Cross-chamber duo’s new bill that calls for different ways to approach funding transport projects

While the federal fuel tax has not seen an increase of any kind going back to 1993, there has been no shortage of proposals for increasing it to get the primary funding mechanism for funding national surface transportation projects back on track, as well as into the black, a place where it is not today as the HTF continues to pay out more money than it currently takes in.

It is not a small problem by any stretch, with data from the Tax Foundation highlighting that, with the HTF facing an estimated $168 billion shortfall over the next decade, and should there be no general fund transfers, the HTF is expected to run out of funds by mid-2015, with to increased spending and an eroding gas tax.

One of the most recent plans to remedy the difficult situation the HTF came from Rep. Ron DeSantis (R-FL) and Sen, Mike Lee (R-UT) with their introduction of the Transportation Empowerment Act in the House and Senate. The pair said that this bill will reform U.S. transportation policy and reduce the federal gasoline tax in addition to giving states the financial flexibility to use transportation funding where it is most appropriate.

“For far too long, Washington has tried to patch the holes in the Highway Trust Fund without offering constructive solutions to the underlying problems,” DeSantis said in a statement. “We need to modernize the way we handle transportation projects, not just rely on short-term fixes or a one size fits all approach to the nation’s infrastructure needs. The Transportation Empowerment Act will give states the power to determine their own road map for transportation policy while largely eliminating Washington’s role as a bureaucratic middleman.”

And Lee cited other drivers for the legislation as well, noting how the HTF remains broken and will not be fixed by another year of “band aid funding,” coupled with drivers buying less fuel, and he explained that this bill would provide a spark to the current state of transportation infrastructure by slowly cutting the federal gas tax and giving states the opportunity to better identity which projects needs funding and how to fund them.

Key components of the Transportation Empowerment Act include:
-transferring much of the responsibility for transportation projects to the individual states, permitting them to decide how to best spend their transportation dollars;
-allowing states to take ownership of their infrastructure needs and programs, eliminating restrictive and costly red tape imposed by the federal government; and
-gradually reducing the federal gasoline tax over 5 years from 18.3 cents a gallon to 3.7 cents a gallon, collecting enough revenue for the federal government to maintain interstate highways and transportation projects

As previously reported, past federal transportation bills, as well as the White House’s GROW AMERICA proposal have one fatal flaw when it comes to the HTF and the federal gasoline tax: they each leave the HTF on worst financial shape after the bill expires than it was prior to the bill being enacted, especially when looking at the projected future HTF deficits, which are based on the Congressional Budget Office’s new current-law-plus-inflation baseline.

The CBO has the HTF deficits are for FY 16 through FY 18 at -$14 billion, -$14 billion and -$15 billion, respectively, with the GROW AMERICA act expected to run even steeper deficits, ranging from -$37 billion alone in FY 2022, $-32 billion in FY 2023, and $-30 billion and -$29 billion in FY 2024 and FY 2025, respectively.
A position paper issued in March by Jeff Davis, senior fellow at the Eno Center for Transportation called for new ways of thinking when it comes to the HTF.

Davis said the best laid plans would essentially replicate what President Dwight D. Eisenhower’s 84th Congress did, which is this: “enact legislation providing ten or more years of contract authority for core federal surface transportation interests while also providing additional funding on a shorter timeline for other transportation programs.”
Davis made it clear that this proposal legs, too, based on historical precedent, as Eisenhower’s 1956 law provided 13 years of stability with guaranteed contract authority drawn on the new HTF which in turn was used to construct the Interstate system in the U.S.

To get back to that period of sustained HTF stability again for the next decade, Davis said two actions are required -reducing new HTF contract authority to whatever the actual user tax receipt levels will be; and -paying down the “legacy debt” of unsustainable outlays from obligations incurred prior to FY 2016 that are estimated to be $20-$25 billion.

This scenario, according to Davis, could require $50 billion in business tax reform or a non highway-user asset to pay for a ten-year transportation bill that would provide $422 billion along with ten years of contract authority for core federal programs at roughly $40 billion per year to be supplemented by $12-$13 billion per year in additional general fund budget authority in the first two years to keep total spending at baseline levels. He also explained that additional proceeds from tax reform could support higher levels of general budget fund authority for a longer period of time, with any increase in highway user taxes automatically increasing the size of annual HTF contract authority appointments.

“People need to start thinking outside the box…in terms of coming up with ways of making money go farther,” Davis said on an Eno-hosted conference. “We are the only country left that has a major revenue source for users paying for surface transportation, but if you are going to keep a trust fund, it should be solvent and self-supporting and should not depend on bailouts.”

Raising the federal gasoline tax still continues to be a non-starter in political circles, with many transportation stakeholders lamenting how the political will is simply not there to make such a move.

Congress has made it clear that the federal gasoline tax, which has remained at the same levels going back to 1993, will not be raised, while leaving the door open to other funding possibilities, including: dedicating funds from corporate tax reform to pay for surface transportation; a proposed streamlining of infrastructure permitting processes; infrastructure banks; and indexing the gas tax to keep pace with inflation; among others.

From a transportation services provider perspective, Randy Mullett, vice president of government relations for Con-way Inc., said it is disappointing that Congress has been unable to agree on funding mechanism that will support a robust, long-term surface transportation bill, adding that Con-way and many others continue to support a fuel tax increase but it appears to be a non-starter with the leaders of both parties.

“In that light, the short-term extension was expected but it does keep pressure on the Congress to come up with a long-term funding solution sooner rather than later,” he said. “Using highway finding as a catalyst for broader tax reform may help us achieve both but it certainly makes the process more complex. If Congress is unable to reach consensus on highway funding by year-end, I don’t expect to see a long-term bill until after the next President takes office.”