16 Days Away: Highway Trust Fund Insolvency

Dollar symbol on endless road16 Legislative Days Away From Highway Trust Fund Insolvency

Congress is 16 days away from the Highway Trust Fund (HTF) becoming insolvent and lawmakers in Washington are scrambling for a solution. It is baffling that Congress finds itself in this situation especially since Congress has been reauthorizing the HTF since it was created in 1956 to provide a dedicated source of federal funding for highways and transit programs for states and local communities across the U.S.

$45 Billion for Highways

According to the U.S. Department of Transportation (October 1, 2013), the HTF began FY 2014  with approximately $1.6 billion in cash.  A $9.7 billion transfer from the General Fund to the Highway Account was processed shortly after the start of the fiscal year ($10.4 billion authorized in MAP-21, reduced by sequestration).  The cash balance has dropped by nearly $3.2 billion since the General Fund transfer occurred.  As of April 25, 2014, the Highway Account cash balance was $8.7 billion. For fiscal year 2014, the Congressional Budget Office (CBO) estimates that HTF revenues will total $33 billion, while estimated spending totals $45 billion.

Senator Barbara Boxer (D-CA), chair of the U.S. Senate Environment and Public Works Committee, believes there needs to be a long-term funding solution for the HTF so states and local communities can better plan for repairs and new construction of transportation projects.  Her Committee marked up a full six-year transportation authorization bill (S. 2322) in mid-May but the committee did not authorize funding for the HTF.  That’s because the HTF receives funding from several fuel taxes and user fees (see below). Those fuel taxes and user fees are under the jurisdiction of the Senate Finance Committee.


U.S. Senator Ron Wyden (D-OR) Chairman, U.S. Senate Committee on Finance

But, Senator Ron Wyden (D-OR) who chairs the U.S. Senate Finance Committee told his Oregon constituents in late May that he believes Congress needs to look at short-term options.

In a June 27 reply letter to Chairman Wyden, CBO indicated a total $8.1 billion in revenue will be needed to meet the financial obligations of the Highway Trust Fund for August 1 – December 31, 2014.

Bring Corporate Money Back To U.S.

One option being floated by Senator Rand Paul (R-KY) would create a one-time repatriation tax holiday to finance a short-term fix.  The measure would likely appeal to multinational corporations and provide incentives for them to transfer profits to the U.S. from overseas. According to the plan, companies could deduct 85% of the funds transferred to U.S. parent corporations from foreign subsidiaries. It is estimated that the measure would generate between $20 billion and $30 billion over the next two years.  Senate Majority Leader Harry Reid (D-NV) has indicated he may be willing to consider Paul’s idea.

But, repatriation tax holiday is not winning the support of Finance Committee Chairman Wyden nor the Committee’s ranking Republican Senator Orrin Hatch (R-UT).  In a letter penned June 6 by Thomas Barthold, Chief of Staff for the Joint Committee on Taxation, it is estimated such a one-time repatriation program will cost the federal government $96 billion in forgone revenue over the ten year period 2014-24.

Eliminate Saturday Mail

Republican leaders in the U.S. House are proposing to capture savings from the U.S. Postal Service by eliminating Saturday mail delivery and transferring those savings to the HTF.  Senate Finance Committee Chairman Wyden has dismissed this idea as well.

Including the upcoming July 4 recess Congress has about 30 legislative days remaining before the HTF runs out of money.  Congress is out of time and with the November elections fast approaching this means two short-term solutions must be crafted.

  1. First, Congress must find about $9 billion to keep the HTF solvent through the remainder of this fiscal year (September 30, 2014).
  2. Second, Congress must enact legislation for FY 2015 beginning October 1 that will increase the HTF by an estimated $15 billion to cover all the projects submitted from state Departments of Transportation throughout the U.S.
  3. After the November elections Congress must engage in the tough debate and craft a more permanent solution on how the U.S. will fund the HTF in the future.  This debate will include raising the federal highway gas tax that has not increased since 1993, or been indexed to inflation.  Exacerbating this is our success at auto fuel efficiency that allows U.S. consumers to purchase less fuel and travel further distances.

User Fee Structure for Federal Highway Trust Fund:

Tax Type                                              Tax Rate

Gasoline                                            18.4 cents per gallon

Diesel                                               24.4 cents per gallon

Gasohol (10% ethanol)*              13 cents per gallon

Special Fuels:

General rate                                      18.4 cents per gallon

Liquefied petroleum gas               13.6 cents per gallon

Liquefied natural gas                      11.9 cents per gallon

M85 (from natural gas)                  9.25 cents per gallon

Compressed natural gas               48.54 cents per thousand cubic feet


0-40 pounds                                       No Tax

Over 40 pounds to 70 pounds     15¢ per pound in excess of 40

Over 70 pounds to 90 pounds     $4.50 plus 30¢ per pound in excess of 70

Over 90 pounds                                $10.50 plus 50¢ per pound in excess of 90

Truck and Trailer Sales 12 percent of retailer’s sales price for tractors and trucks over 33,000 pounds gross vehicle weight (GVW) and trailers over 26,000 pounds GVW

Heavy Vehicle Use Annual tax: Trucks 55,000 pounds and over GVW, $100 plus $22 for each 1,000 pounds (or fraction thereof) in excess of 55,000 pounds (maximum tax of $550)

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