Next Year’s Transportation Bill

June 5, 2019

America’s surface transportation infrastructure needs significant improvements and rehabilitation, yet Congress is uncertain about how to do this. Some want to significantly increase federal spending on infrastructure. Others want to end deficit financing of transportation and end federal restrictions that reduce the efficiency and effectiveness of the funds that are spent.

To resolve this conundrum, this paper presents three principles that Congress should apply to a new surface transportation funding bill. These principles are pay-as-you-go, user fees, and subsidiarity.

Pay-as-you-go. The Congressional Budget Office estimates that limiting transportation expenditures to actual transportation revenues, rather than relying heavily on borrowing, will reduce deficit spending by at least $116 billion over the next decade. Putting transportation on a pay-as-you-go basis will also make transportation agencies more responsive to the needs of transportation users.

User fees. Congress should rely on and encourage state and local governments to rely more on user fees for transportation. This can be done by eliminating restrictions on road tolling and incorporating user fees into the formulas for distributing funds to the states.

Subsidiarity. Congress should give state and local transportation agencies greater latitude in deciding how to spend their shares of federal funds. This should promote the efficient use of those funds by reallocating decisionmaking closer to voters and taxpayers. Subsidiarity includes distributing funds using formulas that divide the funds between jurisdictions, not competitive grants that often reward inefficient proposals, and using as few funds as possible — preferably two, one for highways and one for transit — rather than the two dozen funds used today.

Together, these principles will increase the efficiency and effectiveness of federal transportation spending.

Read the full paper here.

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