Going their separate ways

ENERGY has been an economic bonanza for Texas in recent years, and a financial headache for its transport planners. The state recently forecast that maintaining the roads and bridges that serve its oil- and gasfields and wind farms, along with the rest of the state’s vast network of highways, would outstrip dedicated transport revenues by $5 billion a year.

Relief, however, is on its way. On November 4th Texan voters agreed to steer $1.7 billion of oil- and gas-production taxes towards the highway fund. By the middle of December the state hopes to start doling out the money to local governments for highway expansions, repairs and other much-needed projects.

Texas was not alone. On the same day voters approved 63 out of 94 state and local ballot initiatives providing nearly $15 billion for various transport projects, matching the high approval rates in previous years, according to the American Road & Transportation Builders Association, a trade group. Americans may be divided on the wisdom of government spending, but the tangible appeal of better roads and transport crosses party lines. On the same day that Texas voted for more spending, voters in Maryland and Wisconsin passed constitutional amendments to stop politicians raiding highway funds for other purposes—as they regularly do.

State and local initiatives are becoming increasingly important because federal spending on transport is hamstrung. Of the $142 billion that government spent on roads in 2012, the last year for which data are available, the federal government contributed 28%, almost all of it from the highway trust fund. That fund is financed principally by a petrol tax that has not risen since 1993. Petrol-tax revenue peaked in 2006, and has since declined because cars are more fuel-efficient and younger people are driving less. That has left a gap between federal highway commitments and the money available. Since Congress dare not incur drivers’ wrath by raising the petrol tax, it scrounges money from elsewhere to fill the gap. The latest deviousness came in July, when an accounting gimmick was used to cover a $10.8 billion shortfall and keep the fund going until May.

The gap will only grow in coming years, reaching $120 billion by 2024, according to the Congressional Budget Office. That guarantees a near-permanent cloud of uncertainty over whether federal financing will flow.

States have several ways of financing infrastructure. Publicly-approved bond issues and partnerships with private consortia can support upfront capital outlays. Public funds and bonds plus private bonds and equity are financing a major bridge-and-road project between Indiana and Kentucky (pictured). The public still pays, through tolls, taxes or fees. In the past three years six states have raised fuel taxes, two have introduced wholesale taxes and four have brought in, or considered bringing in, a dedicated sales tax for transport, according to Ken Orski, who writes a newsletter advocating more infrastructure.

Local governments have done the same. In 2010 Clayton County, a suburb of Atlanta which includes its airport, eliminated its entire public-transport system to cope with a budget crisis. On election day this year its voters agreed to a one-cent sales-tax increase to restore it. On the other side of the country voters in Alameda County, California approved a half-cent increase in the sales tax to finance transport improvements.

Voters may be happier paying their state and local governments for transport because they see the benefits directly. This has prompted some to suggest that the federal government should get out of the business altogether. That, however, runs into two problems. One, notes Adie Tomer of the Brookings Institution, a think-tank, is that federal funding makes interstate highways a priority, as the backbone of cross-country trade; states, left to their own devices, might not. The other drawback is that states may not relish taking on the whole transport burden, since they too often face resistance to taxes. In 2013 Massachusetts indexed its petrol tax to inflation; this year, voters repealed that. One reason that Texas tapped oil and gas producers for road money is that legislators dare not raise the state petrol tax, frozen since 1991, or the vehicle-registration fee, largely unchanged since 1987.