How to fix the Highway Trust Fund

De ja vu all over again. That’s what we saw recently on transportation spending. The latest $11 billion “patch”  to the Highway Trust Fund continues a trend that has now gone on for several years.  Each time the fund comes within days of being unable to make obligated payments to states or transit agencies, Congress bails it out with another cash infusion.  This pattern of behavior maximizes uncertainty – reducing the economic value of the very investments we are making – and raises fundamental questions about how federal surface transportation programs should and will be funded in the future.

Historically, federal transportation spending has largely been financed by user fees – primarily taxes on gasoline and diesel fuel that have financed the fund since it was passed under President Dwight Eisenhower in 1956. The past few years, however, have marked a significant departure from this trend, with a greater share of the federal role being supported by general revenues.

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The last surface transportation authorization law – Moving Ahead for Progress in the 21st Century (MAP-21), which became law in 2012 – set program spending levels significantly above dedicated revenues, perpetuating what has recently become a structural gap between the two.  This gap developed as the gas tax’s value has diminished since it was last raised in 1993, and the average American has been driving fewer miles than what trends foretold at the end of the last century.  Moreover, gas tax revenues are likely to be further eroded by future improvements in fuel efficiency. 

The gap between surface transportation spending and dedicated HTF revenues has haphazardly been filled by transfers to the HTF from the general fund (totaling roughly $70 billion since 2008, including the latest patch).  Overall, around 30 percent of federal surface transportation programs are currently supported by general funds, rather than by user fees. And if present trends continue, the portion of these programs supported by general funds could grow to as large as 35 or 40 percent over the next decade. That shouldn’t be an accidental process – policymakers should choose whether to fund transportation through user fees, through general funds, or through some intentional and predictable blend of the two.

Funding our transportation infrastructure entirely through user fees could be achieved by increasing and indexing the gas tax to some measure of inflation, as Sens. Bob Corker (R-Tenn.) and Chris Murphy (D-Conn.) and others have proposed. In addition to (or instead of) increased gas tax revenues, policymakers could consider alternative revenue sources, such as a vehicle-miles-traveled fee or other types of user fees. If there is a desire to increase state-level transportation investment, federal policymakers have the ability to create incentives with additional tools, such as allowing the expansion of traditional tolling systems or promoting other means of revenue capture from wise infrastructure investment.

User fees that grow at a defined rate can assure predictable and sustainable revenue to support investment in long-term transportation infrastructure projects.  The fees both provide an efficient way to assess the costs of these facilities on those who benefit most from them and create a pricing mechanism to influence demand for the transportation system.

Alternatively, policymakers could directly support some set portion of transportation spending from general revenues, whether like other domestic discretionary programs or with some enhanced level of predictability.

One thing is certain: policymakers should not continue the recent pattern of allowing the our transportation funding to come near expiration before passing repeated, ad hoc, short-term patches. Not only does this hinder deliberate planning for the construction and maintenance of transportation infrastructure, but the accompanying policies included to “pay for” the transfer of general funds are increasingly comprised of gimmicky budgetary maneuvers that do nothing to defray the costs of the spending. The recent gimmicks make a mockery of fiscal responsibility at a time when long-term budgetary projections remain daunting.

The growing role of general revenues in funding surface transportation has, to date, been neither sufficiently acknowledged nor debated.  While policymakers were understandably concerned in recent days with protecting the viability of the HTF funding and assuring that its obligations for states and localities continue to be honored, Congress should now pivot to the broader issue of determining the best method to fund federal investment programs for the nation’s transportation infrastructure over the long run.

Failing to answer the vital question of how to sustainably pay for surface transportation prevents the effective restoration and expansion of our country’s infrastructure, upon which so much of our economy depends. With jobs and growth on the line, those are drawbacks that we can ill afford.

Bell is a senior director at the Bipartisan Policy Center, Akabas is an associate director and Frankel is a visiting scholar at the center.

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