Study Finds That Transportation Funding Should Be a State and Local Responsibility
May 4, 2016
FOR IMMEDIATE RELEASE
John A. Charles, Jr.
PORTLAND, Ore. – In a study released today by Cascade Policy Institute, economist Randall Pozdena recommends that transportation regulation and finance devolve from the federal government to state and local governments. In addition, the study recommends that most transportation taxes be replaced with targeted user fees, to ensure that those who pay for services receive benefits commensurate with those payments.
For over 30 years, the federal government has assumed a disproportionately large role in the regulation and subsidization of transportation services. Yet, most travel is local. For instance, the Cascade research paper found:
- More than 50% of all household trips, by all modes, are less than five miles long
- More than 90% are less than 20 miles
- 92% of freight shipments are less than 500 miles, by weight
Despite the dominance of local travel, 32% of all transportation funding flows through federal processes.
Of the various transport modes, private freight, airline travel, and pipeline shipments are the least regulated and least subsidized. These modes benefit from high levels of private ownership and capital investment, subject to normal market discipline.
Highway travel and transit suffer from the most distortions and cross-subsidies through federal intervention. As a result, most urban areas face growing levels of traffic congestion, and large urban transit systems are seriously (and often tragically) under-maintained.
The transit industry, which has steadily become a government-sponsored enterprise since passage of the Urban Mass Transit Act of 1964, is the sector most in need of a new business model. According to Dr. Pozdena,
“By definition, transit trips are extremely short and not important parts of larger networks. Federal and state governments should be out of the transit sector altogether, and rely on fare box revenue to ensure that the cost of the service is worthwhile to the user.”
For comparison purposes, Dr. Pozdena calculates that it costs roughly $60,000 to recruit one new additional transit rider in Oregon, which is 10 times the cost of providing new highway capacity for one additional auto commuter.
The Portland region in particular suffers from a mode imbalance in which vast sums of federal and state dollars have been spent on lightly-used passenger rail lines, while new highways and bridges have been canceled or delayed. This problem can be solved by inviting private investors to build needed new facilities through toll-based payments, and implementing time-of-day pricing schemes to ensure free-flow travel conditions on the regional highway system.
Last week the Oregon legislature announced the formation of an 18-person task force to study transportation funding for the 2017 legislative session. According to John A. Charles, Jr., CEO of Cascade Policy Institute,
“The Oregon Legislature has struggled unsuccessfully for decades to devise a sustainable transportation funding system. As yet another task force prepares to scale the fortress wall with the same weapons used in previous assaults, members should consider a new approach including targeted user fees rather than broad-based taxes, electronic tolling and variable pricing, elimination of political mandates prohibiting new highway facilities, and market-based reforms including privatization.
“These principles work everywhere else in the economy; they would work in the transportation sector as well, if we allowed them.”
The full report, Devolution of Transportation: Reducing Big Government Involvement in Transportation Decision-Making, can be downloaded here.
Founded in 1991, Cascade Policy Institute is Oregon’s premier policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. To that end, the Institute publishes policy studies, provides public speakers, organizes community forums, and sponsors educational programs. Cascade Policy Institute is a tax-exempt educational organization as defined under IRS code 501(c)(3). Cascade neither solicits nor accepts government funding and is supported by individual, foundation, and business contributions. The views expressed in Cascade’s reports are the authors’ own.