Ending the Federal Financing of State Highways

The passage of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users raises several important questions about highway financing. This paper discusses ether there are better ways to finance and provide highways and examines what the role of the federal government should be in highway financing. In the current system, the federal government uses revenue from the Highway Trust Fund to reimburse state governments for the federal share of expenditures previously made by the states. The author concludes that this system shows a lack of accountability both the members of Congress and states, enables low-priority projects to be financed, and discourages innovation and flexibility. These problems could be reduced by applying market pricing and investment principles to roads. Reform should start with the phasing out of federal financing of state roads. This would give states full financial responsibility for their roads, allowing them to introduce charges they consider appropriate. The paper concludes by suggesting strategies for overcoming opposition to this reform.