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John Hennessy III,

A Conservative Vision for the Future of the Highway Trust Fund

Posted by Content Coordinator on Thursday, June 18th, 2015

Innovation Newsbriefs
Vol. 26, No. 5

Submitted to the House Committee on Ways and Means and the Senate Committee on Finance in response to their invitation for written comments in connection with the hearings on Long-Term Financing of the Highway Trust Fund, June 17, and June 18, 2015 respectively.

Many states, facing repeated short-term program extensions and anticipating uncertain prospects for increased congressional funding, have taken steps to significantly increase their transportation budgets this year. Their intent is to place local transportation programs on a more stable and predictable footing that is less subject to the vagaries of congressional budgeting. Twenty-five states have enacted transportation funding legislation this year and another 16 states are currently in the process of doing so (for the latest summary of state funding initiatives see the attached summary and the report of the American Road and Transportation Builders Association (ARTBA) at ) 

Collectively, these measures are generating billions of additional dollars, enabling states to assume greater responsibility for maintaining local infrastructure and paying for transportation improvements of local benefit, such as those involved in the  “TIGER Grants” and the “Transportation Alternatives” program.  Shifting these activities and other expenditures of lesser federal priority out the Highway Trust Fund could eventually bring Trust Fund spending into balance with incoming gas tax revenues—-and fulfill one of the goals of the recently adopted joint congressional Budget Resolution (See, Conference Report on Concurrent Resolution on the Budget for Fiscal Year 2016,  April 29, 2015). It also would restore  the Trust Fund to its primary function of serving as a source of funds for programs  that are clearly of federal concern or national significance—-notably, maintaining and upgrading the Interstate Highway network and the National Highway System, fixing aging bridges and modernizing critical transit infrastructure . 

Most importantly, aligning Trust Fund expenditures with incoming Trust Fund revenue would place the Highway Trust Fund once again on a self-sustaining basis. It would end the need for periodic transfers of general funds, do away with the awkward search for legitimate offsets (or “pay-fors”) and put an end to the sense of a perpetual funding “crisis.”  

Restoring fiscal soundness to the Trust Fund is not  “devolution,” a concept that calls for phasing out the federal gas tax and transferring all authority over federal highway and transit programs to the states.  “I call this a judicious rebalancing of federal-state responsibilities for funding transportation,” a senior state Republican lawmaker told reporters. “States feel they have no choice but to assume more responsibility because they are not convinced they can rely on Congress for adequate and reliable funding. But the federal transportation program continues and the federal gas tax remains an integral part of the highway funding system. The Democrats’ talk of devolution is just a straw man.”

And indeed, the Congressional Budget Office projects a steady and predictable stream of  federal gas tax revenue of $40 billion per year well into the future (see, Baseline Projections of Highway Trust Fund Accounts, March 2015). This should put to rest the misleading notion that the Highway Trust Fund is about to  “go broke,”  become “insolvent” or “run out of money.” 

A self-sustaining, stable annual $40 billion federal-aid transportation budget extending over a period of six to ten years would go a long way toward restoring and improving the nation’s core surface transportation infrastructure— the Interstate Highway network, roads and bridges on the National Highway System and essential transit facilities. It also would provide states with funding certainty and continuity to pursue large capital intensive infrastructure projects of national significance that require funding over multiple years.

With no political consensus on how to fund the projected $85-90 billion shortfall in a six-year highway bill, and with a near-certain prospect of yet another short-term program extension through December 2015, rebalancing the federal-state relationship in surface transportation by shifting funding responsibility for local transportation from the Highway Trust Fund to the States and localities and dedicating Trust Fund revenues to programs of truly federal priority, would bring a lasting solution to the transportation funding crisis. 

2015 State Transportation Funding Initiatives  The following states have taken steps to raise transportation revenue this year:New York:  Gov. Andrew Cuomo proposed $4.2 billion for transportation investments as he began his second term;  Florida:  Gov. Rick Scott proposed $9.9 billion for transportation (over $4 billion for roads and bridges) in his 2015 budget request to the state legislature;   North Dakota: Gov. Jack Dalrymple signed into law a bill that will provide $450 million for state highway impovments. Another bill, known as the Surge Funding Bill will dedicate $1.1 billion from the state’s Strategic Investment and Improvement Fund for critical infrastructure  projects;  Iowa:  Iowa legislature approved a 10-cent per gallon gas tax increase  The increase will allow $700 million in spending on state highway projects and $200 million in local projects annually. The Iowa House passed a $365.2 million transportation bill. Utah: The state legislature passed a bill that will increase the gas tax by 5 cents-per-gallon, add a 12 percent tax on the wholesale price of gasoline and permit counties to seek voter approval for a local sales tax for local transportation projects. South Dakota: The state legislature approved a fuel tax increase of 6 cents per gallon; the bill also raises vehicle license fees and gives local governments authority to levy their own road improvement fees. The measure is expected to generate over $80 million/year for state and local programs.  Montana: a bipartisan group of state senators introduced a bill that calls for spending $50 million in cash and $50 million in bond proceeds over two years on infrastructure. If state revenue receipts exceeded a certain trigger, the authorized amounts could rise as high as $100 million in cash and $100 million in bond proceeds.Ohio: The House-Senate conference committee approved a $7 billion transportation budget for the next two years and sent the bill to the Governor.   Nebraska: The Nebraska legislature approved a 6-cent/gallon gas tax increase over the next four years, eventually expected to generate $76 million annually.  Tennessee: Gov. Bill Haslam released a three-year transportation program featuring $1.2 billion in infrastructure investments. The program reflects the state’s commitmernt to remain debt-free, Haslam said. The budget ensures that projects already underway won’t be negatively impacted by decisions out of Washington, he added. Mississippi: The state legislature voted to raise $200 million in bond financing to pay for transportation improvements, most of them targeted at structurally deficient bridges. The measure takes effect July 1. DOT Secretary Melinda McGrath linked the legislature’s action to lack of action by Congress. Idaho: the Idaho legislature passed a compromise $94.1 million transportation bill funded with a 7-cent increase in the fuel tax and vehicle registration fees.  Minnesota: The Minnesota legislature passed  a $5.5 billion, two-year bill.  Georgia:  Georgia Governor Nathan Deal signed into law a  bill that will increase transportation funding by $900 million per year through increases in fuel taxes and vehicle fees. Georgia thus joins Idaho, Iowa, South Dakota and Utah to have increased their gas tax to generate recurring transportation revenue. The measure also allows local governments to increase transportation-related taxes.  Atlanta voters approved a $188 million transportation infrastructure bond.  Louisiana: The House Ways and Means Committee approved a Democratic-sponsored one-cent sales tax increase and a 10-cent gasoline tax increase that “could pour billions into transportation improvements over the next decade.”  according to press reports. Kansas: A gas tax hike, possibly of five to ten cents, is under discussion in the House committee, according to press reports. South Carolina:  The South Carolina House approved a 10 cent/gallon (or 60 percent) gas tax increase that will provide at least $370 million for transportation projects A competing Senate bill would generate $800 million. Pennsylvania: The state House passed a measure that will provide up to $2.3 billion in annual transportation funding for highways($1.3 billion)  transit. (500 million) and local road maintenance. The measure raises revenue mainly by removing a cap on the franchise tax paid by fuel distributors. The Senate is expected to take up the measure next. Vermont: Gov. Peter Shumlin signed a $616 million transportation bill authorizing funds for FY 2016. The bill includes $116 million for bridges and $100 million for road resurfacing. California:  California’s Senate is considering a bill that would raise the state gas tax by 10 cents/gallon and increase vehicle sales and registartion taxes. The bill is projected to generate more than $4 billion annually.In the lower house, Assembly Speaker Toni Atkins proposes to create a road user fee to raise $2 billion over five years. A compromise state budget plan is yet to emerge. Washington: The state legislature approved and sent to the governor a $7.6 billion transportation budget to keep existing transportation programs going. Another measure, to pay for new projects, is still being negotiated in the legislature.  “The current plan is the most positive movement that we’ve seen on transportation in this state for many, many years,” said Sen. Joe Fain, Vice chairman of the Senate Transportation Committee. Texas: Gov. Greg Abbott signed three transportation-related bills that, in his words, provide “a historic amount of funding” to build roads. The bills include a measure that ends about $1.3 billion in diversions of gas tax money for non highway items and a provision for a November referendum to approve amending the state constitution to dedicate $2.5 billion of the general sales tax and a portion of future motor vehicle sales taxes to the highway fund. The combined pieces of legislation provide more than $4 billion a year for transportation. Oregon: June is the launch of the state’s new voluntary road usage charge program (OReGO) that proponents view as a potential transportation funding model for the nation, replacing the motor fuel tax.Connecticut: The state legislature and Gov. Dannel Malloy have reached agreement to provide $10 billion over the next five years for transportation,  a $2.8 billion increase from last year, partially funded by redirecting one-half cent from the state’s sales tax. This would be the largest investment in transportation in the state’s history, the Governor announced. North Carolina: Gov. Pat McCrory has proposed a  $2.85 billion bond initiative (Connect NC) to finance his 25-year statewide multimodal  “Vision for Transportation.”   The proposal includes a  $1.37 billion highway bond that would fund 27 highway construction projects and 176 paving projects in 64 counties throughout the state. If approved by the General Assembly, the bond proposal will be placed on the ballot in November. Massachusetts: Gov. Charlie Baker signed a $200 million road bond bill in April 2015. State transportation officials proposed roughly $3 billion in capital transportation projects in fiscal year 2016 for highways, small airports and transit according to press reports.Michigan:  The state House of Representatives approved a series of measures  that would generate an extra $555 million in the fiscal 2015-16 budget year and rise to an estimated $1.16 billion when fully phased in during the 2018-19 budget year. The mesures include a hike of 4 cents a gallon in the state diesel fuel tax, indexing all motor fuel taxes to inflation starting in 2016 and revenue diversion from the state’s general fund by dedicating portions of state income and sales taxes to transportation. A final road funding plan still awaits Senate action.Sources: ARTBA’s Transportation Investment Advocacy Center;   AASHTO Daily Transportation Update; T4America’s survey “State Legislation to Raise Additional Transportation Revenue;” NCSL State Bill Database.   

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation Newsbriefs, now in its 26th year of publication.

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