Highway funding woes

Highway improvements, funded by the gas tax, face cash shortfall as Americans drive less and inflation increases

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The Highway Trust Fund — the funding source that pays for most of the nation’s highway improvements — received an emergency infusion of $8 billion from Congress in fall 2008, but the program still faces a long-term cash crisis. The problem, say government watchdogs, is an outmoded revenue-raising model that relies largely on a federal gas tax that has not been adjusted since 1993. This has allowed inflation to eat away at the available money while also leaving the fund short of money when Americans drive less, as in the current economic environment. Overall spending out of the fund has topped revenue since 2002, and the Congressional Budget Office recently estimated that the trust fund would need transfers of a whopping $100 billion from general fund revenues from 2010 to 2018 to cover projected spending unless reforms are made. In 2008 the Government Accountability Office (GAO) listed transportation financing as a “high-risk area” and reported that the Highway Trust Fund “faces a fiscal imbalance at a time when both congestion and travel demand are growing.” The Department of Transportation (DOT) has repeatedly warned Congress to change a funding approach that is now “ineffective and unsustainable.” In January 2008, a National Surface Transportation Policy and Revenue Study Commission recommended increasing the gas tax over the short term, and focusing long-term on a variety of user fees such as “congestion pricing,” for vehicles traveling at peak times in crowded metropolitan areas. A gas tax hike — never an easy sell politically — is likely to face even tougher going in hard economic times, but clearly new funding streams are needed. “It’s not too late, but we’re running out of time,” said a DOT communications official.

Follow-up:
The question of how to finance the Highway Trust Fund will be up for debate next year when Congress takes up a broad reauthorization of surface transportation programs. In late 2008, GAO listed surface transportation as one of 13 “urgent issues” demanding the attention of President-Elect Obama and the 111th Congress.

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