Few Americans are aware that each year, distant bureaucrats in Washington sit in their offices and use a bizarre formula to decide how much money each state needs for highways and other "transportation infrastructure." The inevitable result is that some states get back more than they contribute in taxes for this purpose, while other states actually get less. Cutting the federal middleman out of this process and turning responsibility for highway funding over to state governments could result in large savings and open the door for other experimental cost-saving measures such as road privatization.

Under the current system, begun in 1956, gas-tax dollars go to Washington and are redistributed unevenly among the states. States such as Alaska and Hawaii, along with the District of Columbia, have received grants substantially more than they have paid into the fund, while states such as South Carolina, Texas, and Wisconsin have received only a little more than half the amount they have paid in fuel taxes.

Furthermore, when the road dollars do come back from Washington, they come with strings attached in the form of expensive mandates—so expensive that they can total as much as 80 percent of the federal funds received from the U.S. Department of Transportation (DOT).

In other words, not only can a state receive less money than it put in—in order to receive any money back at all, it must do as it is told by Washington. While some of the required amenities involve important matters, the important question is why states can't handle these matters themselves. Chief among these federal mandates are the following:

Construction wage laws. These require that any project receiving federal funds must pay workers the area's "prevailing wage" as determined by the U.S. Department of Labor. In most cases, this means above-market union wages which add an estimated average of 15% to the cost of affected projects.

Environmental regulations. Threatening to withhold federal highway funds is one way the U.S. Environmental Protection Agency, in cooperation with the DOT, frequently forces states to apply a variety of environmental regulations to car manufacturers and real-estate development.

Miscellaneous regulations and mandates. Other federal requirements and mandates linked to federal highway funds include driver's license screening procedures for controlled substances, safety-belt enforcement, drug-free workplace requirements, the creation and maintenance of a problem-driver point system, commercial motor vehicle safety provisions, enforcement of the "Truth in Mileage Act," and metric conversion.

For this fiscal year, federal spending on transportation is budgeted at just over $46 billion. Of that amount, $31 billion will be spent on ground transportation. Much of DOT's spending is derived from the Highway Trust Fund, which is replenished by the federal fuel tax that every consumer is forced to pay when he fills up his tank.

Unfortunately, the Highway Trust Fund is one of Washington's most notorious sources of "pork barrel" spending. In essence, states are told that if they ever hope to see any of the billions they sent to Washington for highways and infrastructure again, they'd better say yes to the pork their representatives have put into the federal budget to ingratiate themselves with voters.

Needless to say, this process is extremely wasteful and ripe for abuse. It is time for Congress to recognize that continued federal involvement in transportation is an inefficient use of scarce resources. To decrease the cost and decentralize the management of America's transportation system, the DOT should be closed down, and most of today's federal transportation responsibilities returned to individual states, local communities, and the private sector.

The principal weakness in the current federal system is its centralized allocation of financial resources according to mechanical formulas based more on political influence than on transportation needs. Most transportation concerns are local in nature, with federal officials being too far removed to actually know how much should be spent on transportation or how those funds ought to be distributed.

Eliminating the additional layer of transportation bureaucracy at the federal level could allow the state of Michigan to pass along the savings in the form of a gas-tax cut for motorists. Currently, the money collected from individual drivers when they fill up their gas tanks is funneled to Washington, where a little less then two-thirds makes its way back to the states after being deposited in the Highway Trust Fund.

If transportation infrastructure duties were passed back to states, privatization is just one of many ways local leaders could work with greater flexibility and cost efficiency in solving transportation problems.

Ron Utt is a senior research fellow with The Heritage Foundation in Washington, D.C.

If transportation infrastructure duties were passed back to states, privatization is just one of many ways local leaders could work with greater flexibility and cost efficiency in solving transportation problems.