Episode 7. Ante Up. Are all road users paying their fair share?

Bernie Fette (host) (00:16):

Welcome to Thinking Transportation, a podcast about how we get ourselves and our stuff from one place to another, and what it takes to make that happen. I’m your host, Bernie Fette with the Texas A&M Transportation Institute.

Bernie Fette (00:31):

You might have noticed all the electric cars on the roadways lately. Each one takes up an amount of space on the roadway that’s more or less equal to the space that’s needed by a gas-burning vehicle. But what they don’t share equally is how much they pay for using that space. Our transportation infrastructure is funded mostly by the tax on gasoline and diesel that power what most of us drive. Since electric vehicles don’t run on gasoline, they don’t pay that tax at the fuel pump. The gas tax hasn’t been raised in about 30 years, though roadway construction and maintenance costs have increased almost every year due to inflation. What’s all that add up to? The gas tax pays for a lot less than it used to because there’s less of it to go around, now that fewer vehicles on the road need gas to run. And that’s only part of the challenge, as we’re about to hear from Brianne Glover. Brianne is an associate research scientist at TTI, and she’s an expert on infrastructure investment. Thank you for being here, Brianne.

Brianne Glover (guest) (01:39):

Happy to be here. Thanks for having me.

Bernie Fette (01:41):

So just in the last few years, if you want to talk about infrastructure investment, you really have to talk about what kinds of vehicles are using that infrastructure. And that seems to be more true now than it was 10 years ago or even five years ago. Is that fair to say?

Brianne Glover (01:59):

So you mean what type of vehicles are using it as far as like electric or trucks?

Bernie Fette (02:05):

Yes, that mix, over the years, certainly seems to have changed, and along with it changed how the conversation goes.

Brianne Glover (02:13):

I think it kind of goes in cycles, because I can remember probably close to a decade ago, the same kind of topic came up where it was our trucks doing damage to the road. Are they paying for their fair share? What would their fair share be? And it never really got any traction, and it kind of, you know, disappeared as we came up with other types of funding streams to talk about. We diversified the toolbox a little bit. And then it’s recently, it seems to have reemerged as a topic, you know, looking at what, do we have too many heavy trucks on the road? Are they paying enough? That sort of thing.

Bernie Fette (02:47):

And that has reemerged at roughly the same time that we’re seeing a lot more electric vehicles out on the roads, right?

Brianne Glover (02:54):

That’s true. Yes.

Bernie Fette (02:55):

Can you paint a picture for us of what the mix of vehicles on the road right now looks like and how that’s changed recently and how it might change more in the next 10, 20 years?

Brianne Glover (03:07):

Yeah. So in Texas, there’s a little more than 25 million vehicles on the road. About 85 percent of those are what we call light duty, and that is your passenger vehicles, your light-duty trucks, you know, that you’re commuting with every day on the road. And of these light-duty vehicles, about 1.5 percent of those are what we are calling alternative fuel vehicles. That’s your electric vehicles, your hybrid vehicles, which kind of have the bigger slice of that pie. And then a very small category of other, which is like your natural gas- and your propane-powered vehicles. And so we get that question a lot, you know, what’s the future going to look like for electric vehicles? So we’ve worked with some of our TTI colleagues that do energy and emissions research, and we created a forecast to see what these numbers might look like in the future. They came up with a bunch of different scenarios that looked at different growth rates, you know, some slower, some faster than others and different saturation rates. What’s the market going to look like? You know, are people buying more of them or less at different times and kind of one of the middle scenarios — that’s kind of the one I’m defaulting to — showed that these alternative fuel vehicles are growing a little more than 20 percent annually over the next 10 years. So between now and 2030, and that’s a pretty healthy growth rate, 20 percent.

Bernie Fette (04:23):

That sounds like a lot.

Brianne Glover (04:24):

Yeah. And then it kind of shows it plateauing a little, or slowing to that growth to like about 10 percent between 2030 and 2050. So it kind of reaches a saturation point and then slows the growth a little bit. So that 1.5 percent that we have right now, that seems pretty low, but that’s looking to change pretty rapidly. One of the scenarios shows that alternative fuel vehicles could be 70 percent of all the registered vehicles by 2050.

Bernie Fette (04:53):

And that can create — under the current way that roads and bridges are funded — that can create an imbalance, right?

Brianne Glover (05:01):

It can, yeah. So when we have, we’ve looked at so about 60 or 65 percent of transportation revenue in Texas is what we consider funded by traditional revenue sources. That’s your, you know, your fuel tax and your vehicle registration fees. So fuel tax, both at the state and federal level is a really big chunk of our revenue.

Bernie Fette (05:21):

And how long has it been that way?

Brianne Glover (05:23):

It’s actually shrunk a little; the slice of the pie because we’ve brought in a lot of other different types of revenue sources. That whole diversifying-the-toolbox sort of thing, again, comes in. But it’s still a pretty big chunk of the pie. And so if we have all these, these vehicles are growing that are not purchasing gas and, you know, paying that fuel tax, then that’s less revenue for the highway fund.

Bernie Fette (05:47):

But what we’re talking about really is, it’s not just about electric cars as you, I think, were beginning to explain, those cars and that much greater mix of vehicles with alternative fuel vehicles making up a potentially much greater share of what’s on the road in the future, is just exposing how a system that worked well for a long time might not be working as well right now. And if I understand right, that creates what people in the economics business call a structural deficit. So can you kind of explain that for us, what that means and what it does, for all of us non-economists?

Brianne Glover (06:24):

Yeah. So the issue with the fuel tax is kind of two-fold. First, the motor fuel tax, you’re taxing it by the gallon. So it has nothing to do with changing fuel prices, which a lot of people don’t realize. So the state tax is 20 cents per gallon. Um, 20 cents, whether gas costs $2 a gallon or $4 a gallon, it’s 20 cents per gallon. And then that 20 cents is further sliced and diced where transportation only gets 75 percent of that. And 25 percent goes to education. So this tax, you know, you mentioned earlier was a long time ago. It was set in 1991. It’s been this way for a long time in Texas and the federal gas tax, which is 18.4 cents per gallon, that was set in 1993. So these taxes have remained unchanged for like 30 years, but the cost of things has changed a whole lot in those 30 years. The price to buy a house, a car; you go to the grocery store and you buy a gallon of milk or a loaf of bread. All of those costs have gone up a lot in 30 years. And then the cost of construction has gone up as well. So in 1991, 20 cents of gas tax revenue would buy you 20 cents of construction, but now — or let’s just use 2019 — 20 cents will buy you, like, 5 cents of construction. So inflation is a pretty big problem with the gas tax revenue stream.

Bernie Fette (07:44):

Taking a very big bite out of it.

Brianne Glover (07:46):

It has, yes. Because it’s time, it’s basically time. 30 years. The other issue aside from inflation is that cars have gotten more fuel efficient over the last 30 years. I’ve purchased a lot of vehicles in the last 20 years that I’ve been driving and each one of them has become more fuel efficient. And so with each car that I purchase, I’m driving further on a tank of gas, which means I’m buying less fuel at the pump, which means I’m paying less revenue into the gas tax, the motor fuels tax revenue. And so one of the things in the past, that’s kind of helped balance that out is that Texas is a growing population. And so we keep adding drivers to the road. And so that’s more people that are buying fuel and that’s kind of helped balance out that, you know, decline that we’re seeing from fuel efficiency. But in recent years, it’s kind of caught up with us. We’re still getting, you know, more population growth, but the fuel efficiency is kind of outpacing it.

Bernie Fette (08:42):

So, in short, you have the fuel tax paying for less than it used to pay for. And you’ve got a growing number of vehicles that aren’t paying that tax at all.

Brianne Glover (08:54):

That’s right.

Bernie Fette (08:55):

Okay. The conversation we’re having started out with alternative fueled vehicles in the form primarily of electric vehicles, but there are other vehicle classes that come into this picture, too. You started out by mentioning trucks. Can you talk a little about how the truck question has emerged at the same time that electrics and hybrids have come into the discussion?

Brianne Glover (09:20):

Sure. So, that conversation typically revolves around the vehicle registration fee. That again was another one of those traditional funding sources that’s, you know, a decent slice of the pie, and a passenger vehicle pays about $50 to the state annually. When you get your bill in the mail, it’s, you know, it’s more than $50 because there’s, you know, a fee to the county and there’s some processing fees; but the state gets about $50 of that, $50 and 75 cents. Now the amount you pay per vehicle, that goes up by weight when you get past passenger vehicles, when you get above 6,000 pounds. And so at that point, we’re talking trucks. The heavier the vehicle, the greater the fee, is how Texas is sort of structured right now. And so the reasoning behind this is that the heavier vehicles are doing more damage to the roads, so they should pay a heavier fee, a higher fee. And so that becomes, are they paying enough? That seems to be the question that comes up. There’s even a bill in the legislature right now that’s looking to gather data and conduct a study to see how much each vehicle weight category is contributing to revenue. And then how much of the cost, you know, your roadway maintenance costs, your construction costs, are getting sort of attributed to each of these weight classes. And so I think that that’s a pretty important thing to know, at least, that can change a lot of things, that can change what the fee is, that can change heavy truck policy in the future.

Bernie Fette (10:43):

So the purpose of the study that you’re talking about in the legislature is intended to just gather as much information and make sure that the decisions that are made are as informed as they can be?

Brianne Glover (10:56):

Yeah. I think it’s a question of equity that comes down to equity between the different vehicle classes. If one vehicle class is paying more than their fair share of the costs, then another class is paying less. And so it’s, it’s all about balancing that.

Bernie Fette (11:14):

It sounds like the way that funding our infrastructure in Texas then might look a little different in future years. Can you run through what options we have to address that question in the future and maybe what the upside and downside of the various options are?

Brianne Glover (11:31):

Yeah, so, what the mix has looked like has changed a lot over, say, the past decade. And we used to just have those traditional funding sources, you know, your gas tax and your vehicle registration, and then a few other miscellaneous fees. In the past, we’ve also done bonds to help pay for transportation projects. That was basically, you know, putting it on the credit card. The bonds were guaranteed by transportation revenues or even, you know, general revenue. And so that was one option that we’ve employed in the past. Two of the other things that they’ve done recently in the past decade were Prop 1 and Prop 7.

Bernie Fette (12:11):

And those were voter initiatives, right?

Brianne Glover (12:14):

They were, yes. And they passed with a pretty high percentage. I think both of them did. And so it’s really kind of diversified our transportation funds. Prop 1 allocates part of the state’s oil and gas severance tax; the oil and gas severance tax is a tax on production. And so it’s really based on the price of oil and the amount of oil and gas that we’re producing in the state. And so while it’s been a great revenue source for transportation, it’s very hard to predict. It fluctuates. I mean, if I could predict the price of oil, I’d be a billionaire. This past year Prop 1 revenues have been down because the price of oil and production here in the state have both been down. They’ve been creeping back up a little recently. And so our revenue has been creeping back up a little, but it’s very hard to predict, which makes it hard to plan for transportation projects into the future.

Bernie Fette (13:11):

Of course, the tax being the same as it — as it has been for so many years — there’s always the possibility that that could change. But there’s also the question of charging by the mile. Can you talk a little about how a vehicle miles traveled cost or fee would work, and whether or not it’s being used anywhere?

Brianne Glover (13:30):

Yeah. So that’s been kind of a hot topic recently in transportation funding. So vehicle miles traveled fee is where you’re basically charged based on the number of miles that you travel. And there’ve been a lot of pilot studies that have happened. I know Oregon, I think Washington state, maybe Utah have implemented some different pilot studies on the topic. And so there’s a lot of different ways to institute it to, you know, do you check the odometer when someone comes in to get their vehicle inspected annually? Do you have some sort of device that gets scanned? And so while it’s a really good idea because it’s, it’s a true user fee, you’re charged based on the amount of travel, the amount of the road that you’re using.

Bernie Fette (14:15):

Which is not unlike how we pay for electricity, right? It’s treating it as a utility.

Brianne Glover (14:21):

True, yeah. Much more so than, than some of our other, you know, where you just pay a flat annual fee as a registration fee or the gas tax, which is, you know, having some foregone revenue based on some of these alternative fuel vehicles that aren’t paying anymore. The vehicle miles traveled fee gets a lot of pushback due to privacy. That seems to be the number one kind of, “whoa, let’s talk about this” issue that comes up — privacy, because people aren’t necessarily wanting everyone to know where they’re traveling or how much they’re traveling. And so I think that’s really spurred some different ideas on how do we institute this type of fee. And so that’s what these pilots are working on. And I think we’ll see a lot more of them in the coming years and see some states actually start to institute that.

Bernie Fette (15:04):

At the risk of asking you to make a prediction, how long do you think it might be or how, maybe I should ask, how soon it might be considering everything that we’ve talked about, that our picture of funding transportation might be notably different than what we’ve been used to for the last several decades?

Brianne Glover (15:22):

Well, I mean, I think even in Texas, we’re seeing that change. Again, that traditional funding is, you know, 60 percent of the pie instead of a hundred percent. We’ve added in a lot of different things. And so people are getting more creative with different ways to fund transportation. I think we’ll see some other states start coming up with, like we said, the VM fee probably before Texas does; but I think that it’s something that comes up and that we keep, you know, in mind. And so, I can’t really, I don’t really know on the timing, but I see it coming.

Bernie Fette (15:56):

The mix that we’ve talked about, the different factors that go into that equation — you and your colleagues have actually created an online tool to help people see how that might work, the TRENDS model. Can you explain briefly how that works?

Brianne Glover (16:12):

Yeah. So the TRENDS model is the Transportation Revenue Estimator and Needs Determination System — it’s a mouthful. And it’s been around for about a decade. Um, we built it together with TxDOT as a forecasting tool; a forecasting tool to look at different revenue sources that we currently have and what the amount that they’ll forecast out into the future, but also to look at possible revenue sources that we’re not currently using. And so that’s where, you know, like your VM fee comes in — your vehicle miles traveled fee. Different local options are in there as well, where you can pick a MPO or a county and say, okay, I want to institute a local vehicle registration fee or a local gas tax in this area only. And you can see what kind of revenue that that will produce. There’s other things; you can change up how much money is spent in the state on maintenance, on added capacity, that sort of thing. There’s a ton of different factors in there that you can play with and see, you know, I want to change the vehicle registration fee. I want to look at only electric vehicles and I want to charge them $200, you know, or $100 more extra on the vehicle registration fee to make up for the gas tax. There’s all these different what-if scenarios on that you can do and play with in the model. And it sort of spits out for you an output that says, okay, with all these selections that you’ve made, this is what your revenue for Texas will look like out to 2050. And then you can even break that down by MPO and say, okay, then what’s my share? What am I getting?

Bernie Fette (17:47):

So that’s one tool you have for, kind of looking into the future. It’s short of a crystal ball, but it’s more than you had a decade ago, certainly.

Brianne Glover (17:54):

Yes. It’s very helpful. We’ve used it to help answer questions for the public, for policymakers. It’s very, user-friendly.

Bernie Fette (18:04):

What’s the most important thing concerning the whole transportation funding picture and set of needs right now? What the most important thing that you think we should be doing to prepare for what’s coming?

Brianne Glover (18:20):

Education. Educating the public. The more they understand where the money comes from, how transportation is funded, what are our options and how do they work, I think then the easier it will be for us to open up that toolbox to diversify and look at different options when people know where we stand and what this option will give us. I think they are a lot more accepting and a lot more understanding. I just think we need to educate the public more.

Bernie Fette (18:46):

It is a complex picture.

Brianne Glover (18:47):

Yes.

Bernie Fette (18:47):

So you graduated from law school and became a transportation economist. How’d that happen?

Brianne Glover (18:58):

So I actually worked for a civil engineering firm before I went to law school. Law school was kind of a second career for me or a big career change for me. So I was a drafter and I did bid estimates for different highways, projects in the area. And then I went to law school, not really wanting to be a lawyer, just wanting to do something different. And so when I got out of law school and I looked into TTI, I thought, huh, that’s cool. I can, I can, I like numbers. I like to play with spreadsheets, that sort of thing. And so this job really lets me do just that. Yeah, I like to kind of tear things apart, different issues and and put them back together.

Bernie Fette (19:35):

So maybe when everybody else — years ago, when you were in school — was out playing soccer, you were playing with spreadsheets.

Brianne Glover (19:44):

Well, I don’t, I don’t think we had spreadsheets back then, but yeah.

Bernie Fette (19:49):

Okay. You said that you didn’t really want to be a lawyer, but you, I guess could have been. And what you’re in now is a field of public service as opposed to working for a big law firm someplace. What is it that motivates you toward public service?

Brianne Glover (20:03):

That’s a tough one. Public service. I mean, I just, I like being able to explain things to people and I like being able to help people to understand what it is that they’re getting and what it is that they’re dealing with. And I think transportation is a confusing topic. People don’t really understand it for the most part. And so the most rewarding part of my job is being able to help people understand that and explain to them, you know, what it is what’s going on.

Bernie Fette (20:35):

Well, we’re glad you made the choice that you did.

Brianne Glover (20:37):

Thanks.

Bernie Fette (20:37):

And we’re also really glad that you could spend this time with us. Thank you, Brianne. Thank you so much for helping us understand a picture that can be very, very complicated to lots of us. We appreciate it.

Brianne Glover (20:50):

Thank you.

Bernie Fette (20:51):

Electric vehicles may hold promise to do wonders for the environment long term. But some might argue that they’re doing no favors for the roads and bridges that they travel on today. As they make up a growing share of the vast vehicle fleet that’s out there, alternative fuel vehicles, exacerbate a widening gap between how much road funding we need and how much we have. Of course, that gap was there long before electric cars pushed the problem into sharp relief. The motor fuels tax for decades underwrote the interstate highway system along with so many state highways across America. It’s primarily how we paid for the surface transportation that shaped our history. What remains to be seen is how we pay for the network that supports our future.

Bernie Fette (21:46):

Thanks for listening to Thinking Transportation. We hope you’ll subscribe and share, and we hope you’ll check in with us next time, when we visit with Senior Research Engineer Bill Eisele, and get a better understanding of how super-fast delivery is taking a toll on our roadway system and how free next-day delivery is anything but free.

Bernie Fette (22:10):

Thinking Transportation is a production of the Texas A&M Transportation Institute, a member of the Texas A&M University System. The show is edited and produced by Chris Pourteau. I’m your host and writer, Bernie Fette. Thanks again. See you next time.