Economic Challenges

Economic Challenges

In recent times, the distribution of transportation funding revenues has become a hot issue at both the state and federal levels. In the last reauthorization of the federal transportation bill, many states called for a better way to divide up the states' shares of the Highway Trust Fund - more than 60 percent of which are generated by the federal gas tax. Some states argued that their shares of federal transportation dollars should be equal to the amount of gas tax revenue they paid into the Trust Fund. Other states wanted their shares determined by need. To a large extent both groups of states prevailed in obtaining greater equity.

In Ohio, and some other states, state transportation dollars flow to localities on the basis of neither of these standards for revenue distribution. The result in Ohio is a staggered pattern of state transportation spending that is basically anti-city and even anti-suburb. In fact, funds are actually diverted away from the very places that struggle with the greatest transportation needs and pay the most in gas taxes.

Ohio's highways are controlled by the Ohio Department of Transportation (ODOT). Funding for Ohio's highways come from the federal government through the United States Department of Transportation, specifically, the Federal Highway Administration (FHWA). FHWA is given the broad responsibility of ensuring that America's roads and highways continue to be the safest and most technologically up to date. Although State and local governments own most of the nation's highways, the Federal Highway Administration provides financial and technical support to them for construction, improvements, and preservation programs on America's highway system. The FHWA has an annual budge of more than thirty-billion dollars and is funded predominantly by fuel and motor vehicle excise taxes. The budget then gets divided up between two programs. Those programs are federal aid funding for state and local governments, and federal lands Highways funding for parks, forests, Indian reservations, etc.

According to the Ohio Department of Transportation, its funding needs are far in excess of the available resources. There are three primary sources for Ohio's transportation revenue: Federal aid, fuel taxes, and bond revenue. There are, of course, limitations in these sources as well. Other states, such as Tennessee and Virginia, have supplemented these sources by increasing the fuel tax, using motor vehicle registration fees, and the use of public and private partnerships. This information begs the question of just exactly how much money does Ohio need for transportation. The answer depends on whether or not Ohio wants to expand the highway system, maintain the current system, or provide alternative forms of transportation.

In 1995, ODOT official released Access Ohio, a long-range, statewide transportation plan. This plan identified $11.2 billion in highway capacity deficiencies. (Piar, 2006). Ohio's current annual construction program is around $130 million. It would take years to improve deficiencies and make improvements to Ohio's roads on that budget. This trend in spending is putting Ohioans in an uncomfortable position. The federal government has reduced highway funding over the past three years, which puts more pressure on the state to raise fuel taxes and motor-vehicle fees.

In 1991, the Intermodal Surface Transportation Efficiency Act (ISTEA) was passed. This act was looked upon as a major breakthrough in infrastructure legislation. It restructured federal-aid highway systems and provided funding levels never seen before. It also gave states and local governments the flexibility they had desired to spend dollars where they wanted to spend them. The only problem was that federal discretionary spending caps prevent full release of this funding. In 2002, Ohio's state tax on fuel was 22 cents per gallon. The federal gas tax is 18.4 cents per gallon. This put 40.4 cents of every gallon of fuel back into the economy. Ohio does not see all of this money, however. Some portions of these monies are applied to deficit reduction and mass transit. Congress also