Increase federal Highway Trust Fund (HTF) revenue through user fees and excises, drastically cut federal highway and public transportation funding to the states, or significantly increase the federal deficit by borrowing the needed funds. These are the only options for Congress to address the future solvency of the HTF and complete action on a six-year surface transportation bill, according to the American Road & Transportation Builders Association’s (ARTBA) top economist.
ARTBA Vice President of Economics and Research Bill Buechner said there are two serious problems with the HTF that must be immediately addressed.
“The first is dealing with the short term solvency of the trust funds to protect jobs. The second is raising the significant additional revenue necessary to fund the federal share of the future capital improvements and activities necessary to upgrade the dismal physical conditions and performance of our highway and transit system,” Buechner told a House Ways & Means Subcommittee on Special Revenue Measures & Oversight hearing aimed at addressing U.S. surface transportation needs. “Today, through neglect, we have a system that is an increasing drag on the U.S. economy in terms of lost productivity and increased health care and energy costs.”
Buechner, a Harvard-trained economist who spent two decades with the Congressional Joint Economic Committee before joining ARTBA in 1996, told the subcommittee a $5 to $7 billion revenue cash infusion will be necessary by August to prevent the HTF Highway Account from failing to meet its obligations during this fiscal year.
Maintaining the current $41 billion highway program funding level in FY 2010 will require an additional $10 billion trust fund revenue enhancement.
“Failure to provide it will mean every state will lose more than a third of its annual highway fund apportionment — a situation that would jeopardize about 400,000 jobs across the nation,” Buechner testified. “We urge Congress to address the current fiscal year problem immediately, and to address the FY 2010 and beyond problem by passing a robust, six-year authorization bill this year.”
Beyond the immediate HTF challenge, is the immense gap between projected future HTF revenue and looming highway and mass transit investment needs that we should begin tackling in the next surface transportation authorization bill, ARTBA said.
The U.S. Department of Transportation (U.S. DOT) reports to Congress every-other year on the condition and performance of the nation’s surface transportation system. This “needs report” provides a widely accepted baseline of infrastructure cost estimates.
When you combine the U.S. DOT report estimates with real world information on highway construction costs and also assume the federal share of highway investment will be consistent with that of the past several decades, Buechner said, it becomes clear the federal highway program needs to be funded at a minimum of $62 to $69 billion per year in the next authorization just to maintain current conditions and performance.
He pointed to a Congressional Budget Office (CBO) finding that anticipates annual highway account revenues over the next authorization period to be between $32 and $35 billion. This means Congress will have to address a more than $31 billion annual revenue gap just to maintain current road and bridge conditions, he said. Absent additional revenues to the trust fund, CBO calculated that it could only support an average annual highway program investment over the next authorization of $31 billion. That compares to $40.7 billion during the current fiscal year.
A similar analysis based on the U.S. DOT report indicated a public transportation program need of $12 to $13 billion annually just to maintain transit conditions and performance, and a $16 to $18 billion investment to improve them. According to CBO, revenues into the trust fund’s mass transit account are anticipated to average only $5 billion per year.
Buechner cited the reports from the congressionally-chartered National Surface Transportation Infrastructure Financing Commission, and the National Surface Transportation Policy & Revenue Study Commission, which reached a similar conclusion: the most efficient way to increase transportation improvement revenue is to raise the federal gas and diesel tax rates and then index them annually to inflation to finance the next authorization bill.
All other revenue options such as tolling, public-private partnerships, and congestion pricing also should be on the table, Buechner testified. A plan to transition to a vehicle-miles-traveled user fee system for the long term also should be included in the final legislation.
He urged the subcommittee to look at new revenue enhancements to support the development of a federally-led, accelerated program to ensure the nation has the infrastructure necessary to facilitate the safe and efficient movement of goods as proposed in the ARTBA’s “Critical Commerce Corridors” initiative.
The association engaged PricewaterhouseCoopers to develop the structure, administration and revenue estimates for this new freight-related excise and provided it to the subcommittee. To finance this important new initiative outside the gas tax, ARTBA proposes establishment of a new federal freight-related fee — a “Highway Transportation Services Tax,” similar to the federal aviation services tax that has been in operation since the early 1970s.