State of the Highway Trust Fund: Long-Term Solutions for Solvency


State of the Highway Trust Fund: Long-Term Solutions for Solvency

Testimony to the Committee on the Budget in the U.S. House of Representatives

I am Robert Poole, Director of Transportation Policy at the Reason Foundation. Since the mid-1980s I have been researching transportation policy, including problems of funding and finance. I was a member of the Transportation Research Board’s special committee on the long-term viability of fuel taxes as the principal funding source for highways. And I am currently a member of two TRB standing committees, one on congestion pricing and the other on managed lanes. I am a member of the board of the American Road & Transportation Builders Association PPP Division, and I am an advisor to the International Bridge, Tunnel & Turnpike Association.

Before addressing the future of the Highway Trust Fund, I would like to provide some context about the federal role in transportation infrastructure overall. The federal government has entered a new era of fiscal stress, with many experts viewing the federal budget as being out of control, as illustrated by the unprecedented growth of the national debt and large-scale budget deficits years after the recession officially ended. When it comes to transportation infrastructure, we are faced with the conflicting needs to reduce the scope of federal spending while at the same time increasing productive investment in transportation infrastructure.

At a time like this, it is appropriate to step back and take a fresh look at how the federal government invests in this infrastructure. We have four major transportation trust funds: the Aviation Trust Fund, the Highway Trust Fund, the Harbor Maintenance Trust Fund, and the Inland Waterways Trust Fund. Each is the recipient of mode-specific user taxes which are supposed to be used only for investment in that mode of infrastructure.

While all four trust funds do make investments in their respective forms of infrastructure, all share a set of fundamental problems, which lead to far less than optimal results in terms of maximizing productive investment-i.e., getting the most bang for the buck. In a recent Reason Foundation report1, I identified these problems as follows:

1. Because the user taxes are legally taxes, Congress is reluctant to increase their rates, even though in many cases more investment is needed.

2. Each of these trust funds involves significant redistribution-from one part of the country to another, or from one subset of users to another-creating winners and losers and often leading to investments whose benefits are less than their costs.

3. Federal involvement significantly increases the cost of projects that use federal dollars, due to numerous regulatory requirements, such as Davis-Bacon and Buy America.

4. The emphasis in these programs on new capacity tends to bias state and local decisions against maintenance and in favor of capital-intensive projects using what is perceived as “free federal money.”

5. Finally, these federal programs encourage large-scale capital projects to be paid for on a cash basis, rather than being financed and paid for over time, as users derive benefits from the improved infrastructure.

Consequently, as we look to solve both the budget problem and the infrastructure investment problem, it is appropriate to critically examine the user-tax/trust-fund/federal-grant model in each of these modes of transportation infrastructure. Is this model actually the best we can do to make cost-effective investments in vitally needed infrastructure? Let me suggest that the Budget Committee address this larger question, and the other transportation infrastructure trust funds, in addition to today’s topic of the Highway Trust Fund.

Full Testimony