the tolls of expensive gas

Highway Funding Concerns Loom Large in Montana, Other Rural States

By Matthew Frank, 8-22-08

Americans are driving less, especially in rural areas, the U.S. Department of Transportation announced last week. The resultant drop in gas consumption (and combustion) is good, no doubt, but not for the country’s gas tax-fueled Highway Trust Fund, already facing a multibillion dollar shortfall.

Highway projects around the country could be left unfunded if Congress doesn’t act—and it may disproportionately affect large, rural states.

States like Montana.

“If there is a shortfall, it will affect states that have a larger federal program,” said Jim Lynch, director of the Montana Department of Transportation. “So we are concerned, but Montana’s not alone in this.”

Montana is one of the many donee states (as opposed to donor), meaning it receives back more from the Highway Trust Fund than it puts in. In fiscal year 2006, for every dollar Montana contributed it received $2.58 back. By comparison, Alaska received $4.21, California $0.98. (Click here for figures from all states.) In Montana, that federal money accounts for about 80 percent of its highway funding.

The state portion is decreasing, too. “For the first time we’re seeing that revenue flatten out,” Lynch said.

“What came along in this whole thing—which I don’t think a lot of people expected—was gas running up from $2.50 to $4.00 a gallon.”

The Highway Trust Fund is funded by a tax of 18.4 cents on every gallon of gas sold.

The problem is compounded by the fact that as gas prices rise, so too does the cost of construction, meaning highway dollars aren’t going as far as they used to.

“It’s kind of a perfect storm for highway construction,” said Cary Hegreberg, director of the Montana Contractors Association. “It doesn’t bode well for highway infrastructure or for employment.”

Hegreberg says the effects are already being felt. He’s seeing a decline in highway projects and contractors are laying people off, unusual for this time of year.

But, on the federal funding side of things, Doug Hecox of the Federal Highway Administration says that even though the “easy math” suggests states more reliant on federal funding will be impacted most by a shortfall, that’s not necessarily the case, and “we don’t think the rural states will be affected in the near term.” But maybe next year.

“Come October 1, 2009, it’s going to be a brave new world,” he said.

That’s when highway funding under SAFETEA-LU legislation expires. Congress needs to find a solution to the immediate shortfall—one of a dozen or so appropriation bills on its plate next month—or else states’ concerns could be realized even sooner.

What’s coming out of this discussion is a realization that as Americans drive less, highway construction shouldn’t be fixed to gas consumption, an idea that U.S. Transportation Secretary Mary E. Peters has been promoting recently.

“What we have now has worked fine…, but it’s not going to take us much farther,” Hecox said, partly because a hike in gas taxes incents less driving, and thus less money for highways.

Beyond a perhaps ill-advised hike in gas taxes, some ideas put forward include more tolls and charging drivers based on the miles they drive. The latter has been tested in Oregon and thrown around in South Dakota.

“It’s one of the most complicated policy decisions Congress will face next year,” Hecox said.

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