To keep the Highway Trust Fund solvent in 2015, Congress would need to eliminate highway and mass transit spending from the fund, raise taxes on motor fuels by about 10 cents/gallon or transfer about $15 billion from the general fund, a Congressional Budget Office official told lawmakers Tuesday.
A combination of these options could also be used, Kim Cawley, unit chief of CBO’s natural and physical resources cost estimates unit, said at a hearing held by the House Transportation and Infrastructure Committee’s highways and transit panel. CBO estimates the trust fund will have insufficient resources to meet its obligations starting in fiscal year 2015, which begins Oct. 1, 2014.
The HTF is a pool of federal money funded primarily by federal excise taxes on motor fuels. Money in the fund is used for eligible surface transportation projects and activities. Bonds called grant anticipation revenue vehicles, or Garvees, are often backed by the money that states expect to receive from the trust fund.
The economic downturn, increased vehicle fuel-efficiency, and a lower amount of vehicle miles traveled has led the HTF to come close to insolvency during the past few years.
In fall 2008, Congress began transferring money from the general fund to the HTF in order to keep the fund solvent. Congress has authorized the transfer of about $54 billion from the general fund between fiscal years 2008 and 2014, according to subcommittee staff.
Transportation undersecretary for policy Polly Trottenberg said the Obama administration, in its fiscal year 2014 budget, proposed to take funds previously used for the wars in Afghanistan and Iraq and use them to help cover the shortfalls in the HTF over the short run. The administration also is increasingly looking at ways to get the private sector involved in funding transportation projects, she said.
But Trottenberg added that there is a need to search for other options to find a long-term fix for the trust fund. “I think we also acknowledge for a long-term sustainable solution we’re going to need to work with you all here on the Hill and the stakeholders around the country,” she told panel members.
Cawley and Trottenberg both noted that Oregon is experimenting with a vehicle-miles-traveled tax to address the issue of declining revenue from gas taxes due to increased fuel efficiency.
“There is an experiment underway in Oregon that could provide a lot of interesting data,” Trottenberg said. But she added that she does not see a national movement in support of a tax on vehicle miles traveled.
Trottenberg said cutbacks in reimbursement to states from the HTF would be most harmful to smaller, more rural districts that rely more on the federal money. She said that it can often be a challenge for more rural states to use innovative financing methods for transportation projects because it is hard for those states to get revenue sources to repay loans. A couple of panel members said it is important that a solution to the trust fund’s issues not disadvantage people living in rural areas who travel more miles.
Rep. Nick Rahall, the ranking minority member of the committee, said that seven states, including Wyoming and Maryland, enacted “significant transportation revenue-raising measures” such as increases in fuel taxes.
“The message we should take from this is not that the states can take care of this situation on their own,” Rahall said. “Yes, the states must — and are — stepping up, but as we on this committee know very well, there is a significant federal role necessary in surface transportation.”