Tuesday, December 23, 2014

Minnesota’s Broken Transportation Funding System

Note:  This blog appeared as my regular column in the December 22, 2014 edition of the Capitol report (Politics in Minnesota).

    Not only is Minnesota’s infrastructure in badly need of repair but so is the system set up to pay for it.    But it is not just Minnesota; the entire process for how America pays for roads, bridges, and other forms of infrastructure is vastly outdated, reflecting a carbon-intensive consumptive model of the world.  For that reason, whatever the Minnesota legislature likely does this session when it comes to infrastructure and transportation funding, it will be outmoded from the start.
    The 2015 legislative session is one that Governor Dayton declares is supposed to be about infrastructure and  transportation funding.  Everyone thinks this means road, bridges, highways, and perhaps mass transportation.  But infrastructure is more expansive than that.  It should also include water and sewer lines, aging runways for airports, and even broadband internet access.  All of these are just as important and decrepit as the roads we drive on.  Proof of the need lies not just in conjecture but studies by the American Society of Civil Engineers (ASCE).
    Every three years the ASCE releases a report card on America’s infrastructure.  The 2013 report card graded the United States a D+, noting a needed investment of $3.6 trillion by 2020 to repair the existing infrastructure.  This does not include new construction but simply maintenance.  The maintenance includes not just roads, bridges, and sewers, but also investments in parks, hazardous waste treatment, dams, the energy grids,  rail lines, and the many nuclear power plants that should have already been decommissioned but whose life is being pushed to dangerous levels.  We have been living off  of our parents and grandparents investments for too long and it is time for us to pay our fair share.
    Minnesota does not escape from the infrastructure deficit.  There are 1,500 bridges, 10% of the total, which are structurally deficient or obsolete. The state has 14,500 miles of roads of which 11% are in poor condition.  The parks need $375 million in investment, and $7.4 and $4.1 billion respectively are required to upgrade drinking and wastewater facilities respectively.  Overall, the estimate is that the poor quality of the roads, and bridges alone cost drivers annually  in Minnesota an extra $1.2 billion.
    So what should we do?  Ignoring the needs is not an answer.  This is what the Ventura and to a larger extent the Pawlenty administration did.  A second option touted by the Republicans is that bridges and roads can be fixed without new revenue–we just need to readjust current priorities.  That option too is like believing in the tooth fairy.  The $1 billion dollar budget surplus, even if real, is not enough to pay for much.  Cutting spending from some other area begs the question–where?  The state has only just paid back K-12 and it still could use more money, especially to fix aging schools.  From high education?  Go talk to college students and parents about tuition.  From health and human services?  Go talk to our grandmothers in nursing homes or sick poor people sitting in emergency rooms.  Saying that you plan to shift priorities essentially means you are forcing a choice between roads or early childhood education. Both are important.  Finally the debate at the capitol  will also center around roads, bridges, and mass transportation, mostly ignoring the other infrastructure needs in the state. 
    Had the Republicans not taken control of the Minnesota House, Dayton and the Democrats  would have probably proposed raising the gas tax again.  That option is still on the table.  At best  this idea is a short term quick fix, but it is not viable any longer as a solution.  Nationally, the Federal Highway Transportation Fund is the main way to pay for roads and bridges.  It is based on a gas tax similar to what Minnesota has.  But the federal trust fund is insolvent or at least unable to generate the money needed.  Why?  Several reasons.  First the fund is a tax based on the number of gallons of gas people drive.  As cars have become more fuel efficient fewer gallons of gas are sold.  Second, people are actually driving fewer miles; this is especially true with Millennials who are less likely to own cars or who are increasingly living in the city and not commuting from the suburbs.  Finally, development of alternative fuel vehicles and mass transportation options are reducing  use of gas.  Overall, carbon taxes to pay for one aspect of our infrastructure needs is an aging funding  formula that no longer works.
    The worldwide collapse of oil prices is a mixed blessing.  Great for consumers on the one hand, but on the other it makes it difficult to investment in new energy technologies.  Short term the lower prices mean that the Bakken oil fields will become economically inefficient and cut production, or that some consumers will buy bigger cars and drive more, therefore using more gas.  All this is short term and does nothing to address the longer term trends impacting transportation funding. 
    More creative solutions are needed.  Economists have suggested taxes on miles driven, or  a variable tax that adjusts with the price of gas.  Others have even suggested more toll roads.  One could also scrap the fuel tax entirely and shift it to income or other consumption fees.  These are possibilities for Minnesota, although some such as toll roads are hugely unpopular and probably regressive.   Nationally, eliminating the tax breaks for carbon-based companies and putting at least part of that money into infrastructure is an option.  Still others have talked of privatization, but the track record with this option too is mixed.
    This column may not be able to offer the right answer, but it can say that simply doing what Minnesota has done for the last 30 or more years is the wrong solution.  Now is the time to revisit from scratch the entire funding system for all of Minnesota’s infrastructure needs and not just for roads and bridges.  New sources of investment are needed and they must reflect the changes in how people consume resources.

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