Driving Home The Need To Fix The Highway Trust Fund

Washington, D.C., is famous for its traffic circles—and infamous for decision-makers who seem to be stuck in them, going round and round and getting nowhere.

Of course, what is happening (or rather, not happening) at the nexus of the federal budget and surface transportation program policy is no laughing matter. At the time of this writing, our federal highway construction system was close to expiring and the Highway Trust Fund was heading toward insolvency once more.

In May, parties involved in road and bridge construction were suffering, and the needed repairs and improvements were put on hold. Lawmakers passed a two-month extension to once again kick the can down the potholed road with a temporary fix.

Never mind that, when Congress applied the transitory patch last summer, the House Ways and Means Committee stated it would give the legislators and the tax-writing committees “ample time” to consider a more long-term solution.

Ten months later, we are back in the same mess.

What you need to know

States rely on grants from the federal Highway Trust Fund to support (on average) more than 50 percent of their highway and bridge capital improvements. Established in 1956 to finance the interstate highway system and certain other roads, this fund receives money from a federal fuel tax of 18.3 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel. These tax rates have not changed since 1993 and account for 90 percent of the fund’s revenues. The remainder comes from taxes on tires, trucks and trailers, certain kinds of vehicles, and interest credited to the trust fund.

The Highway Trust Fund was flush with cash for decades, prompting lawmakers to increase spending in the 1990s. By 2001, however, spending had overtaken revenue, and the fund’s balance started to shrink. Since 2008, it has suffered five cash-flow crises, requiring $65 billion in temporary cash infusions while the surface transportation programs have endured more than 30 extensions.

The Highway Trust Fund is expected to allocate $52 billion to the states but take in only $34 billion in revenue and interest this year. The Congressional Budget Office says Congress needs to find $16 billion to fund the highway and transit accounts for the fiscal year 2016 (beginning Oct. 1), with future years funded at $11 billion to $18 billion.

Continued uncertainty regarding the fund’s fate is causing states to delay or cancel transportation-improvement projects while businesses involved in highway construction hold off on long-term plans. In fact, states have already delayed more than $1 billion in planned transportation projects that would have been part of this year’s highway construction season.

That’s leaving a lot of people unemployed or underemployed, not just road crews. Current federal transportation spending supports an average of 614,000 employees each year in all sectors of the economy, according to research conducted for the Transportation Construction Coalition (TTC), of which NECA is an active member. The same research found that transportation infrastructure investment also makes a positive impact on gross domestic product, productivity and other economic indicators.

What Congress needs to hear

Many industry groups are calling for some type of temporary gas tax increase to keep the trust fund afloat through the end of the calendar year. But what they really need to come up with are some entirely new ways of paying for road and bridge projects. Time-limited increases in fuel tax can no longer be counted on to raise money, especially given the rise of electric and hybrid vehicles and the boost in fuel-efficiency standards that are reducing gasoline consumption.

I think the most important message Congress needs to hear right now is the same one NECA and other TTC members conveyed in a recent letter to House and Senate leadership outlining the effect that previous short-term fixes have had on the construction industry and advocating for a long-term solution to provide certainty for states to plan for large construction projects: “The next surface transportation extension should be of limited duration and include an explicit timeline detailing when the tax committees and the full Congress will act to generate the revenues needed to stabilize and grow highway and transit investment.”

I hope I can report in a future column that Congress has found a long-term solution. If Congress keeps driving in circles, though, that won’t be the case.

About the Author

David A. Hardt

NECA President
David A. Hardt is the current president of the National Electrical Contractors Association (NECA) and contributes the President's Desk column monthly. He took office in January 2015 and will serve a three-year term.

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