Our Funding Crisis

Why doesn’t the old system work anymore?

In Central Texas, our state’s traditional pay-as-you-go, gas-tax-funded highway system is breaking down. What went wrong? Here’s what:

• The shrinking gas tax. The state’s motor fuels tax (the “gas tax”) hasn’t been increased in 15 years. The federal portion of the tax hasn’t been increased in 10 years. Now, the state’s population growth has meant that more gas is being sold. But increasing fuel efficiency means that the amount of revenue being raised by the gas tax isn’t keeping up with the increase in driving. Nor is it keeping up with inflation. Back in 1991, when the state tax was last raised, Texas received $1.34 in revenue for every 100 miles traveled. In constant dollars, it now receives only 56 cents.


• Other demands for funds. The money that is being raised through fuel taxes isn’t all spent on transportation — one-quarter goes to schools (under the Texas constitution), and one-quarter has been directed by the Legislature to fund other agencies. State fuel taxes account for less than 20% of the Texas Dept. of Transportation’s budget. A larger share — 38% — comes from federal fuel taxes, but that funding has been cut five times just in the last 12 months. On the federal level, Texas is a “donor state” — for every dollar in federal gas tax we collect and send to D.C., we only get back between 70 and 90 cents.


• An aging road network. Many of the roads we drive on every day are between 40 and 70 years old. That’s why more than 40% of TxDOT’s budget (twice what the agency receives in state gas tax revenue) goes to maintenance. And much of the money that goes to “building” roads actually goes to rebuilding existing roads and bridges.


• Increasing construction costs. From 1997 to 2005, construction costs went up 37% — about 4% a  year. Since 2005, they’ve gone up 62% — thanks to demands on the world construction market ranging from the Chinese economic boom to Hurricanes Katrina and Rita. Given that it can take years to plan and build highways, these cost increases are a huge, huge problem.


• Other taxes are maxed out. Transit service is funded with a one-cent sales tax, but due to its increasing costs (largely operations and labor), Capital Metro expects its tax revenue to fall short of current expenses by 2011. Property taxes are used to fund city and county road projects, but these funds are also stretched to the limit throughout most of Central Texas.