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Funding For Mass Transit Dependent On Motorist

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By Lowell L. Kalapa

(Released on 7/06/08)

As gasoline prices soar, we are told more and more commuters are finding alternatives to reach their workplaces other than driving their personal vehicles, such as taking public transportation or tele-commuting by working via the INTERNET or moving to a four-day work week by working ten-hour days.

While it will be difficult for commuters and highway users to make the adjustment, the soaring cost of gasoline is making the choices clearly evident. Indeed, according to national demographics, 91.2% of personal travel is by private vehicle with only 6.7% by public transportation and the remaining 2.1% by other modes of transportation. While there will be a shift in this picture, the changes will not be all that dramatic in the immediate future as it will take time for workers and employers to resolve transportation demands.

However, what is ironic is that federal funding for mass transit or public transportation is highly dependent on the motoring public as nearly 3 cents of the 18.4 cents per gallon in federal taxes on gasoline is designated for the mass transit account. Thus, if soaring fuel costs nudge commuters using personal vehicles to shift to public transportation and therefore reduce the consumption of gasoline, the funding for not only the nation’s roads will decline, but federal subsidies for mass transit will also suffer.

What most taxpayers and highway users do not realize is that the federal highway fund is already destined to go broke, perhaps as early as later this year or early next year, unless the fund is re-authorized by Congress. This is because the last time Congress re-authorized the fund, it was noted that the fund carried a substantial balance. Thus, when the current authorization was extended by the SAFETEA-LU Act of 2005 for the period FY 2005 to FY 2009, the directive embodied a strategy that has the highway administration spending more each year than it takes in new revenue as a means of reducing the balance to almost nothing.

The problem with that strategy is that no one expected the cost of gasoline to soar as it has, putting a crunch on consumption as Americans try to shift their household budgets to accommodate the higher cost of commuting. If, in fact, consumption of fuel declines as the monthly data is beginning to show, fuel tax revenues will correspondingly decline, and the resources available to subsidize highway construction and repair, as well as the subsidy for public transportation, will sink.

So as the federal highway funds begin to dry up, the state is also faced with a similar situation where the state highway fund is forecasted to have insufficient funds to meet its obligations by the year 2013. And if what is happening on the federal level is any precursor to what will happen in Hawaii, a strategy that takes a radically different approach to financing the state highways will have to be explored.

Not that it is all about raising revenues. No indeed, as has been noted, Hawaii’s highway user taxes and fees are amongst the most onerous in the nation. With Hawaii’s combined state and county fuel tax rate at 32.5 cents per gallon, second only to New York at 32.6 cents per gallon, the highway user must wonder just where does all that money go? Given the outcry from motorists about potholes that go wanting to roads that rumble louder than one’s car stereo can blast, highway users question the efficiency and prudent use of the highway taxes Hawaii’s motorists are asked to pay.

So one has to ask, are taxpayers, in this case highway users, getting the maximum bang for their buck in the case of highway repair and maintenance? Judging from motorists’ complaints, no. In this case, a closer examination of how the various highway departments undertake their respective maintenance programs is essential in understanding why the heavy burden of taxes and fees does not necessarily equate with quality roads. In some cases maintenance of roadways was deferred for too many years which resulted in much higher costs to return the roadways to acceptable levels.

Perhaps the most telling question is just how much of the highway user’s taxes actually goes into the roads and just how much goes into the overhead to run the department of transportation. If, in fact, the life cycle for the state’s highway system has matured to the point where there is relatively little new construction or major maintenance overhaul that would qualify for federal aid, one should ask whether or not it is necessary for the department to carry substantial overhead costs as opposed to contracting out for the maintenance work for which they are now responsible.

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa’s commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.

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