WASHINGTON -- Welcome to Infrastructure Week, the five-day period where transportation advocates try to remind elected leaders and the public about why it is important to invest in the nation’s infrastructure. And this year, the weeklong event has a very compelling backdrop: In about two weeks, the Highway Trust Fund (HTF), the account that supports federal highway and transit projects, is set to run out of funding authorization—again—with no long-term fix in sight.
The HTF is funded largely by the 18.4-cents-per-gallon (CPG) federal excise tax on gasoline and 24.4-CPG tax on diesel, but they have not been able to raise enough revenue to keep pace with increasing construction costs, especially as vehicles become more fuel-efficient. According to the U.S. Department of Transportation, the fuel taxes generate around $34 billion each year, far below the $50 billion the federal government usually spends annually on transportation infrastructure.
But the easiest fix to the HTF’s woes—raising the federal excise fuel tax—is a non-starter for many legislators and President Obama.
The current $11 billion transportation funding legislation that has helped support the HTF is set to expire May 31. If funding is not renewed, the HTF will likely run out of money by early August. The concept of a long-term fix to highway funding has the support of Democrats and Republicans, but getting to an agreement has remained elusive, said The Hill.
Meanwhile, the Obama administration warned in a letter to state transportation officials this week that if Congress does not extend federal funding on infrastructure, authorization for payments on construction projects will end on May 31.
“Unless Congress acts prior to this date, the Federal Highway Administration (FHWA) will be unable to make new obligations of Federal-aid funds for your department's highway projects,” Transportation Secretary Anthony Foxx wrote in the letter. “Furthermore, unlike last summer’s cash shortfall when states faced the prospect of delayed payments, under a lapse in authorization, reimbursements on all projects will be halted completely, not simply delayed.”
With the expiration deadline only a couple weeks away, legislators seem to be coalescing around a short-term, stopgap funding bill, likely around the neighborhood of $10 billion. This is exactly what happened in 2014, when Congress temporarily extended a prior transportation funding bill that was set to expire.
In terms of a long-term fix, President Obama has proposed a six-year, $478 billion transportation reauthorization bill—The Grow America Act—that would levy a 14% tax on the approximately $3 trillion in offshore profits that U.S. companies are keeping abroad and use the revenue to invest in road, bridge, transit and freight infrastructure. The bill would boost highway funding by 29% and prioritize repairing the nation’s existing roads and bridges over building new ones. This concept of “repatriation”—taxing offshore profits—has bipartisan support, but getting consensus among legislators on its details has proven tough.
The president’s plan would also lift the ban on states’ ability to levy tolls on existing interstates. Anti-toll groups such as the Alliance for Toll-Free Interstates (ATFI) have denounced this as double taxation, and argue that it is an inefficient means of collecting money that hurts businesses along the nation’s highways. Other groups, led by The International Bridge, Tunnel & Turnpike Association (IBTTA), support the concept of increased tolling, arguing it would give states more flexibility to fund infrastructure repairs.
One item not in the president’s plan: an increase in the federal fuel tax, which have not been raised since 1993.
Transportation advocates have championed raising the federal fuel excise tax and tying it to inflation as the easiest way to raise additional funds and keep up with growing construction costs. One bill before Congress—the Update, Promote & Develop America’s Transportation Essentials (UPDATE) Act—would raise the gas tax by 15 CPG to reach 34.4 CPG, in line with a recommendation in the 2011 Simpson-Bowles budget reform plan. But many conservative Republicans are loath to sign on to any tax increase, whatever the justification.
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