Will Federal Highway Construction Dollars Ever Come Back?
One of the many political issues in Congress which presently suffers from a dearth of press coverage amid the toxic debates over Medicare cuts, tax increases, budget slashing and the deficit ceiling, is the question of long term reauthorization of the Federal Highway Trust Fund. However, work on the Highway Trust Fund issue does continue in Washington. Joseph Kile, CBO’s Assistant Director for Microeconomic Studies, testified recently before Max Baucus’ Senate Committee on Finance about the status of the Highway Trust Fund. The picture Kile painted was not a particularly pretty one.
In his Finance Committee testimony, Kile outlined four potential scenarios for long term Highway Trust Fund reauthorization legislation: 1) funding highway projects for which benefits exceed costs; 2) spending enough to maintain highway performance; 3) maintaining current spending levels adjusted for inflation; or 4) limiting spending to revenues raised by existing motor fuel taxes.
Option 1) Funding projects where benefits exceed costs.
This option would involve significant increases from current spending levels, estimated at $209 billion per year from federal, state and local governments. If the current proportion of federal funding is maintained, this would mean Federal Highway Trust Fund annual expenditures would increase from the current level of $45 billion per year up to $94 billion per year. A somewhat less generous approach would involve setting a minimum threshold for the cost/benefit ratio. If federal funding were restricted to those projects for which benefits exceed costs by at least 20%, total government funding from federal state and local governments would drop to $188 billion per year, with the Federal Highway Trust Fund share decreasing to $84.5 billion per year. If the funding threshold were increased to 150% of costs, project funding would drop to $165 billion per year, and the federal share would drop to $74.2 billion per year.
Option 2) Spending at levels to maintain current highway performance.
Spending levels designed to merely preserve current average travel delays and pavement quality on federal highways would require all levels of government to spend a combined $127 billion per year, with the Federal Highway Trust Fund share approximating $57 billion, an increase of $12 billion above current Trust Fund spending levels.
Option 3) Maintaining current spending levels adjusted for inflation.
Current Highway Trust Fund spending levels of $45 billion per year, adjusted for inflation in construction costs, will exceed the revenues produced by current federal motor fuel taxes by $2.5 billion in fiscal 2011, and by $3.2 billion in 2012. Since the Highway Trust Fund is not permitted to go into a deficit position, even the modest option of maintaining current spending levels will require either annual make up appropriations from general revenues, an increase in federal motor fuel taxes, or additional user fees in the form of tolls or vehicle miles traveled taxes.
Option 4) Limiting spending to revenue from existing motor fuel taxes.
Limiting Highway Trust Fund spending to an amount equal to revenues produced by existing federal motor fuel taxes would result in an immediate reduction in federal highway expenditures from the current $45 billion per year down to about $30 billion per year. Funding at this level would increase deferred road maintenance and reduce new road and transit construction, resulting in accelerated crumbling of an already overstressed national transportation infrastructure.
Which Way Is Congress Headed?
Even if the Republican dominated House of Representatives would pass significant motor fuel tax increases together with new tolls or vehicle miles traveled taxes, the nearly universal inability of state and local governments to raise revenues to produce the required additional matching funds makes it very unlikely that we will see the federal transportation dollars represented by either option 1) or option 2) enacted in a long term Highway Trust Fund reauthorization measure in the foreseeable future. For the same reason, option 3) is less than likely since it would also require more state and local matching appropriations, though not quite at the astronomical levels represented by options 1) and 2). Even should a vehicle miles traveled tax be enacted to supplement revenue from motor fuel levies, the long lead time for adoption of the in vehicle metering technology required to assess and collect the new tax, together with the anticipated privacy objections to letting the federal government have a detailed GPS record of everyone’s minute by minute vehicle travel movements, will likely delay options 1), 2), and 3) for many years to come.
This makes option 4), an immediate one third reduction in Federal Highway Trust Fund expenditures, seem to be the most likely result in any long term Highway Trust Fund reauthorization measure coming out of the 112th Congress. Of course, the fifth alternative, unmentioned in Kile’s Committee testimony, is that Congress continues to limp along with quarterly or semi-annual highway trust fund reauthorizations, as it has for the last few years, awaiting a game changing House election for the enactment of any long term reauthorization legislation. So, will federal highway construction dollars ever come back? As I see it, not any time soon.
James G. McConnell
Attorney at Law
Construction Law Services