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Put Idle U.S. Fees to Work Before Hiking State Gas Tax

January 24, 1988|JOHN H. SULLIVAN | John Sullivan is undersecretary of the state Business, Transportation and Housing Agency. and

Your Gas Taxes at Work, states used to boast on signs at highway construction projects all around the country.

If such signs came back in vogue, conscience would require the largest of all to announce at the U.S. Treasury, Your Gas Taxes at Rest.

In a policy becoming more entrenched yearly, a penny of the nine cents in federal taxes we pay with every gallon of gas is being hoarded in a paper game played to make the federal deficit look smaller. The game goes on, despite the need for major highway work to attack traffic congestion.

Meanwhile, California and other states must plan highway budgets under conditions that could qualify a fortuneteller for stress-disability retirement.

The funding situation is particularly relevant now as the California Legislature resumes work on general obligation bonds for the June ballot. One bond proposal, unveiled by Gov. George Deukmejian last May, would raise $1 billion for state and local transportation.

At the federal level, transportation funding is scheduled four or five years at a time. Federal gas-tax money is available only for new construction and major rehabilitation. A state that wants to maximize return of its motorists' gas taxes must have long-term engineering and funding plans.

Despite the multi-year federal highway program, Congress has routinely made substantial year-by-year changes via the budget. Initially, the purpose was to use highway spending for economic pump-priming. Lately the intent has been to reduce the budget imbalance. The long-term federal transportation act passed in 1987 authorized $13.9 billion in the current federal fiscal year. But the budget enacted last month under Gramm-Rudman's shadow lets states share only $11.8 billion.

Recently retired federal highway administrator Ray Barnhart seethes over the situation, pointing out that the gas tax-supported highway program "is the one federal program that has not contributed one penny either to the $2.7-trillion national deficit or the annual budget imbalance."

Showing more money flowing into the Federal Highway Trust Fund than is going out has the fictional effect of reducing the overall federal deficit, even though federal law does not permit transportation money to be used to pay general bills and reduce the nation's debt. So the effect is simply a swelling trust-fund balance--$10 billion at the end of 1987. California's share is at least half a billion dollars.

This artificial drought of federal highway money has increased competition among states to wring extra dollars out of the complex program. California has done exceptionally well, bringing in an extra $250 million over the past two years.

While states continue vying for pieces of a smaller federal pie, a larger issue looms: What will happen to federal gas-tax dollars no longer needed when interstate highway construction wraps up in the early 1990s?

For many states, a "turn back" policy makes the most sense. Washington could relinquish the cents-per-gallon no longer needed for federal interstate construction and let states add a like amount to their own gas tax. States get a shot of transportation revenue without federal strings or overhead, and taxpayers feel no difference.

But some forces in Congress are not content to use the gas tax for paper budget-balancing. They want the money for real, to spend outside transportation on whatever they choose. Others, while defending the Highway Trust Fund, do not want to lose the chance to pick projects for their districts.

Meanwhile, the California Transportation Commission has just completed its annual task of predicting how much federal and state highway money will be available over the next five years. Funding uncertainty forced the commission to stand pat, to add no major projects to its formal planning list.

But on the next cycle, the commission should be able to make a more solid, optimistic funding estimate. By then, voters will have had time to act on the Paul Gann-sponsored initiative to shift the sales tax on gasoline to transportation. And they will have had the opportunity to approve general obligation bonds proposed by Gov. Deukmejian as part of a transportation plan that stresses stepped-up "traffic management" along with increased funding.

Bonds are turning out to be the right tool for a time of uncertainty. They can be an invaluable load-leveler, smoothing out fluctuations in gas-tax revenue, whether caused by Washington or the world economy. They will boost California's transportation program and give it an essential margin of stability while the future of the federal gas tax is worked out.

There is no question, however, that the quasi-user fee, "pay-as-you-go" fuel tax will continue to anchor transportation finance. But, cries to solve the current problem with a state gas-tax hike are fading. It would be disappointing, at best, to increase a tax and soon discover that, depending on external events, it is raising either too much or too little money. And it would be outrageous to argue for higher gas taxes when much of the tax collected now is sitting unused in Washington.

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