LegiStorm

Summary:

For many years, federal surface transportation programs were funded almost entirely from taxes on motor fuels deposited in the Highway Trust Fund. The tax rates, which are fixed in terms of cents per gallon, have not been increased at the federal level since 1993. Meanwhile, motor fuel consumption is projected to decline due to improved fuel efficiency, increased use of electric vehicles, and slow growth in vehicle miles traveled. In consequence, revenue flowing into the Highway Trust Fund has been insufficient to support the surface transportation program authorized by Congress since 2008. Congress has yet to address the surface transportation program's fundamental revenue issues, and has given limited consideration to raising fuel taxes in recent years. Instead, since 2008 Congress has supported the federal surface transportation program by supplementing fuel tax revenues with transfers from the U.S. Treasury general fund. The most recent reauthorization act, the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94), authorized spending on federal highway and public transportation programs through September 30, 2020. The act provided $70 billion in general fund transfers to the Highway Trust Fund for FY2016 through FY2020. This use of general fund transfers to supplement the Highway Trust Fund will have been the de facto funding policy for 12 years when the FAST Act expires. Congressional Budget Office (CBO) projections indicate that the Highway Trust Fund insufficiency relative to spending will reemerge following expiration of the FAST Act. The projections indicate a shortfall of $68.8 billion over the first five years following the FAST Act, and $90.7 billion over the first six years. These projections do not reflect the possible impact on revenues of the economic downturn related to the COVID-19 pandemic. As the September 2020 expiration of the FAST Act approaches, Congress may again examine adjustments to the funding and financing of the federal role in surface transportation. Raising motor fuel taxes could provide the Highway Trust Fund with sufficient revenue to fully fund the program in the near term, but may not be a viable long-term solution due to expected declines in fuel consumption. It would also not address the equity issue arising from the increasing number of personal and commercial vehicles that are powered electrically and therefore do not pay motor fuel taxes. Replacing motor fuel taxes with a vehicle miles traveled (VMT) charge would need to overcome a variety of financial, administrative, and privacy barriers, but could be a solution in the longer term. Treasury general fund transfers could continue to be used to make up for the Highway Trust Fund's projected shortfalls but could require budget offsets of an equal amount. The political difficulty of adequately funding the Highway Trust Fund could lead Congress to consider altering the trust fund system or eliminating it altogether. This might involve a reallocation of responsibilities and obligations among federal, state, and local governments. Some surface transportation needs can be met by private investment, including public-private partnerships, and federal loans from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. If it desires to promote private investment in transportation infrastructure, Congress could consider asset recycling incentive grants to state and local governments for the sale or lease of government-owned infrastructure if the proceeds are committed to new infrastructure. Tolling may be an effective way to finance specific roads, bridges, or tunnels that are likely to have heavy use and are located such that the tolls are difficult to evade. All revenue from tolls flows to the state or local agencies or private entities that operate tolled facilities; the federal government does not collect any revenue from tolls. However, a major expansion of tolling might reduce the need for federal expenditures on roads. Tolls and private investment are unlikely to provide broad financial support for surface transportation needs, and many projects are not well suited to alternative financing.