Plugging the Potholes in Federal Highway Funding

The Highway Trust Fund (HTF), which serves as the clearinghouse for federal highway dollars, is once again facing a severe shortfall. It is expected to run dry unless it receives a $5 to $7 billion cash infusion from the federal government by August.

Given President Obama's emphasis on infrastructure investment, Congress is unlikely to let the HTF flounder. Yet, supplying the cash is clearly a "Band-Aid" approach. It fails to address the real problem - the inability to ensure ongoing revenue generation long term.

We are likely to see shortfalls in HTF funds for years to come unless a more permanent fix is put in place. The American Road & Transportation Builders Association (ARTBA) is already estimating that the current $41 billion highway program funding level for FY 2010 will necessitate a further $10 billion trust fund revenue infusion next summer.

In testimony before the U.S. House Subcommittees on Special Measures and Oversight, Committee on Ways and Means, Bill Buechner, ARTBA vice president, economics and research, cited the reasons behind the HTF funding gap as: the siphoning of both revenue and interest income from the HTF in the '90s to bolster the General Fund; the failure to increase the federal motor fuels tax since 1993; rising highway construction costs; and a reduction in fuel purchases over the past year. (View a complete transcript of Buechner's testimony at www.artba.org.)

Both the National Surface Transportation Infrastructure Financing Commission and the National Surface Transportation Policy and Revenue Study Commission have concluded the most efficient way to increase needed HTF revenue is to raise the federal gas and diesel tax rates, then index them annually to inflation, Buechner reports. Longer term, the commissions recommend the transition to a vehicle-miles-traveled (VMT) based user fee system.

The pending reauthorization of the six-year highway bill in October offers the perfect chance to incorporate these and other proposed revenue streams into the legislation. Yet, it looks likely that the federal government will be opting for a short-term patch job once again. As of late June, Ray LaHood, U.S. Secretary of Transportation, was pushing the House Transportation and Infrastructure Committee to delay highway bill reauthorization by 18 months due to Congress' overloaded agenda.

Such a delay has the potential to stymie state DOTs and delay large, long-term projects due to uncertainty about available funds. "As history shows, putting the federal transportation programs in limbo contributes to uncertainty at the state level and leads to overall market stagnation," asserts Pete Ruane, ARTBA president and CEO. He adds that the only way to address growing state budget difficulties and combat the current economic downturn is to take action on a "robust, reform-oriented, multi-year reauthorization bill."

Regardless what type of construction you're in, inadequate highway funding affects your business in the form of idle crews, higher material costs, lost hours sitting in traffic, etc. So take action and push Congressional leaders to get their priorities straight, or the chance for lasting reform may go as unfilled as those potholes in the road. 

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