Transit Funding Could Come from the General Fund, Not the Highway Trust Fund

It’s been widely reported that, just like last year, the Federal Highway Trust Fund is going to run out of money before the end of the federal fiscal year. The fix being talked about, like last year, is an emergency infusion from the general fund, thereby adding another $5-7 billion to the federal budget deficit.

The cause of this shortfall is no great mystery. If you’ll recall the last reauthorization debate, the transportation committees in Congress (especially in the House) were determined to greatly increase the size of the program, but the White House had promised to veto any fuel tax increases. So Congress compromised, pushing the promised funding level as high as they possibly could, by making “rosy scenario” assumptions about fuel prices, driving, and the state of the economy. Whoops! Last year’s high oil prices caused people to cut back on driving, meaning fewer gallons were sold than had been projected, and the subsequent recession caused people to economize on driving for a different reason. Both factors translated into lower fuel tax receipts. Meanwhile, the backlog of highway maintenance and repair, let alone long-needed expansions, continues to increase. And the Obama administration has “taken a gas tax increase off the table.”

Meanwhile, transit systems nationwide are making a big push for increased funding, based partly on last year’s ridership increases (which the recession seems to be reversing) and decades of deferred maintenance. With no fuel tax increase in sight, and both highway and transit groups proposing increased funding, how can this circle be squared?

My friend and colleague Alan Pisarski last week proposed what I think is a very promising—if radical—idea. “If we are going to need an infusion from the general fund, and we also need more total funding, why not ‘resolve’ the question of share by avoiding the question? Transfer the transit program 100 percent to the general fund and use all the Highway Trust Fund for highways. It might be a win-win.”

A few years ago this idea might have been dismissed out of hand, primarily because it would have been considered too risky for the transit community. After all, it took until 1964 to get even general fund money for transit, and it was considered a great breakthrough for transit when a transit account was created as part of the Highway Trust Fund (HTF) in 1982. That permitted highway user-tax money, for the first time, to be spent on transit. Because funding highways was popular, any expansion of the HTF would mean an increase for transit, too. And back then, highways were considered far more popular than transit.

That was then, this is now. In the age of energy insecurity and fear of global warming, transit is the cause du jour for many elected officials. It’s quite possible that transit would fare better if it did not have to fight with highway interests for its portion of Highway Trust Fund funding. A Congress eager to showcase its green credentials might want to reposition transit as an energy/environment/housing program, funded (like those programs) out of general revenues. Currently transit gets about 20 percent of Highway Trust Fund dollars, or around $8 billion. Shifting that amount to highways would more than cover the current shortfall. Yet replacing that $8 billion for transit would be a rounding error in the federal general fund.

Making this change would restore the original user-pays/user-benefits principle to the Highway Trust Fund. And if highway users could be assured that all of their fuel-tax dollars would actually be spent to maintain and improve the highway system, they just might be more comfortable with increasing the fuel tax rate. And by restoring the integrity of the highway fund, this change could help pave the way for eventual transition to a highway vehicle mileage tax (VMT) fee as the gas tax’s replacement.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.