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Reason Foundation

Highway Trust Fund Is Going Broke, And Fast

Shirley Ybarra
March 16, 2009, 9:29pm

Dow Jones reports:

The Obama administration, increasingly alarmed by a sharp drop in money available for highway construction, is warning states to prepare for the possibility of less aid for such projects in coming months.
 
The Highway Trust Fund (HTF) reimburses states for road and bridge projects. But officials say the fund is set to become insolvent as early as this summer, an event that could trigger construction delays and late payments to contractors. The HTF provides the funding for the on-going "tradiitional projects". The stimulus projects are over and above this amount.
 
When the DOT faced a similar situation last year, it was forced to slow down payments to states, risking project delays and late payments to contractors. Congress eventually passed the $8 billion emergency bill to shore up the fund.
 
The fund relies mostly on gasoline-tax receipts, which are plunging as Americans continue to cut back on driving. At the same time, state requests for reimbursement are rising, largely because a spending increase was authorized by a long-term highway bill several years ago, long before the fund's current crisis.
 
The administration's options are limited. A federal commission created by Congress to examine the fund's problems issued a report last month calling for an increase in the gas tax and a new mileage-based tax, to be calculated by devices installed in cars. Some members of Congress support a gas-tax increase, but the administration has ruled out both options, saying a recession is the wrong time to impose such policies.
 
DOT Secretary Ray LaHood has suggested more tolls and so-called public-private partnerships - in which private companies invest in construction - as possible ways to increase funding.

Priorities. The stimulus bill  could have solved this problem and funded the Highway Trust Fund rather easily since it would have been a "mere" $5 billion (or so) of the nearly $800 billion bill.


Shirley Ybarra is Senior Transportation Policy Analyst


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