On this week’s Talking Michigan Transportation podcast, a conversation with Susan Howard, director of policy and government relations for the American Association of State Highway and Transportation Officials (AASHTO).
Picking up on last week’s conversation with Richard Czuba, a veteran Michigan pollster and founder of the Glengariff Group, Howard talks about results from a recent Glengariff poll that asked Michigan voters for their perceptions of road conditions and repairs and how those results fit with what she’s seen at the national level.
Howard says contrary to common belief, lawmakers have largely not paid a price for raising taxes or fees that fund transportation infrastructure when voters understand where the money is going and can see the results.
Howard also addresses the health of the Highway Trust Fund and why the “donor-state” concept is no longer an issue in Michigan and other states (save, perhaps for Texas, where she says officials would make a different argument).
The federal government has used the General Fund to compensate for the diminished Highway Trust Fund for several years now, while the federal gas tax has not been raised since 1993. AASHTO officials have cited the cost of other items in 1993 versus now and how transportation infrastructure has suffered because of the lack of action.
Is the Highway Trust Fund model broken? Howard discuses the history of the fund going back to its origins in 1956 and some discussion about whether transportation should be funded like other federally supported discretionary programs.
“The conventional wisdom and accepted course for the future is moving away from the gas tax as the method for funding transportation and to a mileage-based fee,” Howard says, which recalls previous podcast conversations about funding roads like public utilities.
Jeff Cranson: Hi this is the talking Michigan Transportation podcast. I'm your host Jeff Cranson. Once again, Part 2 of this discussion that I began last week with the pollster Richard Juba about roads and perceptions of roads and funding, which is not unique to Michigan. It's been a challenge at the federal level and in every state at one time or another. This week I'm pleased to have Susan Howard, who is the policy director at the American Association of State, Highway and Transportation Officials, also known as AASHTO. We've spoken about these issues before. She has studied this for a long time and knows a lot about what works and what doesn't work. So, Susan, thanks for taking time to talk again.
Susan Howard: My pleasure.
Cranson: So, the polling and the data that I spoke to Richard about; give me your thoughts whether that's a little bit contradictory to what you've seen at the national level or if it dovetails with your experience just to give me your high-level view.
Howard: Yeah, absolutely. Well, I think the polls very interesting. I think that some of what we've seen historically is that there's not a direct link in like voters’ minds between action on transportation spending initiatives and how they're going to vote at the ballot box to first state legislative races and things like that. So, there's been some studies around that like looking at different ballot initiatives or different elections where at different levels of government, there's been action to fund transportation funding and like that we did it result in groundswell though certain decisions made at the ballot box on the kind of ramifications of that, and generally there hasn't been too much of a nexus there in terms of that direct tie. And so, the message from that has been like, OK, state legislatures and others, even Congress, be brave, take the vote. It won't have the political consequences that you think it might. If you show people, if you demonstrate to the voters and the citizens what you're going to get from the increase you're posing, they'll often go along with it or hold you accountable for increasing the gas tax or doing other spending. At the federal level I mean, we've seen a lot of hand wringing about the vote last year around the IIJA in the very small number of Republicans in the House who supported it, and to many of whom are now facing or have faced primary challenges. So, it's very much it took on a higher level. Sort of a higher visibility, I think with the IIJA vote for reasons, probably just some in terms of like what not wanting to see the administration get quote-on-quote win on something. So, it's gotten a little bit more political at least at the federal level in the context of the IIJA,
Cranson: Yeah, because the I Today wasn't like tied to a specific tax increase. I mean, I guess you could make your arguments about government spending overall, but you weren't burdening the taxpayers with a specific new tax because of it,
Cranson: Right. So, yeah, that's interesting talk a little bit about that history, for a long time, a lot of states trying to educate their constituents and what the donor state thing meant. And that's became kind of. Never get back under level now. That hasn't been the case in a long time because the Trust Fund has been basically broke and the general fund has been used to prop it up, right?
Howard: Absolutely. Yeah. There really are I don’t want to say there are no doner states, the argument that they have that dichotomy in the same way anymore. And you're exactly right. It's because since 2008, we had our first Highway Trust fund crisis, the Congress has taken active general fund revenue over to the Trust fund to keep it solvent, billions and billions. Hundreds of billions of dollars. I mean the IIJA think it was $118 billion to keep the trust fund solvent for the life of the bill. So, when the vast well not the majority. But when the Trust Fund is being supplanted by general fund revenue. There's not the same direct Nexus between what's individual and individuals are paying into the gasoline tax, and then what the states contribution is to that bigger pot from their users. It's just not the same calculation as it used to be because we're moving away from a fully user pay system as we call it. A user pay system is one where there's contributions to the asset by the people that are using it, but with more and more general fund revenue propping up federal transportation investment, that's just not the case anymore.
Cranson: And the federal gas tax has been the same since what, 93 or 94?
Howard: Yeah, 1993.
Cranson: OK. So, what else costs the same thing now as it did in 1993?
Howard: Really, we sometimes use a little chart that shows how the cost of everything from a movie ticket to college education to healthcare; what changes we've seen in those household expenses, so to speak, since 1993 when you compare it to the flat gasoline tax.
Cranson: So, is the is the model just broken or outdated? I mean, what do you think about the? I mean, talk a little bit about the origins of the Highway Trust fund and how it came to be. And what the debate is ongoing with some people out there and I don't know if it's a fringe or not that argue for devolution and just want to kind of turn everything back to the states to figure out for themselves.
Howard: Right, right. Well, we've had the Highway Trust fund since 1956. It was the genesis of it really was the need to build complete build and complete the Interstate system. So, we dedicated this revenue from little fuel taxes, both gasoline and diesel taxes to dedicated highway transportation is very unique at the federal level that it has this trust fund that is only used for transportation spending, so there were increases to that contribution of the year. But I mean about 90% of the Highway Trust Fund is comes from those motor fuel taxes. There are a few other things. So, it really is dependent upon this, per gallon. Gasoline and diesel tax that we have. And so, as it's remained flat, it's spinning power has decreased. We see more and more, as you said on transfer, as we mentioned earlier, transfers from the General Fund to keep the Highway Trust Fund solvent keep this spending commitments essentially that are made at the federal level. So, when you have a bill like the IIJA that's huge, you needed that $118 billion to fulfill the promises, the spending that was promised in that bill. Um, so devolution it's interesting it pops up every now and then, but it's certainly, I would say, more of a friend idea. There's a couple of conservative senators who advocate for it, but it has not really had the sustained interest over the years. The one thing, I mean, I think we kind of have been at a crisis point for over a decade now. There's a chance that we may need to do another fix for the trust fund before this bill runs its course. I have heard, and I don't know exactly when it would be, but as of as IIJA winds down, that sometimes happens. You may have to do another stream emergency transfer to keep the highway trust fund going. The other thing that gets discussed a lot of is should transportation be considered along with other domestic discretionary spending programs and not have a dedicated revenue source anymore? I mean, if that was the case, if we if we didn't have the trust Fund anymore, transportation would be in the same kind of pot as education spending and veterans spending and healthcare, health research, and all the domestic discretionary programs that Congress funds through the appropriations process each year. Transportation has always been unique because projects take several years to fund, and you need dedicated revenue that’s why we get a five-year renewal with contract authority laid out. I mean, we have to have the appropriations each year to obligate that funding, but the establishment of the Trust Fund and the way that we fund transportation, the federal level, has recognized the need for dedicated and sustained revenue. If we were competing through the annual appropriations process against other domestic priorities, I think some people question how well transportation would do so it would put us in a little bit more of a vulnerable position, but there has been some talk about that maybe that's ultimately where we'll end up, if the trust fund is just no longer viable and there's no appetite to raise the gasoline tax or find another funding mechanism.
Cranson: Stick around. There's more to come right after this short message.
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Cranson: So, blue sky; let's think of this Susan Howard, you are queen for a day, and you get to restructure this whole thing in a way that is more sustainable just better all the way around. What would you do?
Howard: well I think that the common, accepted way of the future, and again this is Susan speaking this not AASHTO, course for the future is moving away from the gasoline tax as the method for funding transportation into a mileage based fee where it would really be agnostic in terms of the type of vehicle you're driving and you would pay per mile rather than a per gallon tax, I mean this would address a few things vehicle efficiency. I mean one of the reasons that the gasoline tax has been declining, is because we have more efficient vehicles which is better for the environment and better overall. And then the rise of electric vehicles. How Electric vehicles are contributing to the system, given that they are paying into the gasoline tax has been a concern, so, a road usage charge or mileage-based fee certainly addresses those concerns, and it would be more stable over time. The huge push for the administration to build out charging stations across the country that number is going to tick up. Commitments from manufacturers to make more electric vehicles. So, I think that I just don't know how soon we'll get there at the national level, but we have operational programs in three states now Virginia Oregon and Utah. There's a long way to go in terms of getting that scaled up to the national level, administrative things to figure out, data security and privacy. But there's movement in the IIJA toward that, with the establishment of a national pilot, it hasn't gotten underway yet. But we can see that in the life of this bill, and that could be the way forward.
Cranson: Yeah, so in Michigan, we have a legislative mandated study going on for tolling, but there's been discussion of adding in or adding separately, pursuing something on mileage-based user fees. And I think it's probably a good idea. I think there's another myth out there among people that the electric vehicles must not be as hard on the roads, when in fact they're about the same as internal combustion passenger vehicle and maybe a little heavier, but not probably, heavy enough to make it dent like trucks do. But still I think, I think I'm not doing as much damage, so I shouldn't have to pay as much as that's just that's a myth.
Howard: Right, absolutely. And we would need to look at pricing structure that recognizes the impact that different types of vehicles have on the road, we don't really have that. We've used the gasoline tax as a proxy because if you're, if your car is heavier and it uses more fuel, so you end up paying more because you're just paying more when you fill up your tank and maybe more gallons means more of that 18.3 cents going into the trust fund. But yeah, I think that that would need to be looked at when we start thinking about how to price a road usage charge.
Cranson: So, do you think we could ever get to a point where, you've heard me discuss before that I think we should take this out of lawmaker’s hands and do it like a Public Utilities Commission, the way most states regulate utility fees; we don’t ask lawmakers to keep the lights on, so why do we ask them to keep the roads up to grade?
Howard: Yeah. I mean it's certainly possible. I mean, I think that some of the some of the work that's going on right now with the House. Partnering with utilities inevitably to do this electric vehicle charging infrastructure it might prove to have some good lessons there. It's going to be a different rate structure and different indexes and calculus when we're talking about charging electric vehicles. So yeah, maybe there's more parallels with the utilities to come that we'll that we'll see down the road.
Cranson: Yeah, I'd be very interested in that because I just think that as long as we're relying on this, it's always going to be a political football and it will just always be very difficult. And nobody is up to take the tax vote. So. What else do you see coming? I guess in terms of broader policy discussions, I know it's hard to say now what Congress is going to look like in the next session, but knowing what the administration is pushing, what Secretary Buttigieg is interested in, what are you kind of keeping your eye on?
Howard: Very focused on implementation of the IIJA and that includes a lot of different things. But on the policy side, quite a lot of new programs that almost a year into the bill, we're beginning to see requests for information requests for comments and rulemakings coming out. There's a number of substantial discretionary grant programs that will be rolled out. Soon, but expect in the next couple months when we hit the one-year anniversary of the IIJA to have a lot. Lots of pomp and circumstance I would imagine around that and touting the successes. And there certainly have been milestones achieved so far. We have been so focused on the funding. There is a lot of policy in the bill and we're getting to the point now where more and more of that will be coming and so that will keep us busy for two years for sure.
Cranson: What do you think about, you know speaking of those discretionary grants and that received $105 million infra grant and the Secretary was in Detroit last week with the governor and the mayor of Detroit to celebrate that because it's a major project to remove the I 375 kind of ditch freeway. Replace it with an at-grade boulevard with multimodal opportunities and all kinds of connections. And that's a that's a real priority of the secretaries. So, tell me about your thoughts on that and whether you see that becoming more popular around the country.
Howard: Absolutely. It's certainly a party for the administration to see projects that are bold that are multimodal. They're doing more than just rehabbing and rising structure transitions, impacts on quality of life and movement of people on economic development, all that stuff. So yes, I think that that's shifting within the state duties as well, we have responsibilities that we have to keep our system safe and operational. A lot of that it's not big, splashy projects. A lot of it is the routine day-to-day stuff that we do to operate and maintain the system. But certainly, I think cities are thinking about a lot of these big projects in new ways. We're getting populations involved in the engaged process that we maybe didn't as much in the past. It's a big focus for this administration, but I think it'll be a legacy for the future. I mean, I think that they're laying the groundwork for how we look at transportation in the future, and certainly some of these discretionary grant programs and even projects that are done through formula funds, I think we shouldn't discount that either, those federal dollars that states have discretion over, there'll be some real landmark projects hopefully and it will help us see the future way for transportation in our country.
Cranson: Very well said. Thank you, Susan, for taking time to talk about these things and we'll be talking more like you said because IIJA marks a milestone and there's other celebrations and other grants that are awarded. There's going to be a lot more to talk about on this front. So, I'll look forward to talking with you again.
Howard: Thanks so much, Jeff. Great to talk to you.
Cranson: Thank you again for listening to this week's edition of the Talking Michigan Transportation podcast. I also want to thank Randy Debler for his work producing this week's podcast, Jesse Ball conduct social media coordinator who proofreads the show notes and helps with all kinds of things related to getting this done every week. And Courtney Bates, who does a great job putting the podcast together, formatting be posted and Sarah Koenigsknecht in our office, who also helps with the production and the transcription of the podcast.