How MAP-21 Allocates Transpo Funds Where They’re Needed Least

Who wins and who loses when political wheeling and dealing takes the place of sound decision-making on transportation? Graphic: CAP

Transportation reauthorizations have typically not been a time for major discussions about national policy goals. They’ve been a time for getting while the getting’s good, a time for deal-making and pork and a lot of back-room transactions to make sure every member of Congress could go home and talk about how much federal money they were bringing home.

If MAP-21 accomplished anything it was to change that conversation. It eliminated earmarks – no small feat, as the previous transportation bill, 2005’s SAFETEA-LU, was one of the most heavily-earmarked pieces of legislation ever. MAP-21 also eliminated funding formulas, which used to hold up every bill for at least a year or two as Congress members tried to manipulate the numbers to benefit their states. And the bill also eliminated the “equity bonus” program, which ate up 22 percent of transportation funding in 2010 and was, at its heart, the exact opposite of everything reformers are seeking in the transportation bill. The explicit purpose of the equity bonus program was to reallocate billions of dollars to where the money was not needed — and it was the biggest funding program by far in SAFETEA-LU, accounting for nearly $10 billion in 2010.

Unfortunately, although MAP-21 eliminated these inefficient calculations, it froze in place the funding levels that politicians arrived at through this wheeling and dealing. The new law based state-by-state allocations on the share of the total pie each state got in 2009 – and that share was determined by how well the state fared in flawed funding formulas and the equity bonus program.

Donna Cooper and John Griffith at the Center for American Progress just published a report called “Highway Robbery,” lamenting the fact that the equity bonus isn’t truly dead – its legacy still haunts our transportation funding system.

The equity bonus was designed as a way to make sure that no state lost out too badly when it came time to divvy up federal transportation dollars. If the formulas that determined how much funding states received ended up giving a state less than 92 percent of what it sent to the feds in gas taxes, the equity bonus would bump up that state’s take to make sure it wasn’t too much of a “donor” state. In so doing, the program inherently took money from areas of most demonstrated need – based on lane-miles, population, repair costs, and more – and redistributed it to other areas. Pretty screwy, right?

Now, the formulas that determine “need” are far from perfect too. They reward states for having tons of highways, burning tons of fossil fuels, and driving too much. CAP recommends rewriting formulas to take into account repair needs and estimated costs, highway congestion and transit ridership. That seems like a good start. Even better, a discretionary funding system, similar to TIGER grants, would allocate funding to where it will do the most good for mobility, access, and air quality. And real performance requirements would base funding decisions on how well states have managed their money in the past.

So, no one’s arguing that outdated formulas make for a robust and thriving transportation program. But the equity bonus makes a bad situation far worse, mainly serving as a slush fund to cobble together more votes on transportation bills.

The single biggest transportation program is the one that exists to redistribute money to the areas of least need. Graphic: CAP

This was especially apparent in the talks leading up to the passage of SAFETEA-LU in 2005. “They were trying to negotiate this equity bonus thing, and they had to make up data points that would get them to where they needed to get,” said Eno Transportation Center President Joshua Schank, who was then-Senator Hillary Clinton’s transportation advisor at the time. “It was a really complicated way of saying, ‘We need this state in, and we need this state in.’”

Congress added in criteria for population density – low density states got an equity bonus bump, as long as those states also contained a certain amount of federal land. States with populations under a million got some equity bonus money. So did states with high traffic fatalities and low household incomes.

My favorite is the inclusion of a criterion for states with gas tax rates equal to at least 150 percent of the federal gas tax. That netted exactly one state: Wisconsin. Is it a coincidence that in 2005, Wisconsin had a senator on the Appropriations Committee and a House member who was the vice-chair of the Transportation Committee?

The equity bonus deals weren’t reserved for just the hard-to-get votes. The two states that got the most out of the program were Montana and Alaska. Senators Max Baucus (D-MT) and Don Young (R-AK) were among the chief negotiators of SAFETEA-LU. “It was always seen as a cover to how they were going to get the right amount of money to leadership states,” Cooper told Streetsblog. “It was never only going to be donor/donee.”

In the end, a program designed to make sure the formula losers don’t lose too bad ended up giving money to nearly every state in the union – only Rhode Island and Maine were left out of its largesse.

Let’s look closer at Montana. That state got about 30 percent of its federal transportation funding through the equity bonus program in 2010 — $133 million.

CAP calculated what each state would have gotten if the $9.6 billion equity bonus program were eliminated and that money were distributed to the states simply based on existing formulas. Montana would have gotten $86.6 million in that case, a far cry from the $133 million the state received through its equity bonus.

Meanwhile, look at New York, which through the equity bonus program received only half the amount it would have gotten from needs-based funding. From his vantage point in Clinton’s office, Schank said he was especially sensitive to how New York had “a target on its back” in equity bonus negotiations.

California lost big too, down $338 million from what it would have received if there was no equity bonus program. But Alaska? Alaska gets back five dollars for every one it pays into the system.

It adds insult to injury when you think about how Republicans go after the 1.5 percent of federal transportation funds that support active transportation projects. CAP addresses that in the report, saying that the 22 percent of federal transportation funding devoted to equity bonuses sends a lot more money after a lot less good than keeping a little pocket change for “sidewalks that enable kids to walk to school safely or bike routes that are used for commuting or recreation.”

Also carried over from SAFETEA-LU into MAP-21: the mini-equity bonuses worked in to eight of the 11 core highway programs, which guarantee each state a certain percentage of the total dollars available, regardless of their needs. “Making sure everyone gets a piece of the pie is often a winning political strategy, but it’s rarely the most efficient way to allocate scarce government resources,” the CAP authors write. “To further understand the impact of these rules, consider Delaware, the only state to receive the minimum apportionment for all eight highway programs in 2010. On a purely needs-based allocation, Delaware should have received about $36 million through the program. But because of minimum apportionments and other adjustments, it received about $66 million.”

So who loses when states like Alaska and Delaware clean up? California, New York, Pennsylvania – the same states that lose out when funds are distributed through the equity bonus program. Big states with high populations and extensive transit systems — in short, the states with the greatest needs.

  • Larry Littlefield

    We need an equity bonus for the income tax.

  • Bolwerk

    Think that has to do with Texas’ out of proportion population growth?  Because it really doesn’t seem to be a jobs thing. Not a good jobs thing, anyway. 

  • I don’t think it’s too much to ask to suggest that states ought to get back some minimum level of the gas taxes they send to Washington. I’m originally from Indiana, which has long received well less than $1 back from Washington for each dollar it sends. It has actually long received the minimum amount of any state (which is the lowest percentage allowed by law). Given that most of these federal programs are not for projects of national significance, it’s hard to see why we should turn into federal funding into another welfare program. Why should Indiana’s residents pay for bike lanes in New York City, for example?

    As for some of the funding adjustments you criticize, they actually make perfect sense. Transcontinental interstates of national commercial importance pass through some of the big square states out West that have very low populations. It makes sense commercially from a national perspective to pay to keep up those roads.

    If you don’t like all these bonuses, perhaps you could favor devolution instead……

  • Larry Littlefield

    “If you don’t like all these bonuses, perhaps you could favor devolution instead.”

    Eliminating all surface federal transportation expenditures, and a host of things like it including tax break expenditures, sounds good to me. 

    Have the federal government provide directly for people, who can otherwise move between states to flee taxes when they are better off and seek benefits when in need.  Infrastructure and buildings don’t move, and different places have different needs.

  • Mike

    Has anyone ever followed what happens to a dollar of tax submitted to the feds for local transportation projects, and how all the bureaucratic pass throughs, grant applications, reporting, etc eat away at its value? I would not be surprised in the end if that $1 ends up giving us about $0.03 worth of on-the-ground project. Keep the funding local!

  • Joe R.

    @twitter-19213332:disqus You’re 100% wrong here on many levels. First, it’s actually a net transfer of federal funding to sparsely populated states rather than the reverse. I could ask why should NYC pay for highways in Wisconsin, for example, because that’s really what’s happening here. Second, from a commerce perspective funding Interstates in sparsely populated areas makes little sense because moving things long distances by truck makes little sense, actually almost no sense at all. If there’s going to be a net transfer of tax dollars to these Western states then it should be to freight railroads except, unlike highways, they seem to be getting along just fine without tax dollars. Cutting the funding for Interstates where the population density doesn’t justify it makes more sense. Goods will then go by railroad instead of truck, saving huge amounts of fuel/pollution/road wear/carnage in the process. Funding for Interstates is largely a subsidy to the trucking industry. Now subsidies aren’t always bad things. In fact, sometimes subsidies make lots of sense. Not in this case, however. You’re funding a mode which burns much more fuel, causes most of the wear on our highways, and requires more labor per ton of cargo moved. Or put another way, in the absence of any subsidies, goods which are trucked in cost the consumer more than goods bought in by rail. With subsidies the goods may cost the same, but everyone will pay more in taxes. Sure, we still absolutely need trucks to get goods the few tens of miles from the freight yards to their final destination, but most local street and highway networks are adequate for this purpose. The hard truth is much of the federal Interstate highway system is a white elephant which no longer serves any valid use, and should be defunded. Much of it is close to reaching the end of its life. We now face the choice of rebuilding it a huge expense, or putting our dwindling tax dollars into much more efficient rail. Rail really makes the most sense both for long distance freight and especially long distance passenger travel. Under a free market, shouldn’t the most efficient mode win?

    Regarding you comment on devolution, Larry Littlefield has it right. Just end all federal funding for all modes of transport, including indirect subsidies such as wars to secure supplies of transportation fuels. Roads and airlines it turns out would be the biggest losers here. My guess is rail will be the only mode which can largely survive in that climate because it’s the most efficient in terms of land use, energy use, and labor use. This would be the free market in action, even if the end result is exactly opposite of what people like yourself would desire. As for the big, western states, my guess is the ones without any viable farmland would probably become completely unpopulated. Those with farming would have mainly farmers living there and nobody else. In other words, things would revert to the way they were about 100 years ago, before the federal government started policies which favored road and air transport.

  • Jared T Rodriguez

    Did you not read the report @aaron? NYC and New York State (nyc by proxy) oversubsidize other states that are much less productive, places like Indiana. Look at the data. Unfortunately, New York is not getting rail over it’s Tappan Zee Bridge because people in the southeast, the midwest, and the southwest want to keep motoring on larger and larger highways. It’s called redistribution of wealth and the Republicans love to do it with highway spending.

  • Steve Strauss

    The change in the distribution of the Bus and Bus Facilities program from a largely discretionary program to a formula-based program in MAP21 actually will benefit the Washington, DC area.  We will get more capital funds.

  • Bolwerk

    @twitter-19213332:disqus : Unless they pay taxes in NYC for some reason (got a few extra mil$ and a condo on Fifth Ave?), I can guarantee you nobody in Indiana has ever paid for a bike lane in NYC.  The reverse, however, may not be so. New York is a tax donor to the federal government, and NYC is a tax donor to both the feds and NYS. Indiana, on the other hand, is not a tax donor. It gets back more in spending than it sends to Washington. It’s persistent, too.

    Of all the delusions in American politics, one of the most persistent is the red pays/blue leeches myth

  • Larry Littlefield

    “New York is a tax donor to the federal government, and NYC is a tax donor to both the feds and NYS.”
    In total but not for every tax and service individually.  And only those for which NYC is a net recipient are discussed, now that Daniel Patrick Moynihan is not around to point out the rest every year.

  • Bolwerk

    @f9b2cb395abd5a101456b3b0a40912e1:disqus : well, duh. The net receipts and spending are what matter here though. 

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