House and Senate in Different Lanes on Highway Trust Fund
"The House will not support billions of dollars in higher taxes to pay for more spending,” vows one chairman.
July 14, 2014 - 12:48 am
WASHINGTON – The federal Highway Trust Fund, which contributes to road building and maintenance projects across the country, is expected to run out of money in early August, leading some states to issue plans to halt construction in case the well runs dry.
The House and Senate are considering dueling packages and have not reached an agreement on how to address the fund’s impending insolvency. Transportation Secretary Anthony Foxx has advised governors that reimbursements may slow to a trickle if the chambers can’t agree in time.
Foxx told the states his department “will continue to take every possible measure to fully reimburse your state for as long as we can. However, as we approach insolvency, the department will be forced to limit payments to manage the reduced levels of cash available in the trust fund. This means, among other things, that the Federal Highway Administration will no longer make ‘same-day’ payments to reimburse States.”
Congress still has time to act on a long-term solution, Foxx said.
“Our transportation infrastructure is too essential to suffer continued neglect and I hope that Congress will avert this crisis before it is too late,” he told the governors. “I urge you to stand with me in calling on Congress to ensure the solvency of the Highway Trust Fund while committing itself to a sound, bipartisan, and long-term solution that will ensure the stability of the surface transportation system of our nation for the next several years.”
Some states aren’t waiting. Kentucky, for instance, has delayed $185 million in road projects because it can’t count on the federal government to provide reimbursement for the state’s outlays. The Obama administration estimates insolvency could result in the loss of 700,000 jobs.
The Highway Trust Fund was created in 1956 to build the interstate highway system envisioned by President Dwight D. Eisenhower. It has since expanded to help pay for myriad road projects.
It has encountered funding problems for several years. The fund receives money from an 18.3 cents per gallon federal fuels tax on gasoline and 24.4 cents per gallon on diesel fuel, rates that have been in place since 1993. The Congressional Budget Office determined that revenue stream is inadequate to meet contemporary road needs even though the miles Americans drive each year continue to rise. That’s because improved automobile fuel efficiency means drivers are stopping at the pump less frequently, resulting in lower revenues for the fund. Currently, the fuel tax brings in about $34 billion a year.
Congress authorized the transfer of $35 billion from the Treasury to keep the fund solvent from 2008 to 2010 but it thus far has balked at taking action on the latest problem. It has rejected entreaties to increase the fuels tax or tie it to the rate of inflation even though the proposed hike carries the support of the U.S. Chamber of Commerce and other organizations.
“I do not support, and the House will not support, billions of dollars in higher taxes to pay for more spending,” said Rep. Dave Camp (R-Mich.), chairman of the tax-writing House Ways and Means Committee.
The CBO reports that the fund requires an additional $8 billion just to meet its contractual obligations through year’s end. The outlook for FY 2015 is even bleaker. If all existing projects continue at the previous year’s budgeted levels plus inflation and the fuels tax remains at current levels, the Federal Highway Administration would not be able to add any new projects.
The states would be the ones facing the consequences if the issue is not addressed. The American Road & Transportation Builders Association estimates that the average states receives 52 percent of its highway and bridge outlays from the federal government, ranging from a low of 35 percent in New Jersey to a high of 100 percent in Rhode Island. States with toll roads generally receive less federal support than those without toll roads.
President Obama responded by proposing a $302 billion, four-year transportation package that included $63 billion to fill the fundraising gap in the Highway Trust Fund. It included policies and reforms to prioritize investments for repairs and to improve the safety of highways and bridges, subways and bus services, with particular attention to improving roads and bridges in rural and tribal areas.
“It’s not crazy,” Obama said in introducing the plan. “It’s not socialism. It’s not the imperial presidency. We’re just building roads and bridges, like we have for the past 50 years.”