Former transportation secretary offers insight
on future highway funding dilemma

The song Mary Peters heard while scanning radio stations on a motorcycle tour put the status of transportation nationwide in clear perspective. The prophetic song title: “The End of the World as We Know It.”

Peters, former head of the Federal Highway Administration and the U.S. Department of Transportation, was the featured speaker this week at the 2011 Project Development Conference in Boise that attracted more than 350 participants.

In a 40-minute presentation Tuesday afternoon, Peters said the nationwide transportation system is being redefined, largely by demand, funding constraints and highway age.

President Dwight D. Eisenhower signed the first Federal-Aid Highway Act in 1956, laying the foundation for the interstate highway system. It transformed the nation by increasing travel freedom. The massive infrastructure program relied exclusively on federal fuel taxes.

That served the nation well – then.

“I don’t think I would say that if we were asked today to build the interstate highway system as this nation was asked to do in 1956, first I’d say we couldn’t do it. Second, I would say more accurately we wouldn’t do it that way because we’ve learned so much."

Concern over sustainability and the environment make the transportation system much more complex. Today, Peters said, federal funding is spread among 108 programs. The six-year Highway Trust Fund may be redefined as a Transportation Trust Fund, reflecting the diverse programs and clients it serves.

Peters, who also served as director of the Arizona Department of Transportation, says Congress “seems to have lost confidence in the program” as shown by its reluctance to increase the federal fuel tax. It has not increased since 1993, except for a shift of 4 cents per gallon as a deficit reduction measure.

The federal system began losing its focus as it evolved from the interstate construction era, she says.

The playing field has changed radically.

  • Vehicles are more fuel efficient, and there is discussion of a VMT (vehicle miles traveled) tax replacing the per-gallon fuel tax.
  • Federal funding worked well when the miles traveled grew by at least 2 percent per year.
  • Escalating gas prices result in declining use, and in turn, reduces revenue to the highway trust fund

Congress is debating reauthorization of the federal transportation bill but the three key players – the House, Senate and Administration – have yet to reach a compromise. President Obama has proposed increasing the six-year authorization to $556 billion, Peters said. The last authorization was $287 billion. Revenue to the highway trust fund the next six years is projected to be $230 billion. That leaves a significant gap to fill, Peters said. Yet, there is no clear vision for funding the difference.

But Peters considers it a positive sign that serious discussions are taking place.

“When you have the President of the United States talking about the need to invest in infrastructure, that’s not a bad thing. We may not agree on how to get there, but at least if he’s talking about it, that’s not a bad thing at all.”

With the changing political landscape and economic conditions, Peters also predicts major changes in how transportation will be funded in the future.

“I believe that if we are able to get a subsequent authorization act out of Congress in the coming months, it will be the last one that has significant (dependence) on fuel taxes.”

Everything that happens in Washington D.C. during the remainder of President Obama’s first term will be viewed through the lens of reducing the deficit, growing the economy and creating jobs, Peter predicts.

She said rapidly escalating costs of three federal entitlement programs – Medicare, Medicaid and Social Security – will make budget decisions even more difficult.

Published 4-29-2011