The ongoing saga of the Highway Trust Fund shortfall has no clear end in sight

More than a few times in this space, we have rang the bell for the need for something to be done to augment the always perilous state of the Highway Trust Fund (HTF).

As previously noted, the HTF is critical as its revenues are allocated for federal highway, transit, and highway safety programs. But as we also know the main funding source for the HTF, the federal gasoline tax, has not increased from its current levels of 23.4 cents for diesel and 18.4 cents per gallon of gasoline since October 1993. What’s more, diesel taxes represent about 90 percent of Highway Trust Fund (HTF) net revenues.

Calls to increase the HTF and/or have to taxed to inflation for many years, while Congress continues to punt on short-term extensions, or continuing resolutions, to keep things at least in place at current levels, while states are stranded in the sense that is more than hard to plan, manage, and budget for long-term, overdue projects that are lacking in terms of how long actual funding will be made available. Not a good situation to have. As an aside, many industry stakeholders are hopeful that a long-term transportation authorization is coming but we won’t know until we know basically.

To put exactly into perspective how dire the current financial situation is for the HTF, one does not need to look further than data released by the United States Energy Information Administration (EIA).

In a research brief issued on Nov. 10, EIA said that at the end of July the HTF was at its lowest level in decades at $6.1 billion. And while a Congressionally approved transfer of more than $8 billion brought the HTF balance to $12 billion at the end of the fiscal year on September 30, it still represented the second-lowest fiscal year-end level since 1984, more than 30 years ago.

It is clear that as people cut back on driving, less capital goes into the HTF in the form of gasoline tax receipts. EIA explained that the HTF’s balance is derived by the “relative value of tax receipts, outlays, and transfers from other funding sources. Tax receipts are based on fuel consumption rather than driving distance, so as fuel economy improves, tax receipts may decline even as travel rises.”

And from 2007-2011, EIA said that highway travel decreased and reduced HTF tax receipts and since 2011, though, vehicle-miles traveled has gone up, and over time EIA said HTF expenditures have gone up as the highway system expands and ages due to higher maintenance requirements. 

The current predicament of the HTF paying out more than it takes in was intact at the end of the fiscal year, with the EIA saying the average monthly net HTF tax receipt was around $3 billion, while the average monthly outlay was almost $4 billion, which, again, led to Congress authorizing the aforementioned $8 billion transfer from other sources in July to keep the HTF solvent.

Coming up with ways to improve the current situation regarding the HTF’s perpetual funding shortfall somewhat feels like an exercise in futility at this point, given how long it has been since the HTF was actually raised.

Many industry associations maintain that with gas prices still low that not is the time to take action. Think Congress may have jumped on that? Think again.

Is that because they think these short-term extensions are more efficient and productive? It seems doubtful to be honest.

James Burnley, a partner at Washington, D.C.-based law firm Venable LLP and former Secretary of Transportation under the late President Ronald Reagan, told LM last year that the key players in Congress are all signaling that since the transfers from the general treasury accounts into the HTF have been going on for more than six years, these ongoing patches and short-term extensions are essentially a short-term fix.

“Doing these short-term patches has gotten harder, and because of basic underlying trends each time we go through this, we need more money as the shortfall is growing,” he explained. “It is time for leadership in both parties to try to come to a consensus to a longer-term remedy, whatever that means, and find other alternatives. Political leadership in both parties in Congress is saying they have run their string out with short-term patches in this round and are not likely able to keep doing this.”

Here’s to hoping political smarts eventually wins out over the ongoing lack of political will when it comes to raising the federal gasoline tax.