Rethinking the Highway Trust Fund

Abstract

Federal surface transportation policy is at a fateful crossroads. Since the completion of the Interstate system, the federal program has lost its focus and its sense of purpose. And the user-pays funding mechanism used to build that system have gradually been transformed into a public works tax for Congress to spend on its own-- rather than highway users’-- priorities. Most calls to reformulate the federal program would further break faith with highway customers. While appearing to advocate simplification and program consolidation, they would add costly new non-highway programs, increasing highway use taxes but spending much of the proceeds on new kinds of non-highway programs, from passenger trains to energy subsidies to federalized land-use planning. Yet it is thanks to these very trends that American taxpayers no longer have trust in the Highway Trust Fund. Instead of welcoming an expanded federal program, most oppose increases in fuel taxes as unlikely to improve their own transportation situations. This study argues that the federal program needs to be rethought. Every serious study in recent years has concluded that America is under-investing in highway infrastructure; indeed, we are not even investing enough to maintain its current mediocre performance and condition, let alone enough to produce major improvements. But rather than simply putting larger sums of money into a seriously flawed process, the better course is to rethink and refocus the federal role, in order to spend more on core federal purposes and less on peripheral concerns. While the federal government may have an interest in a wide range of transportation issues and concerns, direct federal involvement is both unwise and inappropriate in many of these areas. The facilitation of interstate travel and commerce and international trade are clearly federal responsibilities, so a larger emphasis on inter-state and international transportation should be at the core of a rethought federal role. The Interstate highway system was laid out more than 60 years ago, and begun 50 years ago. Increasing portions are reaching the end of their design life and need complete reconstruction. Most urban Interstates need major additions to eliminate bottlenecks and reduce congestion; and as the lifeblood of goods movement, many inter-city Interstates need more lanes to handle projected growth in truck traffic. A major federal effort to rebuild and modernize the Interstate system for the 21st century is the kind of purpose that could give new focus to the federal highway program. And it offers us the opportunity to restore the original user-fee nature of highway user taxes. Ever since the ISTEA legislation of 1991, each federal reauthorization has expanded the eligible uses of federal highway user taxes to an ever-larger array of non-highway programs. Indeed, this diversion ultimately goes back to the 1970 PL 91-605, which 2 permitted Highway Trust Fund monies to be used for bus facilities and park-and-ride lots, undercutting the user-pays/user-benefits principle. Subsequent reauthorizations steadily increased non-highway uses, such that today urban transit, bikeways, scenic trails, “enhancements,” and numerous other programs consume one-third or more of current federal highway user tax revenues. Congress could dramatically increase funding to reduce the very large backlog of cost-effective highway projects via two changes: (1) shifting non-highway programs either to general revenues or to the states, and (2) narrowing the Trust Fund’s focus to rebuilding and modernizing the Interstate system, both urban and inter-city. This would restore the kind of trust in the Highway Trust Fund that was present during the creation of the Interstate system. Making this change is also probably the best hope we have for gaining political support—not for all-purpose transportation tax increases but for an increase in the “utility bills” that highway users pay to significantly improve the performance of the nation’s most critically important highway infrastructure.