Moving Towards Vehicle Miles User Fees

There is a looming crisis in highway funding that has gone largely unreported: the Highway Trust Fund - which relies primarily on gas taxes to finance road and transit maintenance - is projected to incur a shortfall of $41 billion by 2015. The good news is that there is an innovative way to plug the gap, but it will require a drastic shift in policy.

It has been two years since two different federal commissions on surface transportation released reports recommending that the federal gas tax be gradually replaced with vehicle miles travel user charges. But the proposal was never seriously considered at the federal level. Instead, Congress has relied on transfers from the general fund to keep the Highway Trust Fund from going broke - an increasingly undesirable option given the nation's dire fiscal situation. With the expiration of current stop-gap funding later this year, Congress now has an opportunity put vehicle user charges back on the agenda as it prepares to reauthorize a multi-year highway and transit bill.

The problem has been building for a long time. The federal gas tax has not been raised since 1993, and since then, the costs to maintain and operate the surface transportation system have increased significantly. And because of improved vehicle fuel economy, along with the prospect of Americans driving electric cars in the future, relying on the gas tax as the primary source of transportation funding becomes increasingly unsustainable. The solution is to raise the rate, at least in the short term, but this option is a political non-starter.

In the face of these challenges, a number of states are taking the lead in exploring alternatives, including mileage-based user fees. Employing similar technology to that used for electronic tolling, drivers are charged based on the number of miles driven, rather than the amount of gasoline consumed. This option directly links the costs of using the roads to drivers; thus more accurately reflecting the user-pay concept that the gas tax was originally supposed to embody. The system has been successfully tested in Oregon and a number of other multi-state trials are underway.

Critics of the proposal argue that the use of GPS technology, as envisioned in some options, seriously infringe driver privacy. However, experts say that these fears are overblown. For example, Oregon is exploring an "open" system in a follow-up pilot program planned for this year that would avoid the use of on-board GPS-related devices. The data from the vehicle's odometer would be transmitted wirelessly so that the location of the vehicle is not disclosed. It is also possible to use cellular technology to avoid the use of GPS altogether. It will likely take several years to develop and deploy a fully functioning system but these new proposals should go a long way towards meeting public acceptance of the new system.

Other critics argue that implementing vehicle user charges would set back the adoption of smaller, more fuel-efficient vehicles. But by ensuring that users and direct beneficiaries of the transportation system take into account the true costs of driving, the overall demand for petroleum will likely go down, moving us closer towards energy independence and a cleaner environment.

Beyond the immediate revenue benefits, a vehicle user charge system would likely also spur innovation and result in job creation. Once the system moves beyond the planning and trial stages, it will require an enormous amount of investment to develop and install on-board devices on new vehicles and deploy the required supporting infrastructure, collections and enforcement systems. Given its recent focus on innovation, the administration could move this effort along by providing leadership and resources for the state trials now underway.

Both advocates and critics of vehicle miles traveled fees agree on the need to find a sustainable source of funding to maintain an efficient and reliable surface transportation system. Given the fiscal challenges facing our nation, it will require a combination of re-ordering our priorities and leveraging existing technology to meet this pressing need.

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