Scrap Highway Trust Fund for new, sustainable funding model, says new Eno Foundation report

The Highway Trust Fund is irretrievably broken and should be eliminated in favor of a new system of revenue streams or by dedicating a portion of the federal income tax to pay for transportation.
  
That’s the conclusion of a new multi-year report by the Eno Foundation, an influential Washington transportation think tank. The report, released in early December, was funded by the Rockefeller Foundation.
 
The Eno report concludes the HTF—which has continued to operate even though the 166,000-mile Interstate Highway System was officially completed in 1991—is “broken” and should be replaced by a more modern, sustainable funding scheme.
  
“The U.S. government’s current approach to funding surface transportation is not working,” the Eno report concludes. That’s because the federal fuel tax – the primary source of revenue for the HTF – has not been increased since 1993 “and neither political party wants to take the political risks of increasing it.”
    
The report is timely. One of the major pieces of legislation the new 114th Congress will tackle is the current Interstate highway funding bill, which expires in May. Despite calls from trucking companies such as Federal Express and heavyweight lobbying groups such as the U.S. Chamber of Commerce, Congress shows little inclination to adjust the fuel tax to pay for new highway construction.
     
That tax – currently 18.4 cents on gasoline and 24.4 cents on diesel – is by far the lowest of six industrialized nations. In Germany, for instance, the national fuel tax is $3.43 per gallon, United Kingdom $3.55, Japan $2.00, Australia $1.29, and Canada 37 cents.
 
Not surprisingly, the U.S. ranks 19th among countries in ranking of its infrastructure, far behind Germany, which is 10th. The United States spends $52 billion in national surface transportation spending, but could spend much more, the report says.
 
Starting in 2008, Congress has transferred a total of $65.3 billion from General Treasury funds to offset shortfalls in the HTF.
  
“The transfers were more accurately viewed as bailouts of a trust fund that Congress has not effectively managed,” Eno concludes, adding the current “pay-as-you-go” principle of user fees paying for transportation infrastructure no longer effectively exists.
 
“The user pay principle works in theory but has not worked in practice, at least as applied to federal transportation funding in the United States to date,” the Eno report concludes.
  
Maintaining the same broken status quo system will continue to produce what Eno calls “funding uncertainty,” and will exacerbate the current funding shortfalls. Eno says there are three potential solutions:
-Adjust spending to reflect lower revenue;
Adopt a hybrid approach that combines general funds and fuel tax revenue; and
-Eliminate the HTF and pay for surface transportation through the General Fund.

Eno says lowering transport spending is unlikely. Reducing federal spending on roads would simply shift more costs to the states and could lead to a patchwork of roads and bridges in varying conditions.
  
The hybrid approach would codify what essentially has been happening—using, say, user fees for 75 percent of transport needs and General funding for the rest. Politically, this is the “easiest lift,” Eno says, but would still require funding challenges long term.
 
Eliminating the Highway Trust Fund altogether and moving toward a system already in use elsewhere in the world might be the most workable of the three options, Eno concludes.
 
“While this solution represents the most dramatic change from the existing system, other countries have been at least as successful, if not more successful, at providing sustainable and effective funding for transportation without the use of dedicated gas taxes,” Eno concludes.
  
To implement such a model, the federal budget would have to be adjusted to include additional fees needed for transport projects. This could be done by creating new revenue streams or dedicating a portion of the federal income tax for transport needs, Eno says.
 
“Neither of these options would be easy to implement politically, but a strong case can be made to increase available funds for investment in transportation infrastructure,” the report says. “This is fiscally responsible and economically justified, since a well-functioning transportation system is crucial to future economic growth and funds directed to transportation are likely to provide a clear return on investment if spent effectively.”

Polls have indicated that Americans are less opposed to use of sales taxes as a way to raise transportation revenue than they are to increasing fuel taxes or raising or creating new tolls.
 
Eno concludes that this option does represent a “dramatic improvement” over the current system, but could be politically risky.
 
“However, the political challenge may be worthwhile if the end result is a more sustainable and effective surface transportation program,” the Eno report concludes.
 
Immediate reaction to the Eno report was positive. Typical was that reaction from Patrick D. Jones, who heads the International Bridge, Tunnel & Turnpike Association, which lauded the report for its fresh perspective on the issue of highway funding.

“We are encouraged by the report’s look at the ways in which five other countries tackle their transportation funding needs,” Jones said in a statement. “As an international association with members in more than 20 countries, we embrace the need to harness the power of experiences and lessons learned from around the globe.

“In the public discourse about future funding of U.S. road infrastructure, a common refrain heard in every quarter is that ‘all options are on the table.’ If this is so, then we urge all local, state and national leaders who have a voice in transportation funding decisions to seriously consider the findings and recommendations of the Eno report,” he added.
  
Jones said he doesn’t necessarily agree with all the conclusions of the Eno report, he supports the researchers’ conviction that taking a fresh look at both old and new ideas “is imperative if we are to find a sustainable solution to the worsening transportation funding challenge facing our country.”