Time to Ditch the Highway Trust Fund

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In what has become the norm for transportation finance in the U.S., the national Highway Trust Fund is once again on the brink of insolvency. Everyone acknowledges that the federal gas tax meant to finance transportation infrastructure – and left unchanged since 1993 – can’t keep up with the country’s growing transport needs. And while low gas prices have state and national politicians mulling an oft-contemplated (but rarely successful) attempt to raise fuel taxes, it may be time to consider a completely different tactic. In the face of dwindling fuel tax revenue, state governments are trying new approaches to finance transportation improvements. Can these state experiments transform transportation at the national level?

Established in 1956, the Highway Trust Fund was intended to finance highways, roads, bridges, and mass transit projects. The federal government levied taxes on gasoline and diesel fuel to support the fund, logically concluding that transportation users should bear the cost of improving the nation’s transportation infrastructure. But increased fuel efficiency coupled with a federal fuel tax that hasn’t been raised in over two decades have conspired to make the pay-as-you go system envisioned in 1956 unworkable in the 21st Century. Right now, the most popular method of propping up the Highway Trust Fund is to transfer money from other areas of the federal budget. But this isn’t a long-term solution and it ignores the myriad of alternatives that are available for policymakers.

Since federal action on the issue is unlikely in the near-term, let’s turn to the states that are experimenting with new financing schemes to fund transportation. Oregon, which led the charge on taxing fuels to fund transport in 1919, is once again undertaking a pioneering effort to reshape transportation finance. After launching two pilot projects, the state is poised to launch a volunteer program that charges drivers a per-mile charge as an alternative to the gas tax. Nearby Washington State is contemplating a similar road usage charge to ultimately replace the state fuel tax. Under the latest proposals drivers would have four options: pay “an ‘all you can drive’ flat fee, report odometer readings to the state, have a GPS locator installed in the car or they can download a smartphone application.

California, likewise, is looking into the potential of implementing a road usage charge program of its own. Signed by Governor Brown in September 2014, SB 1077 (DeSaulnier) established the state’s Road Usage Charge Technical Advisory Committee. The group will help guide the development and evaluation of a pilot program to assess the possibility of using a mileage-based revenue collection scheme as an alternative to the state gas tax. As we wait for the federal government’s next move [PDF] on transportation finance front, let’s also pay attention to the more forward-looking policies being implemented at the state level.

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