Congress has less than three legislative work weeks until the Highway Trust Fund runs dry and highway and bridge projects across the country grind to a halt, resulting in the loss of thousands of construction jobs, further slowing economic recovery. By law, the Trust Fund cannot shell out more money than it has.
The Highway Trust Fund sends approximately $35 billion annually to states for new construction and road repair. According to the Department of Transportation, the fund began FY 2014 with roughly $1.6 billion in cash. In October 2013, $9.7 billion was transferred from the General Fund to the Highway Account. The latest projection from the Department of Transportation monthly "ticker" showed $8.1 billion available as of June 1, but depleting rapidly by late August.
With the clock ticking and no bipartisan consensus on a long-term solution, members in the House and Senate are scrambling for a short-term fix. Filling that gap to December will require something in the $8-$10 billion range. Senate Finance Committee Chairman Ron Wyden is leading the charge, contained in what he calls the Preserving America's Transit and Highways Act of 2014 (PATH).
"Strong transportation and infrastructure are critical to a growing and healthy American economy. I hope to see the committee take decisive bipartisan action and send a clear message that stabilizing the Highway Trust Fund is a priority now,” Wyden said.
PATH would raise $9 billion to extend the Highway Trust Fund through the end of this calendar year by changing five tax provisions. The five provisions include modifying the heavy vehicle use tax, requiring additional information on returns for mortgage interest, altering estate planning law as it applies to IRAs and 401(k) accounts, revocation or denial of passports for delinquent taxes and applying a six-year statute of limitations in cases of overstatement. Wyden has scheduled a committee mark-up Thursday on PATH.
Since the House abandoned its earlier plan to use Postal Service reform as a short-term revenue source to bail out the Highway Trust Fund, Wyden's proposal is now the chief option on the table.
However, others in Congress are not giving up on a long-term funding solution. Last week, Senators Chris Murphy (D-CT) and Bob Corker (R-TN) unveiled the first bipartisan push for a 12-cent per gallon federal gas and diesel tax increase. The Murphy-Corker “Highway Funding and Tax Reduction Proposal” would generate about $164 billion for the Trust Fund over 10 years. To satisfy lawmakers weary or wary of tax increases, the proposal makes permanent several provisions in the “tax extenders” bill that already have broad, bipartisan support.
At the press announcement, Corker said, “Growing up in Tennessee as a conservative, I learned that if something was important enough to have, it was important enough to pay for. That’s how we’ve governed in the Volunteer State, which has resulted in the second best transportation system in the country without having one penny of road debt.”
Congress has not raised the federal gas tax since 1993, nor has it attached a provision to index the tax to the rate of inflation, as the Murphy-Corker bill would do.
There is widespread recognition the gas tax has become less effective as a revenue source since cars and trucks have become more fuel efficient. It will be even more ineffective as the number of hybrid-fuel and electric vehicles hit the road. Currently, the federal gas tax accounts for more than half of Highway Trust Fund revenues.
To whip up legislative interest in replenishing the Highway Trust Fund, the Department of Transportation's "Fast Lane" blog will begin featuring posts on how a depleted fund will impact Americans.