33rd Annual William A. Patterson Transportation Lecture

Funding the Future, Lessons from the Past

How Underinvestment in Highway Infrastructure Threatens Transportation Efficiency and Sustainable Economic Health

In 1956, President Dwight D. Eisenhower introduced the Highway Trust Fund (HTF), a facet of the National Interstate and Defense Highway Act, to exclusively fund construction and maintenance of the interstate highway system. Christopher B. Lofgren, President & CEO of Schneider, detailed its importance at the 33rd Annual William A. Patterson Lecture, entitled Funding the Future, Lessons from the Past: How Underinvestment in Highway Infrastructure Threatens Transportation Efficiency and Sustainable Economic Health.

According to Lofgren, the HTF was created to “eliminate unsafe roads, inefficient routes, traffic jams, and all the other things that get in the way of speedy, safe transcontinental travel.” Indeed, it was essential to the economic development and growth of the country. However, in recent years, the fund has seen a precipitous decline. As expenditures from the HTF have expanded from highway construction and maintenance to items such as transit, bike paths, and recreational trails, the fuel tax lost its character as a “user fee”, and became more like any other tax.  The political consensus that had existed to allow period increases in the fuel tax rate was lost.  The HTF has become a political football, as neither major political party seems willing to make the changes necessary to fund it properly. Without major changes, the HTF will go bankrupt by 2015. This, Lofgren said, is a mistake.

“The cost of building a mile of road is rising faster than inflation,” Lofgren explained. At the same time, fuel tax receipts have been affected by a reduction in miles traveled as a result of recessions both here and abroad.

Lofgren outlined a few different ideas on how to strengthen the Highway Trust Fund. First, he mentioned that the best way to secure the future of the HTF is to “tax petroleum at the wellhead.” This would involve a direct tax on oil producers prior to gasoline refinement. In order to fully fund transit and mobility initiatives, Lofgren believes a tax of $2.61 per barrel is needed. He also proposed considering returning the HTF to exclusively funding highway construction and maintenance, rather than other projects like rail.

One proposal Lofgren had that he believes will elicit criticism from all political sides is to raise taxes at the pump. He argued that in the immediate future, an increase of $0.16 per gallon of gasoline and $0.21 per gallon of diesel may be necessary in order to improve infrastructure and prevent catastrophic events like bridge collapses. However, Lofgren also noted that even with indexing, such a tax structure is likely not sustainable because revenues fall as fuel economies improve. Therefore, the best way to use such a tax would be to phase out taxes at the pump and move towards a VMT tax.

A Vehicle Miles Traveled (VMT) tax charges riders based on the usage of roads, and can be adjusted or targeted to address high-traffic times in urban centers. Heavier traffic times, he explained, tend to come during weekday morning and evening commutes to and from work. In cities such as London, adding VMT tax has significantly reduced congestion in central urban areas. Lofgren believes adopting similar measures in highly populated urban centers around the United States could be a step towards insuring the sustainability of the Highway Trust Fund.

In addition, Lofgren noted that gas taxes were last raised in 1993, meaning that the buying power of gas tax revenue has dropped by more than 60%. By not linking the gas tax with inflation, the HTF has been hemorrhaging money. Though paying addition money at the pump would certainly be painful for consumers, Lofgren explained that it is likely necessary if the HTF is to remain solvent beyond 2015.

Lofgren stressed that there are “lots of questions, but not a lot of definitive answers.” But he emphasized the need to enhance the Highway Trust fund both to repair current infrastructure and to expand into new areas as necessary. While admitting that he does not have all the solutions, he said he is willing to put his money where his mouth is: Schneider is, in fact, advocating for an increase on taxes of both gasoline and diesel. With these, Lofgren said, the United States can put itself back on the path that made it one of the most economically powerful countries of the last century.

Article from the McCormick School of Engineering

About Chris Lofgren

Christopher B. Lofgren, Ph.D., is president and chief executive officer at Schneider, a premier provider of transportation and logistics services. He joined Schneider Logistics in 1994 as vice president of engineering and systems. He later served as chief information officer and chief operating officer before being named president and chief executive officer in 2002.

Lofgren currently serves on the Board of Directors of CA Technologies, the U.S. Chamber of Commerce, and the American Transportation Research Institute, a research trust affiliated with the American Trucking Associations. He is also on the Advisory Board of the Georgia Institute of Technology. Locally, he is a member of the Senior Advisory Council for Junior Achievement of Brown County (Wisconsin) and previously served as a board member of the Green Bay Symphony Orchestra and the Green Bay, Wisconsin Boys & Girls Club.

Before joining Schneider, Lofgren held positions at Symantec Corporation, Motorola and CAPS Logistics. He holds a bachelor’s degree and a master’s degree in industrial and management engineering from Montana State University and a doctorate in industrial and systems engineering from the Georgia Institute of Technology. In October 2009, Lofgren was inducted into the National Academy of Engineering.