The Economist: Billion-dollar bandage
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The Texas Legislature finally dealt with the problem of highway funding--sort of. Strong population and economic growth have increased traffic on the state’s highways, but funding has not risen accordingly and the system is severely strained. Despite much debate through the regular session and a trio of special sessions, the final deal punts the issue to voters and doesn’t really solve the problem in any case.
The population of Texas has been expanding faster than most areas due to (1) a relatively high fertility rate (and, thus, rate of natural population increase) and (2) a growing economy attracting people in from elsewhere. The number of Texans more than doubled from 1970 to 2010 (to 25.1 million) and is now approaching 27 million. Depending on the assumed rate of people moving into the state, by 2050, this number could well double again.
Texas added more new residents than any other state over the past 10 years, with growth concentrated in urban areas. Congestion has grown apace, both in the largest metropolitan areas and in smaller ones. The Texas A&M Transportation Institute’s 2012 Urban Mobility Report indicates the yearly hours of delay for commuters is up dramatically since the early 1980s, with notable increases in the past decade alone. In Houston, such delays totaled 52 hours in 2011, up from 40 in 2000. Dallas-Fort Worth-Arlington drivers wasted 45 hours in traffic, up from 39 in 2000. In every other Texas city tracked in the report (Austin, San Antonio, El Paso, McAllen, Brownsville, Beaumont, Laredo, and Corpus Christi), congestion was up since 2000, though significant infrastructure investments have improved some areas over the past few years.
It’s not just an urban problem, of course. The Texas Department of Transportation (TxDOT) maintains more than 80,000 miles of highways, and 480 million miles are driven on these roads every day. Adding to the problem in some areas is the boom in oil and gas activity, which has dramatically increased truck and other traffic well beyond the ability of aging roads to absorb it. In fact, in a great twist of irony, many of the very roads that are supporting the prosperity in the energy industry are being allowed to revert to gravel due to the lack of political will to fund needed repairs and upgrades.
Given all of these factors, the need for investing in new capacity is clear. At the same time, it is crucial to maintain what we have already in place, because preventive maintenance is far more cost effective than allowing excessive deterioration, and insufficient maintenance now will lead to even larger problems in the future.
In an ideal world, as traffic growth generates a need for highway construction, the funds for expansion also need to be generated. This is not the case in Texas, where revenues are dwindling even as needs rise. The state’s portion of the gasoline tax, the major funding source, is $0.20 per gallon. The rate hasn’t changed since 1991 (even though construction and maintenance costs have risen sharply), and more fuel efficient vehicles mean more miles can be driven with less tax paid.
A number of potential new revenue sources were considered by legislators such as increasing fees for various licenses and permits or earmarking vehicle sales taxes. None of these options passed, even though some had very nice properties of letting those who use the roads pay more for their construction and maintenance. Instead, legislators passed a proposed constitutional amendment that diverts some oil and gas revenue from the Rainy Day fund to the state highway fund. In November of 2014, voters will get to decide.
While I’m glad that something was put together, it’s not enough. The extra funds are estimated to add up to about $1 billion per year, while transportation experts put the funds needed at $4 or $5 billion per year. Moreover, it’s shifting finite funds from one account to another, which leaves open the question of what to do about other priorities (such as education). No one wants an overly burdensome tax system, but this bandage solution is not going to fix the wound (even Speaker Strauss called it a “Band-Aid on a pot hole”).
A real solution is essential to long-term prosperity; revenue generated must be linked to funds needed. Our latest forecasts indicate that by 2040, there will be about 15 million more Texans than there are today and that the economy will have more than doubled. Obviously, our highways will not be up to that level of traffic without a consistent program of maintenance and expansion. Productivity and quality of life will suffer, as will economic development. We can only eat our seed corn for so long!!
Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.