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YOU DECIDE: Are we moving fast enough on transportation?

May 18, 2007

By Dr. Mike Walden
North Carolina Cooperative Extension Service

MEDIA CONTACT: Dr. Mike Walden, 919.515.4671 or michael_walden@ncsu.edu

Dr. Mike Walden
Media representatives: For a black-and-white or color copy of this photo, call 919.513.3127 or e-mail dave_caldwell@ncsu.edu.
My wife and I just returned from a weekend in New York City, and whew! are things fast there.

While we've visited many times before, it always takes me some time to get used to the horns constantly beeping, people pushing and shoving and traffic; yes, lots of traffic. Half the time we spent in the cab from the airport was going the final four blocks to our hotel. The energy is fast and furious in New York, but physical progress can be slow.

This got me to thinking about traffic and transportation back here in North Carolina. Certainly we don't have the traffic problems New York has - few do - but highways are definitely a bigger issue in our state than they were 30 years ago, when I first arrived. In rural areas, highways are seen as the path to economic progress. If trucks and parts and finished goods can't easily move in and out of a county, many companies won't give it a second glance.

It's the opposite problem in the fast-growing urban centers like Charlotte and the Triangle. Here growth is so rapid road construction can't keep up, and it's highways being turned into parking lots at rush hour that frustrate drivers.

What's the solution?

As with most things, money is an issue. In North Carolina, transportation funding comes from two major sources, the federal and state governments. Both collect taxes from drivers on each gallon of gas purchased. The money goes to the respective capitals (Washington and Raleigh) for allocation.

North Carolina's problem with the federal gas tax is that we don't get back all we pay. No automatic formula says each state gets back all its federal gas tax money, and North Carolina - like most Southern states - is one that traditionally has come out on the short end of the stick. In some years we've been short 15 cents on the dollar. One reason: a portion of federal gas tax funds subsidizes mass transit systems in big cities like New York and Chicago. So when my wife and I recently rode the subway in Manhattan, it was, in part, compliments of us and our fellow North Carolinians!

There's also a problem with our state gas tax, and let me warn you that it's a problem most of you won't want to hear.

That tax hasn't kept up with inflation. Just as you and I need more money each year to keep up with rising living costs, so too does the state transportation budget need more funds annually to keep pace with rising road construction and maintenance costs.

But the simple fact is, this hasn't happened. Adjusted for inflation (another way of saying, "the rising cost of living"), the state gas tax per gallon today is half of what it was in 1970. As a result, both the revenues available for spending on highways as well as the actual spending, are smaller portions of our economy today than in the past. Translated: gas tax revenues and road spending haven't kept up with our increased driving and roads use. If it makes you feel any better, this happened all over the country.

I know what some of you are asking: "How can this be, since North Carolina's gas tax is the highest in the Southeast and sixth highest in the nation? Aren't we collecting a lot more for highways than other states?"

The answer: North Carolina's gas tax rate is high, but only because most highway spending in North Carolina is by the state government. In other states, local governments spend a significant share on roads using local property tax revenues. Essentially, North Carolina's gas tax is high because we don't use property taxes to fund highways, so our property taxes are low compared to other states!

If we want more roads and less congestion, we don't have any easy options.

Getting more money is the key, so drivers will have to pay more. It can be in the form of higher gas taxes or taxes on vehicle purchases. Some have even talked about these higher taxes being localized, ensuring that the revenues are spent exactly where the money is raised.

Or more highway money can be raised privately, in the form of toll roads. A North Carolina commission is investigating toll road use to help solve our transportation issues. The logic is simple: If a driver uses a road, that driver helps pay for it.

Transportation is one of the biggest and most controversial issues facing North Carolina. One estimate puts our state's needed transportation spending over the next 25 years at $26 billion.

How much of this we pay for, and in what form, will decide how fast - or slowly - we move in the future!

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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University’s College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The Department of Communication Services provides his You Decide column every two weeks. Earlier You Decide columns are at http://www.cals.ncsu.edu/agcomm/writing/walden/decide.htm

Related audio files are at http://www.ces.ncsu.edu/depts/agcomm/writing/walden/index.html

Posted by Dave at May 18, 2007 09:26 AM