Transit Funding Faces Uncertain Future

Transportation stakeholders say that House bill would make long-term transit investments a challenge.
by | February 8, 2012

Transit advocates are continuing their campaign against a provision in the House’s surface transportation authorization that would make the biggest change in nearly 30 years to how the country funds buses and subways.

As Governing reported last week, the House Ways & Means Committee surprised the transportation community with an addition to the House's five-year, $260 billion surface transportation bill that would undo a system signed into law by Ronald Reagan that sets aside a portion of the gas tax for transit.

About 2.86 cents of the 18.3 cent gasoline tax goes into the Highway Trust Fund’s transit account. The Ways & Means Committee has advanced a plan to give transit account a one-time, $40 billion allocation and prevent future fuel taxes from going into that account.

Transportation advocates say doing that would remove a stable, dependable funding stream for transit that they count on. Instead, after the authorization ends in 2016, the transit account would be subject to whatever general funds future legislators choose to allocate.

That would be problematic, says American Public Transportation Association President and CEO Michael Melaniphy, because it would inject uncertainty and unpredictability into the planning process for transit agencies across the country.

“[G]etting rid of the transit trust fund is not helpful to agencies like ours that do long-range planning, who live within their means, who focus on making sure we’re on schedule and on budget,” said Gary Thomas, head of Dallas Area Rapid Transit, during a conference call with reporters Wednesday. “We can’t do that… without knowing with certainty that the money’s going to be there in the future.” 

A broad group of stakeholders – including groups that aren’t typically known for transit cheerleading, including the U.S. Chamber of Commerce and the American Association of State Highway and Transportation Officials -- have joined the transit community in blasting that plan.

“The business community has grave concerns about this,” said Janet Kavinoky, who leads the Chamber's transportation efforts, during the call. Business owners have a vested interest in transit since they want their employees to have a reliable way to get to work. Developers also have an interest in seeing transit projects go forward.

William Anker, a former secretary of Louisiana's transportation department, says if the House's changes become reality, ratings agencies may downgrade the credit ratings of jurisdictions involved with transit, given the heightened risk that comes with a less dependable funding stream. That would increase their cost of borrowing.

He says the change could also affect the outlook for public-private partnerships in the transit field, since the private-sector would likely want to see governments take on a greater share of the financial risk, given the unpredictability of funding.

Transit advocates note that other components of the transportation system – airports, harbors, highways and inland waterways – have their own trust fund and say the change would essentially put public transportation in a separate class. Anker said there hasn’t been a major effort to change the status quo since transit was initially given a portion of the gas tax in 1983.

Conservative groups like the Heritage Foundation have argued that as the country faces serious fiscal challenges, and the balances of the Highway Trust Fund continue to decline, Congress should learn to live within its means and pull back on wasteful programs (which includes transit in that category).

The committee has characterized the move as a way to preserve funding for the transit account, which is expected to no longer be able to meet its obligations in a timely manner at some point during the 2014 fiscal year, according to the Congressional Budget Office.

Under the status quo only about $25 billion from current excise taxes would be available to the transit account, compared to the $40 billion transfer the committee is pushing, a committee spokesperson said. The upfront transfer would keep the account solvent will providing Congress and stakeholders time to explore future funding options.

The Senate transportation bill lacks the controversial change.

Both chambers are expected to start voting on their respective transportation authorizations in the coming days. But the real challenge will be whether the many differences between the bills -- transit funding is just one of them -- can be sorted out by a conference committee. Some transportation experts believe that in an election year, that task will be nearly impossible.

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