The Crisis in State Highway Finances: Its Roots, Current Effects, and Some Possible Remedies

This paper focuses on the American states and the sources of the expanding structural imbalance between their highway-related revenues on the one hand and expenditures for transportation infrastructure needs on the other. The paper describes the roots of the funding problem over recent decades, looks at some of the responses taken at the state and federal level, and discusses their inherent limitations as solutions to this funding crisis. The paper also presents several policy recommendations for increasing revenues. We demonstrate that a variable rate gas tax indexed to the construction cost index and improvements in automobile fuel efficiency and a tax on large commercial trucks based on equivalent standard axle loads (an esal-mile tax) would more effectively fund the state highway system and reduce the need for more spending on maintenance and new facilities.