In the last edition, I reviewed impacts of the new law that reauthorizes federal surface transportation assistance enacted at the end of the year, the Fixing America’s Surface Transportation (FAST) Act. A combination of new provisions in the law, as well as relatively flat funding for the next five years, means that the funding mix will shift to cities, regions and states, and combined with these new provisions, it could mean that the power will flow that way as well.
A shift in funding shares likely
As I mentioned last time, there is a 10.8% increase in funding authorized for the current year, which then virtually freezes at this year’s level for the next four years afterward. Unless the political landscape changes somehow and the president gets his way on his proposed oil tax (or equivalent) to make the Highway Trust Fund whole, in five years, Congress must fill an even bigger funding gap than it had to close to fund the FAST Act. By some estimates, it could be more than $100 billion needed beyond expected gas tax revenues just to fund a bill at least as big as the FAST Act.
Many states and cities are already preparing for the uncertain funding at the federal level by increasing sales, property and fuel taxes on their own. It continues, perhaps even accelerates, a trend that began in the 1980s, when Reagan-era cuts prompted by local and state governments to act on their own. Today, only about 40% of all capital spending in public transportation is funded by federal sources, and with the FAST Act, the federal share is likely to drop further.
Some local ballot measures could be bellwethers in this context. Los Angeles County is planning for another ballot measure that could bring more than $100 billion to highway and public transportation over the next 30 years. Seattle is also looking to their voters for approval of a similar funding measure. These are just two of the largest that could be decided later this year; many others may follow throughout the country. Indeed, for the past quarter century, local and state voters have approved transportation measures at a rate (more than 70%) rivaled only by school and public safety measures.
New rules may accelerate trend
Beyond the funding patterns, new policies in the FAST Act may shift greater decision-making to public transportation agencies. First, the new bill allows for local hiring preferences in the same manner as the FTA’s pilot project. Second, as reported last time, tighter Buy America rules may encourage local agencies to use local money in some of their procurements. Some already do. As states and cities put up more of the money, expect this kind of behavior to grow.