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Highway Trust Fund – Crises Averted, Now What?

Jason Poppen — Hr Green, Inc.

With the recent focus on the dire financial state of the Highway Trust Fund (HTF), added interest has been seen across the land for longer-term measures that would stabilize the HTF. In August a short-term measure bumped the HTF with $10.9 billion which will keep projects active through April 2015.

A group of former Secretaries of Transportation sent an open letter to Congress after passage of the short-term fix, stating: “We are hopeful that Congress appears willing to avert the immediate crisis. But we want to be clear: This bill will not ‘fix’ America’s transportation system. For that, we need a much larger and longer-term investment. On this, all twelve of us agree.”

Gas Pump

The gas tax would need to be raised to 31 cents from the current 18.3 cents per gallon in 2015 and increased thereafter in order for the Highway Trust Fund to keep up with projected transportation funding needs, without new revenue sources, Fitch Ratings said in a recent report.

A multiyear surface transportation bill is needed to shore up the fund for a longer term, but even a six-year proposal that emerged from the Senate Environment and Public Works Committee earlier this year would require a new source of funding or a tax increase. The Congressional Budget Office estimates that the proposed highway bill would need $85 billion in new funding.

The gas tax would need to be raised to 31 cents from the current 18.3 cents per gallon in 2015 and increased thereafter in order for the Highway Trust Fund to keep up with projected transportation funding needs, without new revenue sources, Fitch Ratings said in a recent report.

Some of the proposals beyond simply increasing the gas tax include implementing a vehicle miles traveled (VMT) fee system, a proposal to allow tolling on interstates, eliminating the tax on retail fuel sales and replacing it with a wholesale per-barrel tax on oil and increasing private/public partnerships of P3s to help fund construction of new roads. However none of these proposals appear to have engendered the political support to create meaningful change.

One proposal recently promoted in the Senate makes a complete 360 degree turn. The Transportation Empowerment Act, sponsored by five Senators and 52 Representatives, would devolve control over highways and transit from the federal government to the states. It also would lower the federal gas tax from 18.4 to 3.7 cents a gallon. During a five-year transition period, the states would receive federal block grants with fewer federal requirements than are now in place. Ted Cruz, R-Texas and Michele Bachman, R-Minnesota are prominent backers of this bill.

Making sure our elected representatives know what a crucial role sustained funding of transportation plays in both the importance to public safety and job growth should be our top priority in weeks and months to come.
Critics, including the American Transportation Association, the U.S. Chamber of Commerce, the American Highway Users Alliance, AAA and the American Society of Civil Engineers point out that the money now in the Highway Trust Fund would simply go away and states would have to replace it by raising tens of billions of dollars in taxes or taking the money from other uses. If states opted to raise their own fuel taxes, the average levy would go up by 16 cents a gallon and some states would have to go as high as 30 cents, the groups said.

Congress’ most recent short-term fix weakens pension funds and relies on revenue unrelated to transportation. According to some estimates, the Highway Trust Fund supports as many as 700,000 jobs a year. In addition if funding of highway projects is shifted to the states many desperately needed infrastructure improvements will be delayed or cancelled. Public awareness messaging that underscores transportation’s critical importance to the American people and economy will be essential as a new Congress takes office after the November elections and deals with funding the HTF. Making sure our elected representatives know what a crucial role sustained funding of transportation plays in both the importance to public safety and job growth should be our top priority in weeks and months to come.

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