Thursday, February 20, 2014

Highway Trust Fund Running Low

Image source: MS Word Clip Art / Fotolia

According to the Highway Trust Fund Ticker, The Highway Account portion of the Highway Trust Fund (HTF) is projected to run out of money as soon as late August, 2014.  A new report titled "Understanding the Highway Trust Fund and the Perils of Inaction" and published by the Center for American Progress identifies the primary reasons for this shortage in funding, and its impact if funding is not increased. 

The HTF is capitalized though fuel taxes: 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel.  The gas tax rate was last increased in 1993.  Kevin DeGood, author of this report, explains why this current tax rate will not sustain the HTF.  For one, vehicles have seen a major increase in vehicle fuel efficiency since 1993 when the federal fuel tax rate was last increased.  Next, DeGood states that there has been a decrease in the amount of driving.  In inflation-adjusted terms, 18.4 cents is only worth 11.5 cents today.  While in 1993, the gas tax represented 18 percent of the cost of a gallon of gas, today it represents only five percent.  If the gas and diesel taxes had kept up with inflation, the gas tax would be 29 cents per gallon and the diesel tax would be 38 cents per gallon. 

The HTF will require an additional $15 billion in revenue in FY 2015 to remain solvent.  If this funding shortfall is not fixed, states will receive major cuts in highway and transit funding, causing job loss.  For instance, Colorado is estimated to lose over $200 million in funding and subsequently over 2500 jobs. 

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