Executive Briefings

Transport Funding 1: A Cliffhanger Ending for 2012?

The whole "fiscal cliff" mess, even if averted for the moment, promises to have a huge, long-term impact on nearly every aspect of American life. Transportation, as it so often does, will likely take its place far down the list of lawmakers' priorities. At least until crumbling highways, collapsed bridges and inadequate roads bring key portions of the national infrastructure to a standstill.

That scenario has long been a concern of the National Industrial Transportation League, whose leaders must deal with the fact that their industry is a poor step-sister to other, more powerful constituencies on Capitol Hill. Every few years the state of commercial transportation funding becomes so dire that we patch together some kind of solution, only to ignore the sector's needs until the money runs out. (And sometimes not even then - the previous funding bill, known as SAFETY-LU, was extended nine times because legislators and the President couldn't agree on the details of a new measure.)

We were given reason for hope by the enactment in July of a new funding measure called MAP-21, which authorized $109bn in surface transportation projects for fiscal 2013 and 2014. But the law neglected to specify how all of that work would be paid for. It fell nearly $50bn short of the amount needed to shore up and improve the existing system over that time. (And that's far from all the money that's needed. A report by the Urban Land Institute puts the total cost of addressing U.S. infrastructure requirements at $2tr.)

"The Highway Trust Fund in its current status is dead on arrival," said NITL president and chief executive officer Bruce Carlton, at a press conference at the group's recent annual meeting in Anaheim, Calif. "There's not enough money to do the job."

Now we're perched at the edge of that congressionally created fiscal cliff, and transportation is just one of the areas threatened by legislators who are hell-bent on cutting government spending, regardless of the impact their actions might have. Fortunately, ideology might at last be giving way to pragmatism, but the process is going to be agonizingly slow.

"I don't think that anything is going to be resolved on line-item budget matters until we have broad agreement on a framework that levels out the big problem," said Carlton. He expressed hope that lawmakers have finally realized "that the adults have to be in the room, negotiating, arguing like crazy." The prospect of failure, he said, "is so intimidating at the top level of government that the motivation is there to find a fix."

The most obvious mechanism for funding transportation improvements is, of course the federal gas tax, which just about everyone other than certain fading lobbyists agrees is too low. By how much is the big question; the amount has stood at 18.4 cents per gallon since 1993. NITL executive vice president Peter Gatti said there's support for a tax in the 30- to 40-cent range, with adjustments going forward for inflation.

That's a big jump, but where else is the money going to come from? "The gas tax is probably the single most efficient taxing system that we have," said Carlton. Only one caveat: all of the money from an increased fuel tax must go directly to transportation projects, and not disappear into the general treasury. Unfortunately, given the track record of past so-called trust funds, that setup is by no means assured.

The budget crisis impacts more than the state of roads and bridges. Matt Ehringer, assistant vice president of corporate transportation with NCH Corp., described a "domino effect" that would topple all sorts of transportation-related activities, including regulatory agencies such as U.S. Customs and Border Protection and the Federal Aviation Administration. The latter has some 45,000 employees worldwide, who are essential to maintaining safety in the air. Then there are the contracted personnel who oversee imports, exports and homeland security. "It's going to have a serious impact on the supply chain for everyone," said Ehringer. "I don't think there's anything good that could come from it."

Even with the money in place, painful decisions about the allocation of limited funds will have to be made. In particular, we'll see a revival of the traditional battles between freight and passenger transportation interests, and highway and public transit. "There's always going to be a tension," said Carlton. "It's part of the political fabric."

Even so, he believes there will be a greater focus on automobiles, with power over spending being delegated back to the states. That's not necessarily a bad thing, but it could conflict with MAP 21's goal of crafting a national freight transportation policy, covering some 27,000 miles of roads. To the people-versus-truck debate, add the prospect of states tussling with the federal government over what constitutes a critical route, deserving of money from the Highway Trust Fund.

What else is on NITL's mind these days? Plenty. Carlton foresees a multi-year legal tie-up of the Federal Motor Carrier Safety Administration's new Hours-of-Service regulations. Industry critics say FMCSA has gone too far in curbing the number of hours within a 24-hour period that a truck driver can be at the wheel, to the point of degrading productivity. All shippers will pay for a rule that won't have that much greater an impact on highway safety, they say. "The current rules work," said Carlton. "They don't need changing." Barring a successful challenge by NITL, the American Trucking Association and other industry interests, the more stringent rules would take effect on July 1, 2013.

Shipper and carrier interests also have to be deeply concerned about labor tensions simmering at ports on both coasts. The International Longshoremen's Association remains locked in negotiations with East and Gulf Coast terminal operators over a new contract, raising the possibility of a coastwide strike in 2013, while clerks represented by the International Longshore and Warehouse Union caused an eight-day shutdown of the ports of Los Angeles and Long Beach earlier this month. Labor strife has also been felt recently at the Port of Portland, Ore.

Topic A for transportation, however, will continue to be the question of funding for infrastructure, and whether transportation gets its well-deserved piece of the pie. Carlton is hopeful that the post-election environment will result in a more rational mood in Washington over the coming weeks. "We're going to have some huge battles," he said, "but the price for not drilling down hard, with a laser-beam focus, is just too great. We'll find a way."

Next: Is the gas tax really the best way to fund transportation improvements?

Comment on This Article


Keywords: supply chain, international trade, global logistics, transportation management, logistics management, surface transportation bill, transportation funding, MAP-21, fuel tax, transportation regulation Highway Trust Fund

That scenario has long been a concern of the National Industrial Transportation League, whose leaders must deal with the fact that their industry is a poor step-sister to other, more powerful constituencies on Capitol Hill. Every few years the state of commercial transportation funding becomes so dire that we patch together some kind of solution, only to ignore the sector's needs until the money runs out. (And sometimes not even then - the previous funding bill, known as SAFETY-LU, was extended nine times because legislators and the President couldn't agree on the details of a new measure.)

We were given reason for hope by the enactment in July of a new funding measure called MAP-21, which authorized $109bn in surface transportation projects for fiscal 2013 and 2014. But the law neglected to specify how all of that work would be paid for. It fell nearly $50bn short of the amount needed to shore up and improve the existing system over that time. (And that's far from all the money that's needed. A report by the Urban Land Institute puts the total cost of addressing U.S. infrastructure requirements at $2tr.)

"The Highway Trust Fund in its current status is dead on arrival," said NITL president and chief executive officer Bruce Carlton, at a press conference at the group's recent annual meeting in Anaheim, Calif. "There's not enough money to do the job."

Now we're perched at the edge of that congressionally created fiscal cliff, and transportation is just one of the areas threatened by legislators who are hell-bent on cutting government spending, regardless of the impact their actions might have. Fortunately, ideology might at last be giving way to pragmatism, but the process is going to be agonizingly slow.

"I don't think that anything is going to be resolved on line-item budget matters until we have broad agreement on a framework that levels out the big problem," said Carlton. He expressed hope that lawmakers have finally realized "that the adults have to be in the room, negotiating, arguing like crazy." The prospect of failure, he said, "is so intimidating at the top level of government that the motivation is there to find a fix."

The most obvious mechanism for funding transportation improvements is, of course the federal gas tax, which just about everyone other than certain fading lobbyists agrees is too low. By how much is the big question; the amount has stood at 18.4 cents per gallon since 1993. NITL executive vice president Peter Gatti said there's support for a tax in the 30- to 40-cent range, with adjustments going forward for inflation.

That's a big jump, but where else is the money going to come from? "The gas tax is probably the single most efficient taxing system that we have," said Carlton. Only one caveat: all of the money from an increased fuel tax must go directly to transportation projects, and not disappear into the general treasury. Unfortunately, given the track record of past so-called trust funds, that setup is by no means assured.

The budget crisis impacts more than the state of roads and bridges. Matt Ehringer, assistant vice president of corporate transportation with NCH Corp., described a "domino effect" that would topple all sorts of transportation-related activities, including regulatory agencies such as U.S. Customs and Border Protection and the Federal Aviation Administration. The latter has some 45,000 employees worldwide, who are essential to maintaining safety in the air. Then there are the contracted personnel who oversee imports, exports and homeland security. "It's going to have a serious impact on the supply chain for everyone," said Ehringer. "I don't think there's anything good that could come from it."

Even with the money in place, painful decisions about the allocation of limited funds will have to be made. In particular, we'll see a revival of the traditional battles between freight and passenger transportation interests, and highway and public transit. "There's always going to be a tension," said Carlton. "It's part of the political fabric."

Even so, he believes there will be a greater focus on automobiles, with power over spending being delegated back to the states. That's not necessarily a bad thing, but it could conflict with MAP 21's goal of crafting a national freight transportation policy, covering some 27,000 miles of roads. To the people-versus-truck debate, add the prospect of states tussling with the federal government over what constitutes a critical route, deserving of money from the Highway Trust Fund.

What else is on NITL's mind these days? Plenty. Carlton foresees a multi-year legal tie-up of the Federal Motor Carrier Safety Administration's new Hours-of-Service regulations. Industry critics say FMCSA has gone too far in curbing the number of hours within a 24-hour period that a truck driver can be at the wheel, to the point of degrading productivity. All shippers will pay for a rule that won't have that much greater an impact on highway safety, they say. "The current rules work," said Carlton. "They don't need changing." Barring a successful challenge by NITL, the American Trucking Association and other industry interests, the more stringent rules would take effect on July 1, 2013.

Shipper and carrier interests also have to be deeply concerned about labor tensions simmering at ports on both coasts. The International Longshoremen's Association remains locked in negotiations with East and Gulf Coast terminal operators over a new contract, raising the possibility of a coastwide strike in 2013, while clerks represented by the International Longshore and Warehouse Union caused an eight-day shutdown of the ports of Los Angeles and Long Beach earlier this month. Labor strife has also been felt recently at the Port of Portland, Ore.

Topic A for transportation, however, will continue to be the question of funding for infrastructure, and whether transportation gets its well-deserved piece of the pie. Carlton is hopeful that the post-election environment will result in a more rational mood in Washington over the coming weeks. "We're going to have some huge battles," he said, "but the price for not drilling down hard, with a laser-beam focus, is just too great. We'll find a way."

Next: Is the gas tax really the best way to fund transportation improvements?

Comment on This Article


Keywords: supply chain, international trade, global logistics, transportation management, logistics management, surface transportation bill, transportation funding, MAP-21, fuel tax, transportation regulation Highway Trust Fund