HIGH-SPEED RAIL IS WELL AND TRULY DEAD — FOR NOW
A late-night budget deal made between Senate and House leaders on Monday night, April 11, zeroed out funding for high-speed rail and rescinded $400 million of unspent funds that had been approved for 2010. The deal also cut Amtrak’s budget by $80 million and rescinded funds that had been approved for highways in 2010 but remained unspent by the states.
History shows that rail projects are never truly dead as long as rail nuts and rail contractors work together to keep them alive. The Florida high-speed rail plan, for example, was approved by voters in 2000, rejected by voters in 2004, approved by the governor in 2009, and rejected by a new governor in 2011.
At least for now, however, President Obama’s dream of spending at least $500 billion building a high-speed rail network connecting most major American cities is dead. The Congressional leaders who took high-speed rail out of the 2011 spending bill are not likely to put it back in to the six-year transportation reauthorization bill.
Since Obama’s own budgets never envisioned spending more than 10 percent of that amount during his administration, it is clear his strategy was to build a couple of demonstration lines, such as Tampa to Orlando, and hope they would spur political demands for a more complete system. That dream died when Florida Governor Rick Scott killed the Tampa-Orlando train.
A recent article in National Review Online credits Cato, Reason, and Heritage with doing the research and Tea Parties and the American Dream Coalition with doing the grassroots organizing that killed the program. This was indeed an ideal combination: neither policy analyses nor grassroots organizing alone can be effective without the support of the other.
With the Florida train dead and California train starved for funds, it is likely that Obama’s high-speed rail legacy will be limited to slightly faster trains in Illinois, North Carolina, and Washington state. These projects offer only slight speed gains over existing Amtrak service. The Washington plan, for example, will spend around $750 million to increase speeds by 2.7 mph and increase the number of daily round trips from 5 to 7. State taxpayers will be obligated to subsidize these operations for 20 years or the states could be liable to repay part of the capital grants to the feds.
Bloomberg news article: https://tinyurl.com/3lx9gyx
National Review Online: https://tinyurl.com/3b6hgzb
Congressional budget deal: https://tinyurl.com/6hbbnex (transportation section begins on page 410)
NOW THAT HIGH-SPEED RAIL IS DEAD, WHERE DO WE GO FROM HERE?
The six-year transportation reauthorization bill now being considered by the House Transportation Committee is likely to include more than $300 billion in spending on transportation projects. House leaders have agreed to keep earmarks out of the bill (though some, such as Michele Bachman, have waffled on this promise), and with high-speed rail out, the main question will be the perennial debate over how much federal gas tax revenues will be dedicated to public transit.
The Reason Foundation has proposed to zero out transit funding altogether, thus returning to the pre-1983 system in which fees paid by highway users are dedicated to highways. Under Reason’s proposal, any federal money spent on transit would have to come from general funds, not dedicated shares of gas taxes.
Another proposal is to keep transit funds in but reduce the number of “pots” of money in the bill. Currently, transportation funds are divided into more than 50 pots, each allocated to states using a different formula or grantmaking process. Reducing the number of pots would give the states more leeway in spending the money as effectively as possible.
The two basic ways of allocating those pots are formulas or grants. Obama has proposed an “infrastructure bank,” which effectively means putting a large chunk of money into a pot that would be allocated through a competitive grant process rather than a formula.
Competitive grants sound good on paper, as it suggests the money would be spent on the highest-priority projects. In practice, however, federal transportation grants have been highly politicized. Congress routinely overrules the Federal Transit Administration’s recommendations for high-priority “New Start” transit projects and instead spends the funds in the districts and states of the most powerful members of Congress. Recent GAO studies found that the Obama administration allocated high-speed rail and transit stimulus funds using largely political, rather than technical, criteria.
Once the formulas are decided, formula funds give Congress and the administration much less leeway in interfering with the states in spending the funds. Earmarks became popular because they enabled Congress to override the formula funds. With earmarks dead, at least for now, putting more transportation dollars into formula funds will improve the effectiveness of how they are spent.
Reason plan to rededicate gas taxes to highways: https://tinyurl.com/3242px6
Cato report on formula vs. competitive grants: https://tinyurl.com/6bo87yp (see pages 7 and 8)
GAO report on high-speed rail grants: https://tinyurl.com/6j4rklh
GAO report on transit grants: https://tinyurl.com/65cqkuf
Cato forum invitation: https://tinyurl.com/5wb4rle
PENSIONS AND HEALTH CARE: THE TRANSIT TIME BOMB
Highways are capital-intensive. States lay the concrete and asphalt and then basically count the vehicles and monitor to keep them in good shape. Transit, by contrast, is highly labor-intensive, requiring lots of people to maintain and operate buses and other transit vehicles.
So it should be no surprise that transit agencies, along with other public employee programs, have large unfunded pension and health-care obligations. Rather than risk transit strikes, agency boards and leaders found it easier to give in to transit union demands for huge fringe benefits whose costs would have to be paid by future taxpayers.
Transit pay is probably not significantly greater than pay in the private sector, but pensions and health care benefits are much greater. Counting fringe benefits, New York City’s transit agency has more than 8,000 employees who earn more than $100,000 a year. The highest-paid employee of the city of Madison, Wisconsin is a bus driver.
Portland’s TriMet transit agency is the king of benefits, actually spending 50 percent more on benefits than on payroll itself. Many other transit agencies spend 80 to 90 percent as much on benefits as on direct pay.
These number don’t count the unfunded pension and health care obligations. TriMet has guaranteed to pay virtually 100 percent of health-care costs for all employees and their entire families for the rest of their lives.
New York City transit has more than $15 billion in unfunded liabilities, which is more than three times annual fare revenues. TriMet’s unfunded liabilities are more than ten times annual fares. These pension and health-care costs, combined with the high cost of maintaining rail transit, mean that transit will be a growing burden on the future taxpayers of these cities whether or not transit actually carries many riders.
Cato report on transit: https://tinyurl.com/65gkfb9 (unfunded liabilities on page 9)
Randal O’Toole authors The Antiplanner from Camp Sherman, Oregon. See more at https://ti.org/antiplanner