The federal fund that pays for critical improvements to the nation’s highways was destined for insolvency by the end of August last year.
In typical fashion, Congress stepped in just weeks before an Aug. 1 deadline and fixed the problem — with an $11 billion transfer to the Highway Trust Fund from the federal government’s general fund.
But Congress’ fix didn’t last long. The Highway Trust Fund is again destined for insolvency since the $11 billion patch was only intended to sustain the fund through the end of May. That’s four months away. Between now and then, Congress can either agree to another last-minute, temporary fix or, better, a more enduring solution for the nation’s highway funding dilemma.
The odds would favor another temporary fix. Since 2008, the federal government has transferred nearly $65 billion to the highway fund to keep it afloat. That’s because there’s a fundamental problem with how the nation funds the construction and upkeep of its roadways that Congress has neglected to solve.
The federal gas tax, the Highway Trust Fund’s primary funding source, has remained at 18.4 cents per gallon of gasoline (and 24.4 cents per gallon of diesel) since 1993. But in those 22 years, the cost for the construction the gas tax pays for has risen with inflation. If the gas tax had kept pace, it would be 30 cents per gallon today.
The result? The Highway Trust Fund — which pays for both road and transit improvements — faces a $161 billion shortfall by 2024, according to the Congressional Budget Office. The Institute on Taxation and Economic Policy estimates that 78 percent of the shortfall is due to Congress’ inaction on the gas tax; 22 percent is the result of less gas tax revenue collected due to cars’ improved fuel efficiency.
Fortunately, some in Congress are trying to solve the underlying problem. Sens. Bob Corker, R-Tennessee, and Chris Murphy, D-Connecticut, have reintroduced a bill to raise the gas tax to 30.4 cents a gallon over two years and peg it to inflation after that; the legislation would lower other taxes. Sen. Rand Paul of Kentucky is proposing a tax holiday for corporations during which they could repatriate cash they hold overseas; the revenue from the temporarily reduced rate would replenish the Highway Trust Fund.
Maine Sen. Susan Collins, now chair of the Senate Appropriations Committee’s transportation subcommittee, said earlier this month she was looking into options for raising the gas tax — potentially indexing it to inflation while providing a rebate for low-income people. She also said she was “intrigued” by Paul’s plan, according to the Portland Press Herald.
Maine receives about $160 million a year from the Highway Trust Fund, according to the Maine Department of Transportation. Federal highway funds account for about 31 percent of the department’s roadwork budget.
But even if the federal government stuck to its current funding levels for Maine — which has a 30-cent state-level gas tax that lawmakers stopped indexing to inflation in 2011 — the state would still come up short in maintaining Maine’s major roads.
Under a 2011 law, all Maine roads ranked Priorities 1 and 2 — which account for 11 percent of road miles but 51 percent of traffic — must be in fair condition or better by 2022. By 2027, Priority 3 roads — other key regional routes — must meet the same standard. But the state isn’t on track to meet those goals. According to the three-year work plan the DOT recently released for 2015-2017, the state needs about $119 million more each year to stay on track.
It’s up to Congress this year to find a highway funding fix that lasts more than nine months. In the short term, that likely involves hiking the gas tax and indexing it to inflation. It should explore alternative funding mechanisms — such as a per-mile tax on vehicles or increased tolls — for the long term.