Pennsylvania knows it has a transportation funding problem and proposed legislation could help address those challenges.

In Pennsylvania, transportation facilities have long served as a key component of economic strength. However, the state’s infrastructure is aging significantly due to decades of underinvestment. Roughly half the state’s transportation funding goes to road reconstruction and pavement-related needs. Other major areas of need include bridges, capacity increases, traffic signals, and alternative transit needs (e.g., regional railroad and Amtrak). However, serious funding challenges have arisen in part because fuel tax revenues have dropped as drivers acquire vehicles with better fuel efficiency and reduce their driving time because of the economic downturn.

While infrastructure issues affect state residents, they also have a detrimental effect on companies in industries such as engineering and construction that derive a significant percentage of their business from government infrastructure projects. Fewer projects have translated into lower revenue for many firms, leading to layoffs and liquidation.

Last year, Gov. Tom Corbett established the Governor’s Transportation Funding Advisory Commission to address these issues. In August 2011, the commission issued a report quantifying Pennsylvania’s unfunded transportation needs at approximately $3.5 billion. This amount is expected to grow to $7.2 billion in 10 years if no action is taken.

On Jan. 4, lawmakers introduced a set of transportation funding proposals that mirrors the recommendations of the commission’s, including ending the tax cap for wholesale fuel prices and allocating additional money from the Pennsylvania Turnpike to mass transit.

While we wait to learn what will result from the commission’s work and the proposed legislation, let’s take a deeper look at how we got where we are today.

Where does the state get its funding for transportation projects?

Currently, there is a 32.5-cent per-gallon state tax on gasoline. Most of this tax has not changed since 1987. However, the decline of overall vehicle mileage in Pennsylvania for the first time in recent history combined with improvements in vehicle gas efficiency and the increase in electric vehicles have led to a decrease in the overall tax revenue. This decrease is expected to grow more quickly as the federal government continues to require more efficient cars and promotes alternative fuels.

State law provides that toll proceeds from the Pennsylvania Turnpike be designated for statewide use. Turnpike contributions grew to $900 million in state fiscal year 2009-10, with $500 million going to highways and $400 million for public transit. The law contemplated the tolling of Interstate 80, but that was rejected by the federal government in April 2010.

Most federal funding for state highways and transit originates from the federal Highway Trust Fund (HTF), which counts the federal 18.4-cent per-gallon tax on gasoline and the 24.4-cent per-gallon tax on diesel fuel among its major contributors. These user fees have not increased since 1993 and have not kept pace with inflation and efficiencies in fuel economy.

Other sources of funding include liquid fuels taxes, licenses and fees, sales tax, lottery proceeds, general fund monies, and other more minor sources.

Why is there a problem?

As noted, one of the biggest issues has been inflation. The Bid Price Index, which measures construction contract costs, shows a more than 80 percent increase since 2003. During this time, the two major sources of revenue – federal and state gas taxes – have decreased in real dollars because neither has any inflation protection. Pennsylvania has 22,176 bridges and the fifth largest state highway system in the country, which adds up to a tremendous need for maintenance. Additionally, the maintenance on roads and infrastructure is much greater than states that don’t experience the effects of freezing and thawing on the asphalt surfaces.

Pennsylvania benefitted from the infusion of approximately $1 billion from the American Recovery and Reinvestment Act, which delayed this issue for at least two years, because many essential 2010 and 2011 projects were able to be completed with this “found” money.

In addition, the Motor License Fund – a special state revenue fund created from motor fuels taxes, vehicle registration fees, operator’s license fees, and other miscellaneous fees – has experienced actual revenue consistently short of projections.

How do transportation projects get prioritized?

Historically, maintenance has always been the number one priority of transportation funding and any remaining money was used for improvements. For the four years through June 2012, it is estimated that $3.47 billion will be spent for transportation improvements. Estimates for fiscal 2012-16 are $1.63 billion.

What is the solution?

While there is no perfect solution, most can agree that the longer the state waits to change the funding system and delays the maintenance projects and improvements, the bigger the problem will become. Often, in the quest to determine the perfect solution, government and businesses can become paralyzed to change. It would seem more beneficial to pass some funding legislation quickly than to see no action at all. Modifying or adding to existing legislation is always an option as opportunities for improvement are identified.

Cost savings and additional revenue streams should be part of the answer. Additionally, public-private partnerships can play a key role in providing some funding and cost savings for these projects. Many cities have experienced cost savings in excess of 20 percent when public-private partnerships are used.

While there is sure to be no shortage of debate amongst lawmakers about the future of the state’s transportation infrastructure, everyone seems to agree that the time for action is now.

The full report issued by the Transportation Funding Advisory Commission can be found at


David E. Shaffer can be reached at Email or 215.441.4600.