The growth of Vehicle Miles Traveled – a key indicator for fuel tax revenue has slowed to 1% a year as the expanding use of hybrid and electric vehicles are contributing to the insolvency of the Highway Trust fund - but there are solutions.
"There's no question that the gas tax is the most immediate and cheapest option to fix the Highway Trust Fund," said Rebecca Higgins, vice president of policy for the Eno Center for Transportation.
"It could be increased tomorrow and have an immediate impact on revenues, which is unlike any of the other revenue options being considered."
The comments came during a Capitol Hill briefing hosted by Eno in Washington D.C. last Thursday in conjunction with a
The HTF is a public finance problem child requiring general fund bailouts. The fund was created in 1956 to finance the construction of the interstate highway system. The system was declared complete in 1992.
According to Eno, the HTF became insolvent in 2007, "forcing Congress to provide $272 billion in bailout transfers from general revenues, the last of which is expected to run dry in 2028."
Eno posits the simplest and most cost-effective way to turn the fund around is to raise the federal tax on fuel by 17 cents a gallon. The rate on gasoline is currently 18.3 cents per gallon, a number established in 1993.
"Gas tax prices increased by 35 cents this week," said Higgins "There are major problems as a result of that to the economy, but it can be done. It does require some political will to do it."
The perceived shortage of political will has led the House Transportation and Infrastructure Committee to consider nationwide user fees on hybrid and electric vehicles to make up for the lost gas tax revenue.
The time estimates for when a markup of the new surface transportation reauthorization has already slipped, while Chairman Sam Graves R-Mo., is also preparing for his
In March the U.S. Chamber of Commerce sent a
Eno also explores the possibility of "devolution" of the entire system by eliminating federal fuel taxes and letting the states make up the difference as they see fit.
Many states have already attached user fees to EVs and hybrids by rolling them into registration fees. A total devolution could lead to turning Interstate highways into toll roads and bond sales.
"Many States also use tax-exempt bonds to pay for transportation investments," said Eno. "Imposing new state revenues could provide states with an opportunity to issue new bonds against the future state revenues."
Indiana took the first step towards devolution by passing a law allowing tolls on its interstates and is currently working on a
Devolution models have been explored by Congress in the past but have never advanced into law. Proposals to start the process were launched in 1996 and 2009 but didn't gain traction.
Public transit is also supported by the HTF. The fund kicks in about 20% of its money into funding transit projects, an amount estimated at between $6-$8 billion a year.
Eno believes the amount is too low and the accounts should be rebalanced. The transit account will also be the first one to run out of funding and possibly force another bailout.
"It looks like the Federal Transit Administration will not be able to pay bills starting sometime in the summer of 2027," said Jeff Davis, senior fellow and editor for Eno.
"That is my guess as to when Congress will do something with the bailout, when transit agencies are starting to get stiffed for reimbursements."
