using a drop of gas? Should a motorcycle rider pay more to maintain the roads than the driver of a mid-size sedan?

    The questions are not as easy as we think they are. We’ve been seriously underfunding transportation in this country for decades. It’s not going to be easy to fix that and impossible to do it overnight.

  11. Submitted by Ray Schoch on 09/01/2011 - 01:24 pm.

    I’m with Paul (#1) and a couple others on this one. Raise the fuel tax. While a VMT tax makes some sense, the bureaucratic tangle necessary to put it into place, not to mention the host of privacy issues surrounding its actual use, the potential for fraud, etc., etc., all work against its practical implementation.

    The trucking industry will howl in indignation, but I’m not willing to die of emphysema, or send my grandson to some far-off land to be killed, so that I or my neighbors can get a UPS shipment as quickly as we’d like, nor do I want to risk my life and expensive automobile suspension on an interstate highway dotted with unfilled potholes and other damage that MNDot doesn’t have the funds to repair. Raise the fuel tax high enough to provide a significant incentive to use mass transit, and even better, to use and improve our existing rail network for hauling freight.

    My tendency is to favor walking as a transit alternative, but walking for something other than simply exercise is only practical in neighborhoods that actually have multiple uses present. Most suburbs (and my own Minneapolis neighborhood) were constructed and zoned with the opposite in mind – strict segregation of uses – and no one is going to cheerfully walk 3 miles each way to the grocery store. Unless / until those regulations, and that mind set, are changed, and multiple uses are once again a standard part of neighborhood and community planning, walking will not be a practical alternative for an awful lot of people.

  12. Submitted by Eric Ferguson on 09/01/2011 - 03:02 pm.

    @Jim, from the article, it sounds like you heard wrong. Not only is the tax not being used for non-road purposes, but it doesn’t cover the road costs it’s supposed to cover. If you’re sure you heard otherwise, please share a source.

  13. Submitted by Gregory Lang on 09/01/2011 - 06:22 pm.


    Revenues from fuel taxes are deposited into the Highway Trust Fund, which in turn is distributed to several accounts. Percentages to those accounts vary by fuel type, but the majority (approximately 83 to 87 percent) is deposited into the Highway Trust Fund account. This is used on road construction and maintenance. Most of the remainder – approximately 11 to 15 percent – goes to the Mass Transit Account. About 0.1 cents per gallon goes to the Leaking Underground Storage Tank Trust Fund. (Believe it or not, this is referred to as the LUST Trust Fund by the Federal Highway Administration.)

  14. Submitted by John DeWitt on 09/01/2011 - 08:20 pm.

    There’s a great deal of talk about how to raise money for transportation but little is said about just how much we’ll need as we pursue a business as usual policy.

    The Met Council’s 2030 Transportation Policy Plan forecasts a 36% increase in VMT by 2030 in the Twin Cities region. It goes on to report that accommodating that growth in traffic will require a $40 billion investment in expanding our region’s highway system. That investment alone would require a $2 per gallon gas tax. Municipalities, townships, and counties will require additional roadway expansion adding to the cost. And deferred maintenance will catch up with us someday. Additional parking alone is likely to cost about $1 billion annually.

    Let’s figure out just how much business as usual will cost and decide if we’re willing to fund our auto dominated transportation system at that level.

    Then, let’s talk about how to raise the money.

  15. Submitted by Gregory Lang on 09/01/2011 - 09:13 pm.

    Don’t worry too much about hybrids and full electrics like the Leaf and or the Volt. For all the hype “hybrids” peaked at under 4% of new car sales and now they are barely above 1%.

    Even with a huge subsidy the sales to consumers of the Volt are pathetically low. In a recent month fewer than 125 Volts were sold. Throw in Leaf and the total was under 500 per month.

    AOL-Huffington recently had a headline blaring the grave new threat to our electric grid. It was the Volt and Leaf. Perhaps if they sold several hundred times more of these. We average selling a million new cars a month in the US so 500 is a drop in the bucket.

  16. Submitted by David Greene on 09/01/2011 - 10:18 pm.

    Also, 100% of the state fuel tax is dedicated to highway purposes, per the state constitution.

  17. Submitted by Nathan Lind on 09/02/2011 - 12:18 am.

    If you read the study linked in the article, you’ll see that the 49 cents per gallon for the fuel tax is the lowest in the country. Canada is $1.22 and the Netherlands is a whopping $5.57. Raising the tax I feel is a short-term solution because for many consumers, the price of gas is already too high. The problem with the gas tax right now is that it’s inconsistent. It fluctuates with the price of fuel on a daily basis.

    $4 seems to be the psychological barrier for people changing their driving habits, and we’re already near there. It would be one thing if commuter services were more expanded to the suburbs (light rail, etc.), but we have politicians everywhere trying to slow or stop funding of those services.

    It wouldn’t necessarily be a GPS system used to track mileage-based services. Like the article already says, there are products out there specifically designed to block GPS signals, so there’s a far greater chance of tampering. The article mentioned the possibility of adding computerized readers to gas pumps. Maybe there’d be a card swiper that you’d have to use which would calculate how much you’d pay at the pump. It’d be linked to your digital odometer, and no card=no gas. Whatever solution is eventually decided, it’s going to be a major cost to consumers, sadly.

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