Keeping up

August 27, 2007

Since 1971, Maryland has financed its road and transit projects through a self-sustaining account known as the Transportation Trust Fund. It's proved a highly successful formula. A variety of user fees including the state gas tax, vehicle titling tax, registration fees and the like have fueled billions of dollars of investment in needed infrastructure. But the system is in danger of breaking down.

The most obvious reason for this is a lack of funds. An estimated $40 billion in new transportation projects are needed to forestall gridlock, particularly in the Washington suburbs. Growth fueled by thousands of military-related jobs coming to the region in the next several years under the Pentagon's base realignment and closure plans is likely to make matters worse.

But the failure of the last two governors to raise the state's 23.5-cent fuel tax to keep pace with inflation is also a big part of the problem. Two decades ago, the tax was periodically increased on a fairly routine basis to finance projects from beltway widening to Baltimore's light rail. But rising fuel prices and increasingly partisan politics have made the possibility of a gas tax increase far from routine.

That's why Gov. Martin O'Malley and the General Assembly need to, if not raise the gas tax, agree to index it (either with consumer prices or specifically construction costs) so that revenue can at least keep up with inflation. At least 16 states have adopted some form of indexing - most commonly by applying a sales or gross receipts tax on a percentage basis instead of a fixed per-gallon fee.

Lawmakers have resisted this notion in the past, but their concerns over automatic escalations now seem overwrought. If Maryland indexes to the Consumer Price Index, the gas tax is likely to rise by about a half-cent each year. This would produce only about $45 million in new revenue annually - a fraction of the $600 million infusion advocates say the trust fund needs.

Indexing isn't the whole answer, but it's clearly part of one - particularly if it helps the state keep up with basic maintenance of bridges, tunnels and other potentially vulnerable infrastructure that could become neglected if the fund's finances worsen.

Then-Gov. Robert L. Ehrlich Jr.'s doubling of the car registration fee several years ago provided modest relief, but much of the buying power has already been eaten up by inflation. Over the past two years the State Highway Administration's cost of resurfacing asphalt roads has grown 42 percent, thanks in large part to rising petroleum costs.

Various alternatives to replenishing the trust fund - from raising the vehicle titling tax (particularly for gas guzzlers) and increasing the trust fund's share of the state tax on corporate profits, to applying the state sales tax to transportation-related transactions like car repairs - deserve serious consideration. But indexing the gas tax - arguably the fairest of all the highway user fees, because those who drive the most also pay the most - ought to be the starting point for next year's debate.

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