here for PDF format
here for participants' responses to this interview.
Lee Munnich, director, State
and Local Policy Program,
Humphrey School of Public Affairs, University of Minnesota
8301 Creekside Circle #920, Bloomington, MN 55437
of the discussion
Verne Johnson (chair), Paul Gilje, John James, Sallie Kemper, Dan Loritz,
Tim McDonald, Jim Olson (phone), Wayne Popham (phone), Clarence
Welcome and introductions
Munnich is a Senior Fellow at the Humphrey School of Public Affairs,
University of Minnesota, where he is director of the State and Local
Policy Program. He focuses on transportation policy and finance,
congestion pricing, rural road safety, regional economic development, and
has more than twenty-three years of experience with state and local
governments, including positions at the Minnesota Department of Trade and
Economic Development, Minnesota Business Partnership, Minnesota House of
Representatives, Midwest Research Institute's
of Economic Studies. He has served as executive director of the Minnesota
Tax Study Commission. He was elected to the Minneapolis City Council
twice, in 1973 and 1975.
received a bachelor's degree in economics from
University in 1967 and has done postgraduate work in economics and
computer science at the University of Minnesota.
the discussion Munnich presented a report from the Center for
- During the course of the discussion the following points were raised:
The gas tax is not a sustainable source for road funding.
commissions set up by Congress arrived at the same conclusion
independently, Munnich said. Both federal commissions determined that the
gas tax is not a sustainable source of revenue sufficient to offset
necessary road maintenance costs. In recent years the federal stimulus
funding has offset the some of the effect of the shortfall, but the trend
is clear: Cars are becoming more fuel efficient, and as a result they are
requiring less gas and paying less gas tax which funds road maintenance.
Yet they are still using the road, and from the viewpoint of the overall
transportations system they are getting the same or greater benefits.
become more fuel efficient the model of using a fuel tax to fund road
maintenance falls apart," Munnich said.
While the system is not sustainable, revenue is becoming politicized.
system is frozen in time, Munnich said, precisely in the year 1956 when
the federal gasoline tax went into effect. The state highway funds are
basically stuck with this cents-per-gallon funding model, while the
federal fund has needed to be bailed out a couple of times. There is
limited appetite for added taxes. However, a problem emerges as both fuel
efficiency and the price of fuel increase causing fuel consumption to
decline and, thus, causing tax revenue to decline as well with no
corresponding decline in road maintenance costs. Since the tax is not
indexed to the rise in fuel prices, but rather to the actual gallons
consumed, price fluctuations do not directly affect tax revenue, except as
they influence demand for fuel.
to be that this topic was bi-partisan, he added, but it's becoming less so
because, in a way, it has become reliant on federal debt financing, which
takes the issue in the direction of an entirely different debate.
Move toward a mileage-based fee model.
Discussing the Humphrey School report, which was funded through the ITS
Institute of the University of Minnesota's Center for Transportation
Studies, Munnich concluded that "if you agree the system should be a
user-financed system, then you look to mileage driven, not gallons
consumed, as being the right basis for taxation."
there are two fundamental challenges facing such a proposal: (1) privacy,
or the need to monitor an individual's driving habits, and (2) technology,
or figuring out how to meter cars for mileage.
limited political appetite for this proposal at the federal level, Munnich
said. Obama won't go near it. There are some Senators interested in it.
is doing a pilot test right now of putting a monitoring device in a car,
County. The technology could be used for other things too, such as
tracking congestion. Private insurance companies are interested in its
possible application in pricing insurance policies more in line with
mileage and travel behavior.
the other aspects Munnich said of the mileage-based tool for revenue is
the transparency. Right now people don't know what they're paying in gas
taxes and don't know how it's being spent. There are questions regarding
how the whole system works at present that might be answered with a
restructuring based on mileage.
The gas tax is convenient to administer.
in 1919, the gas tax was eventually adopted by the federal government to
finance the construction of the interstate highway system. These are cheap
and convenient taxes to collect, Munnich said-it's not even done at the
pump, but at the wholesaler, based on the gallons sold to retailers.
Federal level Congress decides how money is spent on transportation. Every
six years there's an authorization bill passed that includes how the
revenue from gas taxes will be spent. In recent years, the authorization
legislation has been delayed due to the funding problems, and Congress has
simply extended the existing authorization level rather than updating the
addition, there are formulas for distribution of money earmarked for
transportation to the states, to local agencies and regional planning
entities. This money tends to be used for capital costs.
decisions on spending for maintenance and operations are done at the state
is now in the higher end of the spectrum for taxes on gas-around 21st in
the country, Munnich said.
Analysis of fuel taxes vs. mileage-based user fee.
ran through the pros and cons for fuel taxes and mileage-based user fees
with the group. Both options have been assessed by the Humphrey School's
State and Local Policy Program (SLPP) on the basis of their ability to
achieve five transportation finance principles: efficiency, equity,
revenue adequacy and sustainability, environmental sustainability and
Mileage-based user fee
*Efficiency is defined as the extent to which users pay for the system.
assessment indicates that mileage-based user fees would have a greater
ability to achieve the financing principles laid out in the CTS study.
participant asked who would come out better or worse as a result of the
change. Munnich said that would depend on how the fees were structured.
an argument now that heavy truckers are not paying their fair share for
the wear they have on the road." Those with higher gas-mileage cars
contribute less to the construction, operations and maintenance of roads.
"Is that fair?" Munnich asked, "I don't know."
consideration is that a mileage-based system would take away an incentive
for more fuel-efficient vehicles, though the fuel tax represents only a
small portion of the price of gas.
is a leader in rethinking the fuel tax.
was the first state in the country to implement the fuel tax, Munnich
said, and has been the first to think about how to replace the fuel tax.
legislature has given the governor the authority to develop alternative
proposals and the state has conducted a pilot study for transitioning to
mileage-based fees paid for at the pump.
working with a task force at the Minnesota Department of Transportation,
testing a mileage-based approach using GPS technology, and will bring a
representative out from Oregon to visit Minnesota with to share ideas on
this approach," Munnich said.
Cost of implementation
of implementing the gas tax now is about 1-2 percent of the tax. Any
mileage-based system that might be adopted will cost 5-15 percent, but
there may be offsetting safety benefits and other user benefits with GPS
technology in the vehicle. During a transition period there would likely
be some combination of a mileage-based and a gas-based tax.
now in place a task force at MNDOT studying the issue, and transportation
committees in the legislature are considering taking it up. "I'm not sure
whether people are pushing this particular idea," Munnich noted, "but
people are seeing that something needs to change if we intend to meet the
funding needs of our transportation system."
can't just talk about needing more without talking about what kind of a
system best meets our needs," Munnich said in closing. "This may mean a
wholesale review of transportation priorities in the state, including
rural vs. metro-area, roads vs. mass transit, and many other conflicting
priorities. Then we will also need to decide whether we want to continue
with gas-based revenue, or transition to a mileage-based system."
still in the policy development stage, he added, with only a few
transportation policy experts seriously investing in the research. Right
now transportation is a couple of levels down on the priority list of both
the country and the state-but it is a system with a major funding
shortfall that will need to be addressed, and now is the time to begin
working on it.
you to Lee Munnich for a good visit.