November 28, 2006

Tomorrow is Another Day

Tennessee Gov. Phil Bredesen has no plans to raise the state's gas tax "at this time," a spokesperson says.

He couldn't anyway - the legislature isn't in session. But with TDOT proclaiming it needs an extra $2 billion over the next decade to keep up with the state's needs for new roads, some lawmakers are discussing a variety of options including toll roads, or raising the gas tax - currently 21.4 cents per gallon, of which TDOT gets 13 cents.

But they aren't discussing altering the state's policy of paying all cash for roads, even though it is that policy that is preventing TDOT from keeping pace with Tennessee's growing road needs with the existing gas tax.

Tennessee's gasoline tax of 21.4 cents per gallon brings in about $608 million in revenue per year. TDOT gets about 13 cents per gallon of that revenue, or about $365 million. Based on that funding split, Tennessee's gas tax would need to be raised by 12 cents per gallon to give TDOT the extra $200 million a year it is seeking.

There's no sign the Bredesen administration is considering financing new road construction with government bonds, but it should. - bond-financed roads are a sensible alternative to sticking with the state's pay-as-you-go policy for road construction. Here's why:

The roads we build now will be used by us, but also will be driven on years from now by people who haven't yet been born, or yet moved to the state. Financing roads with 30-year government bonds allows the state to spread the cost of paying for the roads to all of the drivers who will use them over the next thirty years - while the state repays the bonds with inflation-devalued dollars. Pay-as-you-use, rather than pay-as-you-build is a more equitable fiscal policy because it shares the costs via debt service payments with both current and future road users.

It also allows the state to keep current with road construction needs - $100 million finances a lot more miles of bond-financed roads than the same $100 million will build when you're paying cash.

Pay-as-we-go is good fiscal policy for road maintenance - a current expense for current needs. But pay-as-we-go is bad fiscal policy for road construction because it puts all of the burden on today's drivers for roads that will be used for decades by many, many drivers who didn't help pay for them. Pay-as-you-go also means that some road projects will be delayed - and when we finally do build them, the cost for construction (labor, materials and right-of-way acquistion) all will be higher.

If the Bredesen administration really doesn't plan to raise the gas tax, and it won't use bonds, then it is condemning Tennessee to ever-increasing road congestion.