State transportation agencies are depending on large federal payouts this time of year to complete road construction projects during prime construction season. But those payments could start shrinking come Friday.
That’s the deadline for Congress to agree on a way to replenish the federal Highway Trust Fund, which is again headed toward insolvency as spending outpaces revenue. This fiscal year, payouts from the Highway Trust Fund to pay for road work (about $44 billion) are expected to exceed revenues, primarily from federal fuel taxes ($34 billion), by almost 30 percent, according to the Congressional Budget Office.
That the plan to replenish funding is coming down to the wire in Congress again is no surprise. Also unsurprisingly, there’s limited talk of a serious, long-term solution to the nation’s highway funding dilemma factoring into the debate on Capitol Hill, which has come down to two competing plans to fund work on the nation’s highway infrastructure.
The Republican-led Senate is expected to take a final vote this week on a six-year funding extension that cobbles together revenue ( but only three years’ worth) from measures that strengthen enforcement of some taxation provisions and redirect some revenue sources to the highway fund from the Treasury’s general fund. Over the weekend and on Monday, debate in the chamber focused on unrelated amendments to repeal the Affordable Care Act and reauthorize the Export-Import Bank and attempted amendments to halt the Iran nuclear deal and President Obama’s executive action on immigration.
The House, also Republican-led, has approved a measure to replenish the Highway Trust Fund through December while U.S. Rep. Paul Ryan, R-Wisconsin, leads an effort to work out changes to the way the federal government taxes U.S. corporations’ overseas profits. Under a draft plan developed in the Senate, the Highway Trust Fund would benefit from a one-time tax on profits companies are holding overseas.
Meanwhile, seven states (not Maine) have halted highway construction as they wait on Congress, which is in a bind because Republican leaders refuse to fully tap into the Highway Trust Fund’s built-in revenue source: the gas tax.
The tax rose to 18.4 cents per gallon in 1993 (and 24.4 cents for diesel), but it hasn’t changed in the more than two decades since. If the tax had kept pace with inflation, it would be 30.4 cents today.
But it’s possible that not even that level would have been enough to keep up with the amounts needed to cover highway repairs, maintenance and construction. Since 2003, prices for asphalt, concrete, cement and other critical components of road construction have risen faster than inflation. To complicate matters, Highway Trust Fund revenues have stagnated in recent years as people have driven fewer miles and driven more fuel-efficient vehicles — largely the result of a depressed economy. Meanwhile, the nation’s highway infrastructure has continued to age.
If members of Congress wanted to get serious about long-term revenue options for the Highway Trust Fund, they would have plenty to talk about.
In the short term, they should focus on raising the gas tax — a user tax that ensures those who use the roads the most assume most of the cost of maintaining them. There are options to limit the impact on low-income drivers. The Hamilton Project, an initiative of the Brookings Institution, suggests having the gas tax fluctuate inversely with the price of gasoline, so drivers pay less tax when fuel prices are high. Congress would set minimum and maximum levels for the federal gas tax, and those levels would change with inflation.
For the long term, the federal government — through pilot project grants — can help states transition to systems in which they charge a tax based on the number of miles drivers travel. A Congressional Budget Office analysis found that such fees are less onerous on low-income and rural households than fuel taxes because these households tend to own older, less fuel-efficient vehicles.
Unfortunately, today’s Congress seems virtually incapable of such serious consideration of a major policy problem.