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House committee holds hearing on Highway Trust Fund status

By Jeff Berman, Group News Editor
July 25, 2013

The fact that the Highway Trust Fund (HTF) is financially challenged comes as no surprise to anyone involved in freight transportation and supply chain circles. What’s more, now that it is on the verge of insolvency, how to address that problem appears to be gaining traction in Congress.

That was a major takeaway of a hearing hosted this week by the House Subcommittee on Highways and Transit entitled “How the Financial Status of the Highway Trust Fund Impacts Surface Transportation Programs.”

Current taxes levied for the HTF stand at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel, which together account for about 90 percent of HTF net revenues. These revenues are allocated for federal highway, transit, and highway safety programs. The current HTF tax levels have not been increased since 1993.

In his comments at the hearing, Representative Tom Petri (R-WI), the chairman of the House Subcommittee on Highways and Transit, said that in 2008 the HTF had insufficient revenues and cash balances to meet its obligations, which resulted in an $8 billion transfer from the United States Treasury General Fund.

That transaction came at a time when the future of the HTF was dire, as it was facing the prospect of running out of money entirely.

Petri added that by the end of 2014, a total of $54 billion will have been transferred from the General Fund into the HTF in order to remain solvent, including an $18.8 billion transfer signed off on by Congress as part of the federal transportation bill, MAP-21, which is set to expire in September 2014.

“As the purchasing power of the Federal fuel taxes continues to decline year-to-year and vehicles become more fuel efficient, current spending levels will continue to outpace the money collected from fuel taxes,” said Petri. “Over time, the gap will only worsen. MAP-21 is set to expire [next year] and current projections show that the Trust Fund will once again become insolvent and unable to meet its obligations starting in fiscal year 2015.  Without changes in spending levels or additional revenue, the Trust Fund will continue to be unable to meet its obligations over the ten year budget window.”

Petri’s comments were nothing entirely new to those whom have been following this issue, but the fact that it is being raised could eventually be a positive, depending on what steps Congress might take to address it in the future. 

But in the present, the state of the HTF is—and has been—an issue for a number of years.

U.S. Chamber of Commerce President and Chief Executive Officer Thomas J. Donohue has said myriad times in recent years that the U.S. needs to “quit fooling itself,” When it comes to the motor fuel tax. He has also noted that with the tax not being changed for more than 15 years, it is likely that infrastructure and related-funding problems will continue.

Even though the federal gasoline tax situation remains muddled, there are positive steps being made on a state level in certain states to increase taxes on their own in Maryland, Virginia, and Wyoming. And other states are starting to consider following suite vetting the possibility of raising their gasoline taxes to address their respective transportation infrastructure issues, which is both a state and national issue.

“I have three quick thoughts on the fact that states are starting to vote for higher taxes to fund highway investment,” said John Cutler, general counsel for the National Shippers Strategic Transportation Council (NASSTRAC). “First, this is a bi-partisan development. The Virginia state government is controlled by Republicans and the Maryland state government is controlled by Democrats, but both states are acting to address state transportation needs. Second, it’s appalling that the federal government is unable to do what state governments are doing, and unable to bring comprehensive national planning to the process. I understand the fundamental role played in this dispute by the two parties’ conflicting positions on taxes. However, the failure of Congress to compromise on infrastructure investment after so many blue-ribbon commission reports calling for more spending, after ATA’s announcement of support for higher fuel taxes, and after the recent Civil Engineers’ report card of D for our infrastructure, helps explain why approval ratings for Congress are at or under 10 percent. Third, MAP-21 expires just before the 2014 mid-term elections, when a longer term solution is least likely. It makes sense for states to act.”

In a 2012 column written for LM, Transplace CEO Tom Sanderson explained that the HTF currently takes in and pays out about $35 billion per year— excluding transfers from the Treasury General Fund.

“What started off as a user-fee system to pay for highway construction and repair has morphed into a large federal ‘cookie jar’ that politicians use to direct money to their favorite causes while our highways and bridges deteriorate at an alarming pace,” wrote Sanderson. “Now is the time to take the cookie jar back.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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