October 25, 2014

CBO Warnings on Highway Trust Fund

  • Discretionary spending is the portion of the federal budget determined through the Congressional appropriations process. Approximately one-third of...

The Congressional Budget Office (CBO) recently emphasized the need for lawmakers to soon address the revenue shortfall in the Highway Trust Fund, which must otherwise stop some payments for ongoing projects later this summer.

Congress, however, is still struggling to find a solution.

In a response last week to questions from lawmakers on the issue, CBO warned that the current mismatch between transportation spending and revenues “creates uncertainty for state and local governments and for private contractors that build and maintain highways.”

The budget office added that sudden changes in spending authority as a result of this mismatch could lead to planning difficulties for state and local authorities and delays in planned and ongoing projects.

For the next decade, the projected imbalance between trust fund spending and revenues is $167 billion.

In the last six years, Congress has transferred over $50 billion in general revenues to cover shortfalls in the Highway Trust Fund. That defeats the purpose of having a dedicated source of revenue -- the federal motor fuels tax -- and does not resolve the basic problem.

At its current level, the motor fuels tax can no longer produce enough revenue to keep up with spending. Lawmakers, however, have refused to increase the tax since 1993. If they continue to do so, they will need to consider other options.

So far lawmakers have only introduced short-term proposals that rely on unrelated items like postal service cuts or closing certain tax loopholes. These would do nothing to address the structural problems with transportation funding.