What is the Highway Trust Fund?
In 1956, Congress created the Highway Trust Fund (HTF) as a way to assist states in financing the construction of highway and interstate projects across the country. It is largely funded by taxes on gasoline and diesel and spends roughly $45 billion annually. States are responsible for collecting the Fund’s revenue and sending it to the Federal Highway Administration, where bureaucrats and special interest groups decide how to spend and redistribute billions in tax revenue.
For nearly half a century, the Fund has successfully aided states in meeting their transportation needs. In recent years, however, HTF has run into financial trouble, as Americans drive fewer miles in more efficient vehicles, and Congress continues to divert billions to projects unrelated to transportation. The federal gas tax, which is currently 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel, has not been raised since the mid-1990s. As the value of these funds has decreased and HTF has continued to increase spending, since 2008 Congress has been forced to allocate an additional $54 billion – mostly from the Treasury – in revenue.
In August 2014, Congress waited until the last minute to bailout a struggling Highway Trust Fund. Since the Highway Trust Fund cannot run a negative balance, the Department of Transportation warned states that reimbursement payments might slow. Instead of finding a long-term solution, Congress passed a short term bailout of the Fund using an accounting gimmick known as “pension smoothing.”
As the 114th Congress begins and calls to raise the gas tax grow louder, Congress has an opportunity to pass real, long-term reform that fundamentally changes the federal government’s role in financing highway spending. Instead of raising gas taxes or shifting revenue collection to invasive fees that charge users per mile traveled, Congress should free the states to innovate.
The existing highway funding system is an outdated mechanism; the responsibility for highway, transit, and transportation funding should be shifted to the states. States would be free to prioritize spending as they see fit. No longer would state governments be beholden to the whims of federal bureaucrats or complicated labor and environmental regulations that dramatically push the cost of projects upwards. The Transportation Empowerment Act, introduced last Congress by Senator Mike Lee (R-UT) and Congressman Tom Graves (R-GA), would lay the groundwork for a nationwide transportation revolution; a shift that is already beginning to take place.