The highway trust fund (HTF) has been kept solvent since 2007 only because Congress has augmented dedicated revenues with $54 billion in general fund transfers. The Committee for a Responsible Federal Budget (CRFB) estimates that if dedicated revenues don’t rise and highway spending rises only at the rate of inflation, the total shortfall would be $170 billion from 2014 through 2024.
CRFB identified four options that individually would completely eliminate the projected $170 billion shortfall over the next decade: (1) cut spending by 35%; (2) raise federal gasoline and diesel taxes by 15 cents; (3) raise the gas and diesel tax by 11 cents and then index the tax to inflation; and (4) replace the fuel taxes altogether with a 1.85-cents-per-mile vehicle miles traveled (VMT) fee. CRFB warned, however, that due to a number of issues that need further study, a VMT likely could not be implemented for a number of years.
The CRFB report addresses not just the funding shortfall but also the need for better prioritization of projects for funding and a reform of the budgetary treatment of highway spending. “The HTF has a unique treatment in the budget, making it immune to the normal forms of budget discipline that ensure policymakers account for the full costs of legislation they pass.”
In the event Congress chooses to keep the HTF afloat through general revenue transfers, it should offset those transfers with savings elsewhere in the budget, CRFB said. Although those offsets could come from anywhere, “there is a strong case for identifying savings from transportation-related spending or tax breaks, given the need to leave other savings ‘on the table’ to address our mounting national debt,” it said.
If Congress is unwilling to deal with the HTF’s funding problem through a structural fix, “transferring funds from general revenue into the HTF would be an acceptable alternative if and only if those funds were fully offset with real spending cuts and/or tax increases elsewhere in the budget,” CRFB said. “Under no circumstance should lawmakers rely on a deficit-financed (or gimmick-financed) general revenue transfer to fund the HTF.”