The Highway Trust Fund is running out of money
Photo 56616934 © Peter Titmuss |


The Highway Trust Fund is running out of money

The Congressional Budget Office projects that the highway and transit accounts of the Highway Trust Fund will be out of money in 2028.

On Oct. 18, the House Transportation and Infrastructure Subcommittee on Highways and Transit held a hearing on the future of the federal Highway Trust Fund. It was bad news all around, with expert testimony from Congressional Budget Office analyst Chad Shirley, Eno Transportation Weekly’s Jeff Davis, and officials from the Oregon and Washington state transportation departments. The headline on the Republican-led committee’s website for the session was “Highway Trust Fund: Running on Empty.

CBO’s Dr. Chad Shirley laid out the bad news.

The Congressional Budget Office projects that balances in both the highway and transit accounts of the Highway Trust Fund will be exhausted in 2028. If the taxes that are currently credited to the trust fund remained in place and if funding for highway and transit programs increased annually at the rate of inflation, the shortfalls accumulated in the Highway Trust Fund’s highway and transit accounts from 2024 to 2033 would total $241 billion, according to CBO’s May 2023 baseline budget projections

Declining federal highway user tax revenues are forecast to total $37 billion by 2033, while projected spending would be $65 billion that year. Shirley noted that if Congress increased federal gasoline and diesel taxes by 15 cents per gallon today, it would raise $250 billion through 2033, offsetting the projected shortfall. However, don’t hold your breath for that to happen in the current Congress.

Eno’s Jeff Davis’s lengthy testimony got into the details of how and why the Highway Trust Fund got into this mess and then discussed possible policy reforms, none easy. Davis outlines three main reasons for the Trust Fund’s growing insolvency.

First, the robust growth in annual vehicle miles of travel (VMT) from the 1950s through the 1970s has slowed down. The growth was 4.5% per year from 1950 through the late 1970s but slowed to 2.5% per year from 1979 to 2003. And from 2004 to 2019, VMT growth averaged only 0.8% per year. And VMT per capita peaked in 2004. By 2019, VMT per capita was 2.7% lower than in 2004.

The second reason is the result of federal fuel-economy regulations—the Corporate Average Fuel Economy (CAFE) standards—that require automakers to keep increasing the miles per gallon of new vehicles. In 1976, the average passenger car consumed 7.2 gallons for every 100 miles driven. Today, the average car consumes only 4.0 gallons per 100 miles. Similar figures affect sport utility vehicles and pickup trucks. That means the per-gallon fuel tax is no longer a good proxy for road use.

But the biggest reason for the Highway Trust Fund’s looming insolvency is Congress, which has failed to increase the rates of highway user taxes or to cut spending to match the available revenue. Instead, beginning with the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, or SAFETEA-LU, reauthorization bill in 2005, each congressional reauthorization bill transferred general fund money into the Highway Trust Fund to ensure that ever-increasing spending could go on. So far, these bailouts total $272 billion. As Davis helpfully points out, they were “all deficit spending.”

Looking ahead, Davis then posed three questions that Congress must eventually answer. The first question is philosophical: Should the federal government retain the users-pay/users-benefit system for surface transportation? Davis points out that “most of our OECD [Organisation for Economic Co-operation and Development] peer nations no longer use a centralized user-pay fund for their national surface transportation programs.”

They rely on their general taxation, and although Davis does not mention this, European fuel taxes generally take in far more than those governments spend on highways and transit.

Davis also notes that the U.S. has the worst of both worlds. We pretend to have a users-pay highway system even though the Highway Trust Fund will be only 60% self-sufficient by 2026 (when funding in the Infrastructure Investment and Jobs Act expires). The Highway Trust Fund is projected to be less than 50% self-sufficient in 2031.

Davis’s second question is strategic: If the federal government retains a users-pay system, what surface transportation programs should users pay for, and which should be directly funded by all taxpayers?

His tables show the budget amounts for several Trust Fund programs that could make sense as general-taxpayer responsibilities: safety regulation (National Highway Traffic Safety Administration and Federal Motor Carrier Safety Administration) and non-highway modes (most of which are supported by state and local governments). If such changes were to be made, “the general fund money must be appropriated outside of, and in addition to, the Highway Trust Fund instead of being transferred into the Trust Fund and making the user-pay imbalance worse.”

Davis’ third question is tactical: “If the federal government keeps the user-pay system, and if the amount we want to raise from system users exceeds the forecasts of proceeds from current [user] tax rates, how should we raise user revenues in the future?”

This leads to Davis discussing the likely alternative to gas taxes: per-mile charges for private and commercial vehicles instead of today’s highway user taxes. He notes common concerns about the workability of mileage-based user fees (MBUFs), also known as road user charges (RUCs). One is obviously the cost of collection from 278 million vehicles compared with the low collection cost of fuel taxes collected from about 1,300 fuel distributors. Other problems include protecting vehicle operators’ privacy amidst understandable concerns about intrusive government tracking and use of data and the need to structure MBUFs so their revenue keeps pace with inflation.

Kris Strickler, director of the Oregon Department of Transportation, and Reema Griffith, executive director of the Washington State Transportation Commission, discussed their states’ road-user charge pilot programs and lessons learned from them, answering questions about privacy, equity, and the impact on the trucking industry, as well as the perennial question about whether rural drivers would be made worse off (empirical data show they would be slightly better off since on average they drive older, less fuel-efficient vehicles than urban dwellers).

This was one of the most important congressional hearings on highway funding in several decades. Davis has asked many of the right questions.

My view is that a users-pay/users-benefit highway policy is far better than relying on the general fund to fund highways, as illustrated by Europe’s experience with the latter.

In my next Public Works Financing column, I will offer suggestions on the way forward for U.S. highways.

A version of this column first appeared in Public Works Financing.