Covid-19, the Gas Tax, and the Future of Funding Infrastructure
By now, many of the long-term effects of the Covid-19 pandemic have become clear- school closures, a shutdown of the entertainment industry, and a sharp decrease in travel are already underway. But drivers may be surprised to find that there are additional consequences for the condition of the roads when they return to work, from potholes to a lack of proper Symons forms on construction projects. The decrease in driving caused by a lack of travel and an increase in remote work has significantly impacted the gas tax revenue in state and local governments, which has traditionally been used to fund American infrastructure. While this is a COVID- related situation, it has highlighted other areas where infrastructure funding needs to be improved.
Problems with Infrastructure Funding
With the budget shortfalls becoming more apparent, local and state governments are working on difficult decisions about how to maintain infrastructure. Some are forced to reduce maintenance, resort to used plywood for sale or put projects on hold that were intended to improve road travel. One example in Maryland is a proposal that cuts $3 billion from a 6-year Consolidated Transportation Program budget, including delays for road projects worth $900 million and cuts to bus and train service. Many states are in similar predicaments, with cuts affecting transit service, the addition of elements like Symons forms to road structures, and paving initiatives.
In New Jersey, the gas tax has to be raised this fall by more than 9 cents per gallon. This was done in accordance with a law that requires an automatic tax increase when the state is not meeting the revenue they need. The American Association of State Highway and Transportation Officials is broadcasting a total $37 billion deficit amongst state governments without funding assistance from Congress, though this will impact each city in a different way. The general prediction is that this will lead to projects like filling potholes and shoveling snow being completed, ignoring long-term projects designed for innovation.
Why Gas Tax Revenue Has Plummeted
As cities began to institute lockdowns, work became a remote activity, travel ceased, and school was no longer a destination, leading to empty streets around the country. March 2020 showed a 19% drop in vehicle miles traveled compared to March of 2019, via the Federal Highway Administration. This became a 40% drop in April and steadily decreased over the summer, leading to a cumulative gap of about 15%. This means that not only is less gas being bought, but tires are enduring less wear and tear, leaving the Highway Trust Fund without its two main sources of revenue.
However, the impact of COVID-19 to construction the industry and infrastructure is only highlighting problems that existed before. State representatives for Departments of Transportation say that funding challenges are not unique to 2020 but have been overcome in part by these gas taxes in the past. Now, they say an investment is needed to maintain progress. Officials are also beginning to focus more on diversification to increase revenues where they are able. For example, Oregon has been able to avoid some losses because of their heavy reliance on fees associated with trucks, who are charged based on mileage and weight.
As we reckon with COVID-19, transportation funding will need to make changes that have been looming for over a decade. The rise of electric and fuel-efficient vehicles has already impacted revenues, and many people will remain remote workers long after the pandemic. While Congress has stepped in to cover past shortfalls, it has not raised the gas tax or created laws that link it to inflation. Rather than pass a long-term reauthorization bill as expected, legislators instead passed a one-year extension to prolong the issue.
Now that these issues are being compounded by further deficits, Congress will likely look seriously at alternatives to the gas tax in the future. One common suggestion is a fee that is charged based on the number of miles driven, seen as a sort of utility fee for use of the roads. Some states are piloting programs to see if and how this could work, while others have begun considering congestion charges.
Now and once COVID-19 has passed, it remains to be seen what driving habits will look like in the future, and therefore is still not clear the best source for infrastructure funding over time.
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