DMI Blog

John Petro

The Highway Trust Fund Shortfall

In a reversal of policy, the Bush administration has stated its support for plugging a hole in the US Highway Trust Fund by using funds from the country's general fund. The Highway Trust Fund is supported by gasoline taxes, an 18.4 cent charge on every gallon of gasoline sold in the US. However, because Americans are driving less, the Highway Trust Fund has unexpectedly found itself short on funds.

But the real reason for the shortfall, according to US Department of Transportation Secretary Mary Peters, is Congress.

In a press briefing last week, Secretary Peters cited "wasteful spending and and unnecessary and unsupported earmarks" totaling $24 billion in the last transportation bill. Additionally, Congress had the audacity to balk at the administration's proposal to raid the country's Mass Transit Account, which currently has a surplus of $3.1 billion.

Let's not bother with the fact that, for the first time since a brief dip in 1979, Vehicle Miles Traveled (VMT) is decreasing, meaning that Americans are using highways less, and mass transit ridership is increasing. I know, in the face of these trends, most would figure that we should be increasing mass transit spending while decreasing highway spending, but that's not how the logic of Mary Peters operates.

Fortunately, Congress decided that the solution touted by Mary Peters and the president just doesn't make sense.

One common sense solution would be to pull back any upcoming new highway construction. Why should we continue to expand the highway network at the same rate as before when VMT is dropping?

Another common sense solution would be to increase the gas tax. Since the gas tax is a charge on the number of gallons purchased, rather than a percentage of the total purchase price, the amount of tax collected per miles driven is decreasing (especially now that consumers are turning to more fuel-efficient cars). The gas tax has not been raised since 1990 and federal gas tax receipts plateaued in the late 1990s. Since then, gas tax revenues have been declining, when controlled for inflation.

Raising the gas tax would most certainly be a politically difficult task, and would be something that most Americans would not support. But the fact is, Americans will have to pay for their roads and highways one way or another. If not through the gas tax, than it will be through other taxes and fees. User taxes, such as the gas tax, at least ensure that those using the road system are those that pay for it.

As for that Mass Transit Account surplus, we should look at reforming the process by which the federal government approves funding for transit projects. Specifically, the way the FTA calculates "cost effectiveness" when rating projects and the fact that highway projects get funding for 80% of cost and transit projects get at most 60% federal funding.

John Petro: Author Bio | Other Posts
Posted at 11:46 AM, Sep 10, 2008 in Transporation
Permalink | Email to Friend