Report shows Highway Trust Fund could become insolvent by 2008

News AASHTO November 11, 2005
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A report by the U.S. Chamber of Commerce Foundation says the Highway Account of the federal Highway Trust Fund could become insolvent as early as 2008, leaving a serious gap in the ability to maintain and improve the nation’s transportation system.

The report, called Future Highway and Public Transportation Financing, states, “To maintain our current transportation system, all levels of government must invest $235 billion in 2006, $304 billion in 2015 and $472 billion in 2030.” Current revenue streams are on target to come up short through 2015 by $500 billion.

“To improve our transportation system to a level that benefits the nation’s economic productivity, all levels of government must invest $288 billion in 2006, $368 billion in 2015 and $561 billion in 2030,” the report reads. Through current revenue streams, the shortfall to improve the system through 2015 is $1.1 trillion.

Furthermore, the report states that based on current estimates forecasters are predicting declining growth in revenues through the life of the current authorization before it expires on Sept. 30, 2009, and the next reauthorization. The report attributed the projected shortfall to a one-third loss in fuel-tax purchasing power because the fuel tax has not been increased since 1993.

To address the shortfall, the report recommends in the short term the indexing of the federal fuel tax to inflation, closing exemptions and adding interest to the fund and charging a customs tariff to address the immediate crisis while longer-term solutions are implemented.

For the mid term, the report’s strategies include:

• An annual vehicle tax on hybrid and non-petroleum-powered vehicles;

• Subsidies of hybrid and non-petroleum-powered vehicles would be paid for from the U.S. Treasury’s General Fund instead of the Highway Trust Fund; and

• Supplementing the diesel fuel tax by increasing the Heavy Vehicle Use Tax—an excise sales tax on heavy vehicles and tire taxes paid into the Highway Trust Fund.

Long-term financing strategies include the following recommendations:

• States and local jurisdictions implement a mileage-based transportation revenue system to address long-term revenue shortfalls, which includes a state vehicle miles of travel fee and a local option fee;

• All users would be charged a VMT fee as a supplement to and perhaps an eventual replacement for state motor vehicle taxes; and

• The local-option VMT fee could be implemented at state and local congestion to address urban congestion and local transit needs.

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