Infrastructure will be a burden either way
The White House recently proposed a $2 trillion plan to rebuild infrastructure and reshape the economy over eight years. The details will be widely debated, and the final plan will most certainly look different from its early days.
Federal spending bills are never a picture of efficiency. The reality of the system opens the doors for pork-barrel spending and pet projects for lawmakers who have enough clout. This proposal, like previous bills that promised infrastructure spending, is laden with funding that goes wide of what you and I would probably agree to be infrastructure—tangible physical and organizational structures and facilities such as buildings, roads, bridges and power supplies needed for the operation of society.
The plan’s intended focus is spot on, though. Significant parts of this country’s aging infrastructure present considerable challenges and require prompt attention. One could argue that dependable infrastructure is integral to maintaining and improving our standard of living.
As a lobbying point for the massive plan, the White House released an “infrastructure report card” for each state. Nationwide, states hovered between C and D. None received an overall grade higher than a C. And while that may be accurate, it isn’t surprising to see a list of failing infrastructure in advance of negotiations about a staggering amount of federal spending.
For MFA’s trade area, Missouri scored a C-, while Kansas and Iowa each logged a C. Somehow, Arkansas didn’t receive a letter grade, just a note saying the state has suffered from a decades-long systemic lack of investment.
This report includes a long list of infrastructure priorities critical to agriculture and rural communities. A shortlist for most of us would include roads, bridges, waterways, rail and broadband networks. Strength in these areas help our agriculture enjoy a competitive advantage over the rest of the world.
Each state lists an uncomfortable percentage of this infrastructure in poor condition. Increased productivity spurred by innovation and technology will continue to put more stress on an already aging system. Dependable rural roads and bridges are a critical first step in moving ag production from the farm to the consumer.
Adequate rail and barge options can reduce pressure on roads and bridges. While rail traffic is mainly driven by private industry, our waterways depend on government funding. Missouri enjoys access to two navigable rivers (Missouri and Mississippi) that provide benefits to many states. However, environmental and complicated funding issues have limited infrastructure updates.
Might we expect more funding in the future? One area of focus in the White House plan is around climate change. The report claims a gallon of fuel can move one ton of cargo 647 miles on the waterways, compared to 477 miles on rail or 145 miles on the road. A comparable reduction in greenhouse gas emissions is also recognized with the increased efficiencies.
We all agree the need is there. The question is, how is it funded? The plan exposes the deficiencies, but only brings a portion of the funding necessary. Where does the rest of the money come from?
In Missouri, just over one-third of the state’s transportation revenue comes from federal sources, generated by fuel taxes and government aid programs. The remainder of the transportation budget is funded through state user fees and general revenue funds. These funding sources include vehicle registration and driver’s licensing fees (20.7%), multimodal and highway safety fees (0.1%), motor vehicle sales and use taxes (25.9%), and interest and miscellaneous fees (7.7%). However, the main source of user fee revenue comes from the state motor vehicle fuel tax (45.3%).
The state motor fuel tax has not increased since 1996, and Missouri ranks 4th lowest in state gas tax and 47th overall in revenue per mile. Due to inflation and rising construction costs, the 17-cent tax now equates to 8 cents in purchasing power. Compare that to the increased cost of asphalt, concrete and steel of 200% to 300%, and the shortfall comes into focus.
It should be no surprise that infrastructure improvements come with a discussion of tax increases. The White House plan targets corporate tax rates. The Missouri plan is currently looking at increasing the state fuel tax.
Tax increases aren’t popular but may be necessary if we want to continue to enjoy our current standard of living. The bill is coming due for deferred maintenance.
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