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What Would Happen If Washington Cuts Transpo Funding 35 Percent?

The Republicans have retreated from their insistence on cutting transportation spending by 35 percent to match Highway Trust Fund revenues -- for now. But the problem is far from solved. As a reminder of the dangers such a policy presents, the Bipartisan Policy Center and the Eno Center for Transportation put out a new report yesterday on the potential consequences of a 35 percent cut in transportation spending.

The future of transit? Photo: ## Longa##

The report, The Consequences of Reduced Federal Transportation Investment, follows up another report BPC released in June 2011, called Performance Driven, which argued that if funding is reduced, major policy reforms have to accompany the cut in order to maintain the best of the transportation system, not the worst.

But is this still a conversation worth having? As Republican Transportation Committee staffer Jim Tymon said plainly at yesterday’s report release, “There was an attempt to move in that direction, and there wasn’t the political will to do that.”

Indeed, the conversation quickly morphed into a discussion about the gas tax. After all, if no one wants to cut spending, the other side of the coin is to raise revenues. But, as Tymon reminded the audience: “There isn’t the political appetite to raise gas tax.”

That’s pretty much where federal policy has been stuck for the last three years, since the rejection of Rep. Jim Oberstar’s ambitious, six-year, $500 billion proposal.

One audience member noted yesterday, “We don’t have a revenue problem; we have a political problem.” Rather than seize the opportunity with MAP-21 to address the revenue question, Congress and the Obama administration punted. And addressing the revenue issue is a prerequisite for implementing other major changes to federal policy: As Shin-pei Tsay of the Carnegie Endowment said, “We’re not going to come around to the policy reform unless we really deal with the funding issue.”

The fact that the conversation started off focused on the consequences of a 35 percent revenue cut and ended up exclusively focused on revenues was no mistake. “Policy is more often made by inaction than action,” said the BPC's Emil Frankel, noting that the effective policy of the country right now is to continue an unsustainable funding regime and bail it out from the general fund from time to time. “I think it’s important that people pay attention and say, ‘Is that really what we’re doing? Is this really what the options are?’”

With that, let’s circle back to the conclusions of the report – the consequences of a 35 percent cut that are dismal enough to turn the conversation toward the topic of tax increases.

So what would be the fallout of a funding cut as severe as the one that Republicans lined up behind earlier this year (before they retreated)? Smaller population states would have a larger percentage of their transportation program cut, which could be disproportionately harmful for them. But larger states would see a larger absolute sum eliminated, which, as Eno’s Joshua Schank said, “would be a ton of money to try to replace.”

What's the likelihood that states would replace the lost funding? Ten states and the District of Columbia have raised their state gas taxes in the past three years, showing that it is possible, but the highest of those increases was six cents per gallon, in Minnesota, with an average of less than three cents – far below the 10 to 15 cents most experts say would be the minimum to actually begin to address infrastructure needs.

Plus, BPC and Eno concluded that the states that have had recent increases are less likely to implement another increase anytime soon, even if it was needed to make up for federal shortfalls.

They also looked at the climate for tolling and regional tax initiatives in the various states. All together, they estimate that no more than 60 percent of transportation dollars could be made up.

Transit would have an even harder time. The grantees aren’t states but transit authorities, which, as Schank said, are “much more limited in their ability to raise revenue because of the fact that they’re public authorities and not necessarily directly controlled by states.” They depend more on federal funding for operations than many people think, he said – and some depend on federal funds for 100 percent of their capital spending.

So the most likely reaction to funding cuts would be as follows: Large transit agencies will defer maintenance, which increases costs in the future. Mid-size agencies will reduce service levels. And smaller ones will implement even more substantial service cuts, shutting down some routes. “The transit impacts in many ways are greater than highway impacts – that was one of the key findings of this report,” Schank said, “because transit agencies don’t have the mechanisms by which to replace these revenues and they face little choice but to cut service or to defer investment.”

The people riding those smaller systems tend to be low-income and transit-dependent, Schank said, and they’d be the most affected.

So with a balanced, across-the-board cut, the report showed, transit will disproportionately pay the price. But transit is vulnerable to even more severe scenarios given the current paralysis over spending and revenue. When cutting transportation spending to align with revenues comes up in Congress, it invariably intensifies the rhetoric of those who want to push transit and bike/ped out of the Highway Trust Fund.

That brings us back to BPC’s previous report, on performance measures. Performance measures are key for two reasons. First, spending smarter could allow states to spend less while getting as much or more value out of their transportation investments. And second, it could rebuild the public trust in the government’s handling of infrastructure funds enough to make a gas tax increase politically viable. And as the conversation yesterday proved, that’s the real solution to the funding gap – not draconian cuts.

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