Blog: 10 Myths About the Highway Trust Fund
Crossposted from the American Society of Civil Engineers blog.
1. The Highway Trust Fund is Running Out of Money Because We Waste Money
Thanks to the Intermodal Surface Transportation Efficiency Act (ISTEA), first passed in 1991, transportation projects are planned, developed and executed efficiently while utilizing innovation. Grades in the Report Card prove that when we invest in infrastructure, we see results. The 2013 Report Card saw improvement in six infrastructure sectors that benefited from private investment, targeted efforts from cities and states, or a one-time federal funding boost.
Communities oftentimes know best where money will be best utilized, and the Highway Trust Fund allows many transportation project decisions to be made on the state and local levels. For example, federal funding eligibility for bicycle lanes is a concern in many places. Since there is a growing national share of bicycle and pedestrian fatalities that needs to be addressed through better road design and other proven countermeasures, the Highway Trust Fund allows a community to identify this need on its own roads and decide how to best design bike lanes for that community.
2. The Federal Government Should Get Out of the Infrastructure Business and Let States Make Their Own Decisions
The Highway Trust Fund is designed to assist states in paying (historically about 45%) for transportation projects for many reasons, and it is a system that has served the country well. The cost of transportation projects is a huge expense and states do not have the funding to go this alone.
The U.S. Constitution’s Commerce Clause (Article 1, Section 8, Clause 3) grants Congress the power to invest and maintain roads, bridges and public transit.
From the Interstate Highway System (keyword: Interstate) to our ever-expanding electrical grid, infrastructure is indeed a national issue that must be addressed through a national vision.
3. The Current Gas Tax Rate is Perfect and Does Not Need to Be Changed
The Highway Trust Fund is how Congress provides federal funding for transportation projects. It was created in 1956 to be funded by the federal gas tax.
The U.S. Department of Transportation projects that the Highway Account of the Highway Trust Fund will run out of money for new projects as early as July. According to the Congressional Budget Office, to prevent insolvency of the Highway Trust Fund in 2015, federal surface transportation investment would have to be cut by 92% that year.
The gas tax is not tied to inflation and hasn’t been raised in more than 20 years. We are trying to run a 2014 transportation system on 1993 dollars. Consider that the cost of many items has doubled or tripled since 1993. For example, a new car cost $12,750 in 1993, whereas in 2013 a new car costs on average $31,252.
The purchasing power of the federal gas tax is not what it once was. This is obviously an untenable formula that must be addressed.
4. We Can Just Raise Enough Revenue Through Tolls and Public-Private Partnerships (P3s).
Tolls and P3s can be successful sources of revenue, and are a part of the overall solution, but neither is a silver bullet in finding a sustainable long-term funding source. Historically, federal highway funding has accounted for approximately 45% of what state DOTs spend on highway and bridge capital improvements. Quite simply, the federal government must lead on the issue of funding.
For the 10 year window, 2015-2024, the cumulative shortfall in the highway and mass transit accounts of the HTF will be over $170 billion. This is too large a figure for anyone to expect to be filled by tolling and P3s. While as House T&I Chairman Bill Shuster (R-PA) has said “the private sector continues to show significant, growing interest in investing in infrastructure,” they cannot be a substitute for federal investment and federal leadership.
The key is finding a long-term, sustainable funding source. P3s and tolls are pieces of the puzzle, and when partnered with a sustainable revenue stream, can help ensure reliable revenue for the Highway Trust Fund.
5. We Don’t Have Enough Revenue Because People Are Driving Less
Over the past two years, vehicle miles traveled (VMT) actually increased; in 2012 by 0.3 percent and in 2013 by 0.6%. While there was a downturn in vehicle miles traveled after 2007, this decrease coincided with the recession. As the economy continues to improve, more employees will return to work, increasing VMT. Furthermore, the U.S. population grows each year by just under three million people, and the number of licensed drivers also grows by two million people. It is estimated that this trend in population growth will lead to an increase of 25 billion VMT annually.
6. Raising the Gas Tax Would Hurt Economic Growth
In our Failure to Act economic studies, ASCE explored the consequences of continued underinvestment in infrastructure. Ultimately, the studies concluded that our deteriorating infrastructure will cost the American economy more than 867,000 jobs in 2020 and suppress the growth of our GDP by $897 billion by 2020. Per household, the cost of deficient surface transportation will cost $1,060 per year. To simplify, a homeowner can either fix a leaky roof now or wait for his or her home to eventually cave. Clearly, the former is much more cost effective. Our nation’s infrastructure needs to be tended to and funded now, or we will all continue to pay for it in a multitude of ways at much higher costs.
7. The Gas Tax Isn’t Raising Enough Money Because Cars are More Fuel Efficient
Between 2012 and 2022, gas tax revenues will decrease by less than 1%, ($2.5 billion) the CBO estimates. The issue at hand is not really fuel efficiency, but rather that the gas tax has not been increased since 1993. In the 20 years since, it has lost more than a third of its value because of inflation. Fuel efficiency will become more of a problem as fuel efficiency technology continues to advance in the coming decades, but in the near term it is less of a problem than often stated.
8. We Can Afford to Do a Short-Term Bill and Maintain the Status Quo
Not this time. The 2012 surface transportation law, MAP-21, temporarily preserved levels of federal highway and public transportation investment by supplementing existing Highway Trust Fund revenues with other federal resources. Since 2008, over $52 billion has been transferred from the General Fund to the Highway Trust Fund to keep it solvent.
MAP-21’s funding will run out as the Highway Trust Fund becomes insolvent in the weeks (or more likely months) before the law intended the money to end. Attempting to “Band-Aid” the Trust Fund once again will only result in this becoming a recurring issue. States, planners, and engineers cannot plan needed infrastructure projects without committed funding. As the impending insolvency demonstrates, there is currently not enough revenue to support the system.
Furthermore, the 2013 Report Card for America’s Infrastructure graded our nation’s infrastructure at a D+. Clearly that status quo is not enough in helping the U.S. build a 21st century infrastructure capable of competing on a global scale.
9. Congress Cannot Get Big Things Done Because Everything Turns in to a Partisan Fight
In the words of Senate Minority Leader Mitch McConnell, “Infrastructure spending is popular on both sides.” In the past year transportation legislation and funding ideas have come from both Democrats and Republicans. Notably, Rep. John Delaney’s (D-MD) Infrastructure Bank bill was proposed with an equal number of Democrat and Republican co-sponsors. Sen. Vitter (R-LA) and Sen. Boxer (D-CA) have worked closely to craft a six-year highway bill, which passed out of committee with a unanimous bipartisan vote. And Rep. Dave Camp (R-MI) proposed a tax reform bill which included $126 billion for transportation projects in an effort to close the Highway Trust Fund shortfall. Efforts from both sides of the aisle, and the recent bipartisan support that led to the passage of the Water Resources Reform & Development Act (WRRDA), prove that there is support for infrastructure investment in both parties.
Furthermore, the U.S. Chamber of Commerce continues to support raising the gas tax, stating it is the “simplest and most straightforward” option to fund a long-term highway bill.
Without question, infrastructure is a bipartisan issue that has seen encouraging proposals on both sides. Given that this is an area where Congress can agree, now is the time to work together and get something done.
10. We Don’t Have the Money to Fix The Problem
The Highway Trust Fund will become insolvent in only a couple months, meaning the federal government will slow or stop sending checks to state DOTs this summer. The economic consequences of not being able to pay contractors and employees will send shockwaves throughout our economy. This is going to happen.
The notion that we simply cannot find a long-term, sustainable revenue source is false. The costs of inaction and allowing the Highway Trust Fund to cease funding for needed repairs and maintenance are immense.
Americans are already paying for the cost of our nation’s D+ infrastructure. American families and businesses are losing money and time. Congested roads cost an estimated $101 billion per year in wasted time and fuel, and driving on roads in need of repair costs motorists an average of $324 per year in vehicle repair and operating costs.
We can either invest now or pay a whole lot more in the years ahead. The lesson is clear: We can’t afford not to act.
On June 10, ASCE and other industry leaders launched www.FixTheTrustFund.org, a new public advocacy campaign aimed at mobilizing public action on the looming transportation funding cliff. Check out the Youtube promotional video, sign a Change.org petition, or follow the conversation on Twitter at #FixTheTrustFund.