Michael Sargent / May 12, 2015
Transportation funding could hit a dead-end at the end of the month. On May 31, the Highway Trust Fund’s authorization to pay for the nation’s highway and mass transit projects will expire.
Even worse, the fund is running a $13 billion cash flow deficit this year and is expected to exhaust all its money sometime in July unless lawmakers take action.
Here’s a snapshot from Heritage’s latest Backgrounder on what you need to know about the Highway Trust Fund:
What is the Highway Trust Fund?
The Highway Trust Fund was established in 1956 to pay for the construction of the Interstate Highway System. Although it was intended to be temporary, it is now the primary federal mechanism to finance transportation projects across the country.
The fund is financed mostly by the gas tax—an 18.3 cent tax on gasoline and a 24.3 cent tax on diesel fuels. It spends over $50 billion every year on roads and mass transit, which includes rail, buses, streetcars and other forms of public transportation.
What’s the problem?
Like most federal programs, the Highway Trust Fund consistently spends more than it receives in revenues. Congress has constantly had to bailout the fund with money from the Treasury in order to keep its balance in the black, and has spent $62 billion covering the fund’s shortfalls since 2008.
This year, the Congressional Budget Office projected the Highway Trust Fund’s spending will top its revenues by $13 billion.
Why is the fund in such bad shape?
Unable to relinquish the taxing and spending authority that should have expired when the Interstate Highway System was completed in the 1980s, Congress has expanded the Highway Trust Fund far beyond its intended scope.
The fund now spends more than ever and diverts billions from roadways to projects that should be left to states and localities. These boondoggles not only include unnecessary mass transit projects, but things like sidewalks, roadside landscaping and bike paths.
And spending increases have vastly outpaced fuel tax revenues, which have flattened as cars have become more fuel efficient. The result is a meandering, unsustainable fund that is plagued by special interests and unreliable for state transportation planning.
What should Congress do about it?
Some members of Congress are saying that they should just provide more money to the trust fund, either through a bailout or a gas tax hike, so that it can continue its profligate spending.
This is the wrong approach.
Congress needs to examine the inherent flaws in the way the nation invests in transportation infrastructure. The current system of taxing drivers and then redistributing their money through the federal government to projects unrelated to highways no longer makes sense.
Instead, Congress should end the top-down approach that breeds inefficiency and special interest handouts at the expense of prudent infrastructure investment.
The right approach would be to let states and localities—which are more in touch with the needs of their citizens—make their own decisions on transportation. Allowing them to tax and spend on infrastructure as they see fit without the interference of Washington would inject a much-needed degree of accountability and reliability into transportation investment.
For more information on the Highway Trust Fund and the upcoming deadline, see Highway Trust Fund Basics: A Primer on Federal Surface Transportation Spending.
