The National Academies

NCHRP Synthesis 20-05/Topic 09-09 [Final (Synthesis)]

State Resources for Financing Transportation Programs
[ NCHRP 20-05 (Synthesis of Information Related to Highway Practices) ]

  Project Data

"In recent years, the states have faced a crisis in the provision of transportation facilities and services. Some of the reasons for this crisis are: A revenue base that is not responsive to inflation; A relative slowdown in motor fuel consumption, the principal present source of revenue; Soaring costs; Greater sensitivity to social and political pressures; and Increasing demands for transportation facilities and services. Improvements in motor vehicle fuel efficiency and conversion to new energy sources will worsen the situation. One of the strengths of current transportation financing--the dedication of highway funds--has contributed to the difficulties many states are facing. Dedication has tended to isolate highway financing from the mainstream of policy making, shielding it from the attention of legislative bodies and preventing revenue problems from receiving early deliberation and action. User charges are employed widely by the states to defray highway costs. In recent years, this financing system has fallen prey to inflation, and states have looked more eagerly to other revenue sources. The discussion here identifies these potential revenues and their relative merits and demerits. The criteria for appraising the quality of a tax structure include: Equitable distribution of the burden, Minimal interference with economic decisions in otherwise efficient markets, and Efficient and nonarbitrary administration. A diverse state and local tax structure tends to minimize tax competition between jurisdictions. A combination of financing may be preferable to reliance completely on either general tax subsidy or total benefit financing. A judicious combination of the two methods might promote equity and minimize excess burden. An in- depth review of both user financing and general taxation has turned up no hidden revenue fountain to rescue states from difficulties in providing for transportation needs. On the positive side, no flaws were revealed in current methods of financing of such nature and magnitude that appropriate revenue levels cannot be achieved. Revenue issues pertain mainly to the distribution of the burden. What appears to be needed is an institutional framework that will facilitate timely adjustments in the revenue structure. The many issues involved in transportation financing are complex, and much pertinent information gathered for this synthesis could not be included. The material not included has been published by the University of California (l), and readers desiring a more detailed discussion of this subject are referred thereto."  The report for this topic can be purchased at http://www.trb.org/news/blurb_detail.asp?id=3494

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