Highway Funding Hits the Credit Wall

If you were running a business that needed the next three years of income to meet its current financial obligations, you would want to pull in some new revenue in a hurry.

But that’s the state of affairs that Sarah Puro, principal analyst with the non-partisan Congressional Budget Office, laid out for the federal Highway Trust Fund (HTF), in a presentation at IBTTA’s Transportation Finance and Road Usage Charging Conference earlier this year.

Puro reinforced the point the highway infrastructure community has been hearing and making for years: that the federal highway and transit accounts will both have difficulty meeting all their obligations this summer without the latest in a series of cash infusions.

But then she took the analysis a step further: “With no changes in estimated receipts,” she said, “in 2016, all of the receipts credited to the fund will be needed to meet obligations made before that year.”

Hitting the Credit Wall
The takeaway from Puro’s presentation was that the HTF is in even worse shape than most people realize.

“It means that when you put your credit card down for loan payments, all of your income will be going to meet obligations that have already been promised,” she said. “Anyone have a guess as to how many years of revenue we need to meet our prior obligations? Three years of revenue for the highway fund, and five for the transit fund. That’s the magnitude of the problem at the federal level.”

So even if Congress agreed to a significant increase in the Highway Trust Fund, only a fraction of the funds would be devoted to new projects. Puro said the backlog in funding current obligations explains some of the delays in projects that are already under way.

A Toolbox of Solutions
Puro’s talk was the latest in a series of teachable moments for anyone who’s concerned about the state of America’s highways.

In the two months since her presentation, Congress and the White House adopted another short-term patch to sustain the HTF for a few more months. The next round of debate on funding options has already begun.

It’s no way to fund a complex, national highway system, or even to pay down a credit card. To dig out of a deficit this deep, legislators will need to embrace a menu of options.

They’ll have to raise the federal gas tax, following the lead of their counterparts who’ve already done so at the state level. (As Rep. Earl Blumenauer pointed out during the RUC conference, the vast majority of the state lawmakers who adopted gas tax increases were re-elected in 2014.)

They’ll want to consider the kind of road usage charging system that Oregon will be piloting as of July 1.

And they’ll need to give states the flexibility to toll interstate highways to fund their reconstruction. That solution won’t be right for every road in every jurisdiction. But state, regional, and local governments are in the best position to choose the funding tools that best suit their needs. They just need the leeway from Congress to do exactly that.

For the latest on highway funding, click here for the report of IBTTA’s 2015 Transportation Finance and Road Usage Charging Conference, April 26-28, 2015 in Portland, OR.