The Highway Trust Fund Broke in 2014: What it Means and How to Fix It

Highway System
Highway Trust Fund Going Broke

According to the Congressional Budget Office (CBO), the Highway Trust Fund, founded in 1956 to build the interstate highway system, will go broke sometime before 2015. This isn’t the first time this has happened, as Congress has had to shore it up to the tune of 29.7 billion, taking money from the federal government’s general operating fund.

Lawmakers are discussing options and trying to determine the best course to take to prevent the expected 14 billion dollar shortfall for the 2014 fiscal year. While raising gas taxes, the source of revenue for this fund, has been considered, congress and the president are reluctant to do this.
This isn’t a simple problem as it doesn’t just have one root. Amongst the various roots that have created this problem are:

  • Gas taxes haven’t been raised in the last 20 years, even with inflation. The tax is charged “per gallon” not allowing for inflation.
  • Cars are becoming more fuel efficient, causing consumers to buy less gallons of gas.
  • Higher gasoline prices are causing people to drive less, also reducing their gasoline consumption.
  • Credits for hybrids and other more efficient cars are encouraging more people to shift to these vehicles which consume less fuel.
  • The fund being used for more than its original purposes, providing funding for a host of transportation projects that aren’t part of the federal highway system.

The additional transportation related projects which are diverting funds from the original purpose of the Highway Trust Fund include local transit, environmental mitigation, ferry boats, bicycle paths, and nature trails. None of these were included under the original charter of the fund, yet they account for a sizeable percent of the fund’s total expenditures. Transit alone received 17 percent of the funds in 2010, even though it is a local issue and not a federal one.

At the same time all this is happening, our interstate highway system is in need of major maintenance, with bridges crumbling and highways becoming potholed. Even so, politicians and government bureaucrats would rather spend taxpayer money on impressive new projects, rather than maintain the existing infrastructure, allowing roads and bridges to decay.

While the problem is serious, it isn’t without a solution; even a solution that doesn’t require raising taxes. However, this would require that the government take some drastic steps to maintain and even reduce federal highway costs; something that politicians are reluctant to do.
Nevertheless, a number of practical steps have been proposed to make it possible to keep the fund from going bankrupt, while keeping congress from having to bail it out. These steps include:

  • Limiting spending to available revenues.
  • Ending cash transfers from the general fund to the HTF.
  • Phasing out programs that are locally or regionally based.
  • Limit funding to programs that improve mobility, safety, and relieve traffic congestion.
  • Force state and local governments to pay for local and regional projects, without federal assistance.

While these measures may not be popular, they are necessary to prevent the fund from falling short in 2014. Even though congress could bail out the fund once again, that would merely be a stop-gap measure, not a solution. Raising taxes would help, but America is already screaming about excessive taxes. Increasing gas taxes would not be a popular solution.

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