Myths Surrounding Devolution of Federal Transportation Programs

Myths Surrounding Devolution of Federal Transportation Programs

November 25, 2014  | ENO CENTER FOR TRANSPORTATION

As the lame-duck session of Congress approaches, there is nascent optimism within the transportation community that perhaps this could be an opportunity to confront an ongoing funding problem. Congress almost always disappoints optimists who hope that great things can be accomplished during lame ducks. On the other hand, Congressional leaders have likely grown tired of bailing out the Highway Trust Fund (HTF) and are looking for any opportunity to implement a longer-term solution. Stranger things have happened.

However, one of the obstacles to a long-term solution is that there are several members of Congress, backed by the Club for Growth, pushing a different solution: devolution. This idea, which is not new, seems like an easy way out. Rather than tackling the challenging problem of adequately maintaining our infrastructure, the federal government could simply push the problem down to the states. Eliminating the gas tax is generally a political winner, as is the idea of shrinking the federal government. Some elected officials in Congress might be tempted.

They should probably know that although this may sound like a political winner, it has always failed because it ultimately fails the press release test. A Congressional office is not likely to issue a press release trumpeting the fact that a member of Congress helped eliminate federal funds for transportation in his or her district. There is no positive way to spin the ultimate result, and any member who desires re-election would see that (there are of course some members who do not care about re-election and would stand on principle, but these members remain a distinct minority). This is why the House of Representatives could not even muster enough votes, during the MAP-21 reauthorization, to cut spending to correspond to existing gas tax revenue levels.

This means that devolution is more of a talking point to avoid taking effective action than it is an actual policy idea. But even as a talking point, devolution fails the smell test because it propagates several myths about federal transportation policy that need to be dispelled. These include the following:

1) States can and will replace federal funds.

Eno and the Bipartisan Policy Center issued a report several years ago that looked at the impact of a 35% reduction in federal funding. We found that even under an optimistic scenario, states would only be able to replace approximately 60% of the lost federal funding. The problem is not only that states would face challenges in raising revenues, either through taxes or tolls. It is also that they are facing the same problem as the federal government – they are dependent on fuel taxes for funding transportation and fuel taxes are a declining source of revenue.

A recent report from Pew confirms the fact that states would have trouble replacing federal funding. While many reporters have trumpeted the states and localities that have effectively raised revenue for transportation as the federal role has diminished, these anecdotes do not actually add up to an increase. To the contrary, states have been raising less money since federal funding began to stagnate. It is hard to imagine how cutting federal spending will increase transportation investment, but these numbers show that it will most likely decrease overall investment. That would be a serious economic problem for the nation, severely hampering our competitiveness.

2) States will make better investment decisions without federal interference.

This myth reflects a fundamental misunderstanding of how the federal program currently works. The federal government provides 88% of funding for highways and transit via formula directly to states and urban areas, leaving substantial discretion to states and other grantees with regard to investment decisions. While there are some restrictions on how that formula money can be spent, they have a limited effect on state transportation investment programs or decisions. Only discretionary programs, which account for less than 12% of federal transportation spending, can fairly be viewed as having a strong federal role in the decision-making process. Despite this stronger federal role, discretionary programs remain popular and continue to be authorized by Congress – for example the New Starts program has been around for 50 years now. The level of federal interference on state decisions with respect to formula money remains limited or non-existent.

This myth implies that state decisions are free from politics, and that State Departments of Transportation and Metropolitan Planning Organizations would simply allocate funds to the most effective investments were the federal government to step aside. Unfortunately we know that this is not true. State Transportation Improvement Plans (STIPs) are not immune from politics in project selection. More critically, most states have little to no accountability in place to ensure that limited funds are prioritized effectively. Eno recently documented this problem in our report with the American Society of Civil Engineers on lifecycle cost analysis. A stronger federal role in establishing goals and analytical processes, while still leaving project decision-making to states and other grantees, is the best way to improve transportation investment decisions.

3) Project delivery speed will increase

It is convenient to blame the federal government for the long time it takes to complete transportation infrastructure projects in the U.S. It is true that there are several federal regulatory processes that can increase project delivery time due to the need to secure approvals. However, while it is easy to blame federal regulation, state procurement and contracting laws can often be an even bigger obstacle. Another problem is funding. Many excellent (and not so excellent) projects are slowed as they await final funding approval, often times for years. The Second Avenue subway in New York City, a very valuable and viable but expensive project, has technically been delayed for over 90 years. The delay has not been due to regulation, but rather the challenges of cobbling together sufficient funding for a multi-billion dollar project.

Yet another problem is that many delays are due to lawsuits filed by interests that do not want to see the project go forward. In fact it is virtually impossible to build a major transportation project in the U.S. without being sued. The fact that many of these lawsuits are based on existing environmental regulations is not particularly relevant. If these federal regulations went away, or states were handling projects on their own, opposing parties would simply find another law on which they could challenge the project. The regulations are not the problem – the problem is that most of our investment decisions are made without clear accountability for outcomes. If outcomes, potential performance, and costs and benefits were made clear through an official state process, this might deter litigation. But such processes are likely to come into place only if the federal government helps incentivize them.

Conclusions

Devolution is a convenient talking point, but falls apart upon closer examination. However, there is a strong case to be made for giving states greater flexibility with respect to transportation investment. The federal government should not, in principle, be telling states how to spend their transportation dollars. States should have the flexibility to invest in whatever modes they wish, and should be able to fund operations or capital. Allowing states and localities to be the laboratories of innovation has a strong history in the U.S. and with good reason. Many excellent innovations in transportation and other fields have been developed in this manner.

But we should be careful not confuse flexibility with a lack of accountability. Without a strong federal presence, it would be difficult if not impossible to complete projects with benefits and costs that span multiple states. We need a federal program in order to invest adequately in our transportation infrastructure in metropolitan areas. Accountability for grantees is required to ensure stronger investment decisions that are made in the national interest. This is why federal money that states receive should be used to accomplish national goals. MAP-21 spelled out specific national goals for transportation and states receiving funds from the federal government should be held accountable for achieving those goals. The next authorization bill should be seen as an opportunity to begin doing just that.

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