Kay Bailey Hutchison and The Donor-State Dilemma

Texas Senator Kay Bailey Hutchison has introduced a bill to the U.S. Senate related to how federal gas taxes are doled back out to the states.  Specifically, her bill would allow states (or at least Texas) to opt out of the funding mechanism, such that gas taxes collected in the state, instead of being distributed by the usual formula, would all be returned to that state.  This would solve the problem of states that constantly received less money for their highways than what they collect in gas taxes–often called “donor states” since they essentially “donate” money to the road networks in other states.

This raises a couple of questions–first, whether Hutchison seriously expects this thing to pass in a Democrat-controlled Congress (never mind the Democrat-controlled White House) or whether it is just political posturing in preparation for her upcoming gubernatorial primary race against toll-road advocate Gov. Rick Perry. 

The second question is whether this is, in fact, a good idea.  It sounds like a really good idea–of course states should get back the money they send to Washington, right?

Well…we probably should ask why they don’t–in short, why we set up the current system.  The Highway Trust Fund, the repository for incoming gas taxes, was initially set up in order to build the Interstate system–that is, a national system of highways.  It was rather expected that the states with lots of area and smaller populations would not be able to cover construction costs.  It was also expected that the donor states–or at least the nation–would still benefit from the highways through the smaller states.  For example, Texans would benefit from roads in New Mexico due to trade with the West Coast, even if some Texans never traveled over them personally.

Of course in politics there’s usually a gap between the intent and the implementation.  As originally envisioned, the Interstates were supposed to provide national connectivity; in practice, where they impinged on cities, the Interstates developed into important (local) commuter routes.  Also, the role of the fund evolved from purely construction and maintenance of the Interstates to covering the larger federal highway network as well as (oddly) providing a certain amount of support for mass transit–again, a local concern.  

This leads to a reasonable question:  to what extent is the nation on the hook for local transportation needs?  Texans may benefit from a highway across Arizona, but should they pay to resolve local traffic jams in Tucson?  Should they be paying for Phoenix’s snazzy new mass transit system?  (I should note that the question of gas revenues paying for mass transit is a separate question that I may cover another time.  Meanwhile, I should also note that Arizona is in fact a donor state as well:  for a complete list of winners and losers as of FY2005, please see  http://www.heritage.org/research/smartGrowth/images/B2047_table_1-lg.gif)

So what would happen if the Hutchison bill passed?  Well, obviously:  all the donor states would opt out, leaving the recipient states dangling in the wind.  Now, this might not be quite as much of a disaster as it seems, depending on how much “pork” you assume to be in the lists of state transportation “needs.”  At the very least it would mean a great deal of prioritizing and soul-searching in the recipient states that may or may not be taking place now.

This would, of course, mean the end of the Federal Highway Administration as we know it:  power of the purse is the ultimate power in Washington.  If the taxes are just being collected and then returned intact, why should they be sent to Washington at all?  Just let the states collect them, keep them, and spend them as they see fit.  Keep a bit of FHWA going in order to set road design standards and a few other functions, perhaps, but take away the spending authority.  At least states would no longer have to send potential projects to Washington, providing sufficient support documentation, so that they can be evaluated and ranked by bureaucrats who, at the end of the day, have no way of knowing for certain whether Project A is really beter than Project B, or if its documentation has been tinkered to make it look that way.

Or is getting rid of the FHWA such a good idea?  Before we get rid of one bureaucracy, it’s good to know what we’d get in return.  The landlocked states, in particular, might think twice before they entrusted their connectivity to other states.  Do Carson City, Salt Lake City, and Phoenix really want to trust Sacramento with their access to the West Coast?  The end result might be a series of interstate compacts between, say, Oklahoma and Texas, or Oklahoma, Arkansas, and Louisiana, that address rights of passage, road design standards, and so forth.  It’s an interesting concept–but the possible permutations across 50 states (okay, make that 48) suggest it could mutate into the stuff that legal nightmares are made of. 

Would that be worth tossing the FHWA overboard for?  Perhaps not–but at least it’s nice to know that there are alternatives; that we could perhaps find a way to muddle through without bureaucracy–or at least without this one.  And it would be nice for the FHWA to know that there are, perhaps, other ways of doing transportation business.  It might start a conversation about what sorts of transportation benefits are the responsibility of the country to pay for, and which should be paid for locally.

Maybe that’s what the Hutchison bill is all about.

(Of course we already know of one other way of doing transportation business–unfortunately, it’s called “earmarks.”  More about that another time, perhaps.)

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One Response to “Kay Bailey Hutchison and The Donor-State Dilemma”

  1. dhparker Says:

    Interesting to see this story from a transportation planner’s perspective. Thanks.

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