Developing a State Free Market Transportation Policy

In my last post we examined how to create a local free-market transportation policy. This posting will examine how to create a similar policy on the state level where Republicans will control 32 governorships in 2015, almost 2/3 of the U.S. total. Most states lack a comprehensive transportation vision. Many depend on Washington D.C. for more than 50% of their funds. Yet with federal budget challenges, most policy makers expect federal funding to decrease. As a result, states need to create a transportation vision and ensure that they have the budget to implement such a vision.

States should focus on funding statewide assets. What is a statewide asset? Generally, it is a transportation asset that serves intrastate movement. Most national systems which transport people throughout the country transport people throughout the state and qualify as state assets. These systems include Interstate highways and other major roads that are part of the National Highway System, class one railroads and certain aviation routes. Railroads typically are self-funded so states can merely need to coordinate freight needs with the railroads. Intrastate passenger rail services should also receive some state-level funding assuming the corridors are commercially viable. Statewide and regional transit systems also merit some funding, although the majority of funding should come from the regional, county or city level. While it may be popular to fund non-motorized transport, bicycling and walking are primarily local activities that should be funded at the regional, county or local level.

How should states fund such a system? Similar to at the federal level, the most economically efficient method is a user-pay/user-benefit system. For highways this means transitioning from a partial user-pay/user-benefit gas tax system (some of the money gets diverted to other uses) to a complete user-pay/user-benefit mileage based user fee system (MBUF). An MBUF is the best option because it could be set up to include no revenue diversions. Further, it allows states to vary rates based on type of road and level of congestion to provide a more advanced system. Oregon allows its drivers to choose from one of three models. The most advanced option monitors driving habits and charges rates based on the type of road and the time of day. But for those wary of government intrusion Oregon also offers the option of an annual fee with neither destination nor time-of-day monitoring for motorist travel. Oregon also refunds gas tax revenue so motorists are not paying twice.


Comments are closed.