In a good example of history repeating itself, Congress for the second year in a row is going down to the wire on a mid-summer deadline to replenish the Highway Trust Fund before it runs out of money.
If lawmakers can’t find a solution by July 31, states will not receive promised funding from the federal government to help pay for transportation projects, bringing many such projects around the country to an abrupt halt.
In a good example of history repeating itself, Congress for the second year in a row is going down to the wire on a mid-summer deadline to replenish the Highway Trust Fund before it runs out of money.
If lawmakers can’t find a solution by July 31, states will not receive promised funding from the federal government to help pay for transportation projects, bringing many such projects around the country to an abrupt halt.
Proposals released last week rely on a flawed plan to temporarily replenish the trust fund. One of those proposals, however, does identify an alternative way to fund transportation spending that could be a long-term solution.
Lawmakers also have to reauthorize highway and transit programs after passing a two-month extension of them in late May. The short-term patch ensured that state governments could continue to be reimbursed for infrastructure projects during peak construction season, but lawmakers delayed action on needed reforms to transportation financing.
And make no mistake, the trust fund has structural problems that need to be addressed. Over the next decade, the gap between dedicated revenue and planned spending will significantly widen. That will force Congress to either fill the shortfall with money from elsewhere in the federal budget or greatly reduce funding for transportation programs.
The primary reason for the growing gap is that taxes on gasoline and diesel fuel — the dedicated funding source — have not been indexed to inflation or otherwise raised since 1993.
In addition to worsening the federal government’s fiscal position, the gap creates uncertainty for state and local governments that depend on federal transportation funding.
The potential consequences of the trust fund’s shortfall should galvanize lawmakers, but so far they have made little progress towards a long-term solution.
At recent hearings focused on the trust fund, top lawmakers on the Senate Finance and House Ways and Means committees said they were committed to passing a 6-year reauthorization of transportation programs but were light on the funding details.
The Congressional Budget Office estimates that dedicated revenue for the trust fund will fall short of planned spending by nearly $90 billion over six years, a large gap for lawmakers to fill if they want a 6-year reauthorization.
The Senate Environment and Public Works Committee approved such a measure and added new spending, but left out how it would be paid for.
The lack of a payment plan makes it more likely that lawmakers will fall back on another short-term extension, continuing an unfortunate pattern of cobbling together funding for only a few months at a time. Ways and Means Chairman Paul Ryan (R-Wis.) recently expressed his support for a short-term extension, saying he is drafting legislation to pay for transportation funding until the end of this year, hoping the extra time will allow lawmakers to find a longer-lasting source of revenue.
Recent history though suggests lawmakers will struggle to use the time given by yet another temporary extension to find such a funding source.
Over the last six years, Congress passed 33 short-term funding extensions for the Highway Trust Fund, relying on transfers from the Treasury’s general fund as well as dubious offsets and gimmicks. Lawmakers should not continue to use general revenue to plug the trust fund’s growing deficits; nor should they mask the cost of doing so by authorizing funding for only months at a time. It is fiscally irresponsible and simply delays the action needed for long-term solvency.
Senators Chuck Schumer (D-N.Y.) and Rob Portman (R-Ohio) last week endorsed using repatriated corporate profits to support the trust fund, joining congressional leaders and President Obama.
A bipartisan working group of Senate Finance Committee members last week also suggested using repatriated corporate profits but added that this is not a viable long-term solution.
Using unrelated corporate profits to fund transportation spending is a poor approach that runs counter to the idea of dedicated revenue, relies on one-time measures that will not produce adequate permanent funding, and delays structural changes.
Lawmakers should work to find a feasible, bipartisan solution. The trust fund should have a reliable stream of dedicated revenue that is consistent with the country’s transportation needs and the fund’s historical “user pays” principle — the idea that funding should come from taxes or fees directly tied to the purpose of a particular fund.
There are a number of responsible options to bring trust fund spending and revenues in line. They include:
- Raise revenue by increasing motor fuels taxes.
- Economize on highway spending by directing more funding towards maintenance rather than new construction.
- Find other additional funding or an alternative to motor fuels taxes.
A bipartisan group of congressmen introduced a promising plan in the spring that would index motor fuels taxes to inflation. The plan then would establish a commission to find an alternative funding source. If that panel fails to do so, motor fuels taxes would be periodically raised to cover the remaining shortfall for the next decade.
Proposals have been supported by other lawmakers and bipartisan commissions to raise motor fuels taxes or replace them with an alternative funding source. The Senate Finance Committee working group highlighted a vehicles-miles-traveled tax (VMT) as a long-term replacement for motor fuels taxes, saying it could be a reliable, efficient funding source that maintains the “user pays” principle.
None of these solutions can make a difference unless lawmakers decide to enact them. To that end, Congressmen Reid Ribble (R-Wis.) and Peter Welch (D-Vt.) are urging congressional leaders to adopt a little-known legislative process called “Queen of the Hill.”
Under this process, Congress could consider a number of options to replenish the fund, with the one receiving the most support advancing to the President’s desk. While such a process might not necessarily yield the ideal solution, it would at least give lawmakers a range of bipartisan options to consider instead of forcing them to accept or reject a flawed proposal. Because every senator would have an opportunity to weigh in during this process, the Queen of the Hill approach would also discourage filibustering the winning measure.
A solvent Highway Trust Fund would provide crucial benefits for the nation, including:
- An end to general revenue transfers that place additional pressure on the federal budget.
- Greater confidence among the states in the reliability of federal funding.
- A clear path forward for transportation funding.
Lawmakers acknowledge a long-term solution is badly needed, but they have to start taking steps to enact one.
Iain Barr, a Concord Coalition intern, contributed to this blog post.
