Biden Administration has many hurdles to leap in addressing surface transportation infrastructure

With the outcome of the election all but certain, at this point, there is now a pivot to the future, in many ways, especially on the freight transportation front.

One area in which this has a freight transportation-related policy tone is surface transportation infrastructure, which was the focus of a webcast hosted earlier this week by Washington, D.C.-based law firm Venable LLP.

Not surprisingly, the question of how to pay for future surface transportation authorizations was front and center. As we all know, the bulk of the capital for these efforts comes from the Highway Trust Fund, with current taxes levied for the HTF standing at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel, which together account for about 90 percent of HTF net revenues. These revenues are allocated for federal highway, transit, and highway safety programs. The current HTF tax levels have not been increased since 1993, nearly 30 years ago.

On the webcast, Jim Burnley, a partner at Venable and former Secretary of Transportation under the late President Ronald Reagan, said that the question of what we think of, in terms of paying for transportation infrastructure, is the HTF.

“As a result, given the program expenditures for highway and transit programs have increased,” he said. “Over the last five years, revenues have fallen short by a total of more than $140 billion, in terms of paying for existing programs, and that shortfall has been covered by transfers from general treasury accounts.”

And that, he explained, will be an issue the Biden Administration inherits, coupled with the question of what do you do if you wait to increase spending on the traditional highway and transit programs.

“If you are not going to just continue to do the greater deficit financing in this environment, there will be greater pressure for both parties not to do that without end, at least on transportation aid programs,” he said. “Obviously, you could raise the fuel tax, but the incoming administration could not be clearer about its desire to move automobiles and trucks away from petroleum-based fuels to electric vehicles.”

That, in turn, leads to what Burnley called a double-whammy, with the first part being if fuel taxes are raised, they need to be increased at a higher level than what would be viewed as politically tolerable or to the extent that we move away from gasoline- or diesel-powered vehicles if we have another rapidly-growing deficit in revenues versus expenditures for the Highway Trust Fund.

This remains a huge issue that has not been resolved, nor is it new, Burnley observed, adding that it will be central to any discussion that might occur over the next couple of years, as it relates to re-authorizing existing federal programs, which should be done, in theory, by September 30, much less adding to those programs in a way that requires additional funding by the HTF.

When asked how private sector industries can play a role in increasing needed revenues, Burnley said that the trucking industry has traditionally been very skeptical of moving away from a fuel tax-based system.

“The American Trucking Associations, for several years, has supported an increase in fuel taxes, but they are [not in favor] of a vehicle miles traveled (VMT) tax,” he said. “The very active debate that must occur to address the revenue side of the equation of surface transportation on a federal level has to be one in which the sectors that are bearing this burden for shoring these revenues are heard. But there needs to be a process that hopefully the new administration can lead and bring people to some type of consensus on. The pace at which we transition away from automobiles and trucks that are powered by petroleum products is highly relevant to the transition.”

And should automotive manufacturers go forward with that transition, he said it leads to the question of what that change looks like and what federal policies the Biden Administration will be successful in implementing and further incentivizing and encouraging that shift.

“It is a complex picture, and you have to get private interests at the table from the beginning, if you are going to have any hope of reaching a political consensus that successfully addresses the revenue side of the issue,” he said.

Addressing President-Elect Biden’s stated focus on not just shovel-ready, but also shovel-worthy, infrastructure projects, Burnley said that Biden is focused on initiatives that are going to be financed with federal aid and make sense and not just feeding troughs for lawyers, lobbyists, consultants, and engineers.

And in looking back at President Obama’s first term, he said there is likely to be some sensitivity there, as many former Obama staffers will likely be part of Biden’s team.

“Lessons were learned, and there will be a desire to make sure the projects actually do improve the infrastructure for transportation in a meaningful way,” he said. “That said, people will differ in what is meaningful and what is worthy. On the implementation side, my hope and expectation are that there will be more of an effort than there was in Obama’s first term to sort out the worthy projects from those that don’t make quite as much sense.”

Based on these comments and insights from Burnley, it is not hard to see that the Biden Administration has its work cut out for them, when it comes to facing surface transportation infrastructure issues, especially funding, head on. The time for kicking the can down the road needs to come to a long overdue end. Here is to hoping things get done so that we all can reap the benefits.