Funding the Future: Elections and the Highway Trust Fund

by Patrick Gaskins

Patrick Gaskins, Senior Vice President Fleet Solutions at Corcentric Fleet Solutions, oversees both sales and operations for fleet offerings. Gaskins has grown the fleet services area by implementing an asset management database and a data-driven approach to providing clients with visibility into all areas of their fleet spend. He joined Corcentric in 2010, bringing over 30 years of experience as a financial services professional in the transportation industry.

Patrick Gaskins of AmeriQuest Transportation Services outlines what’s at stake for the transportation industry, the Highway Trust Fund and the nation’s infrastructure in the upcoming elections.

Election season shines the spotlight on a wide variety of issues as both parties lay out their platforms on everything from jobs and voting rights to education and national security. They also take positions on infrastructure and transportation, which is very near and dear to our hearts in the transportation industry.

Here’s a quick look at where the candidates and their parties stand on the key elements of these two important issues.

The Republican Platform

  • Remove programs from the Highway Trust Fund that should not be part of the federal government. They contend one-quarter of the fund’s money is diverted from its original purpose and goes to things like bike-share programs, sidewalks, recreational trails, etc.
  • Phase-out the federal transit program and reform provisions of the National Environmental Policy Act that they claim delays and drives-up transportation costs.
  • Over time additional monies will be needed to expand the carrying capacity of roads and bridges. It advocates removing roadblocks to public-private agreements that can save taxpayers’ money and bring outside investment to meet a community’s needs.
  • No increase in the federal fuel tax.

The Democratic Platform

  • Build a 21st century infrastructure with a major federal investment to rebuild crumbling infrastructure.
  • Create a “national infrastructure bank” to offer loans to state and local governments for transportation infrastructure.
  • Transform transportation by reducing oil consumption through cleaner vehicles, vehicle electrification and by increasing the fuel efficiency of various modes of transportation.
  • Mandate efficiency standards including fuel economy standards for heavy-duty trucks.

At this point, we can’t predict who will be sitting in the Oval Office for the next four years, but it’s not too early to offer some thoughts and advice for the next President about what is best for the nation’s transportation industry. Here’s my take:

I think we’ve lost our way with the Highway Trust Fund. The fund was originally designed to provide matching funds to states for the construction of approximately 40,000 miles of interstate highways. Under President Eisenhower, the federal government committed to providing 90% of the funds for the system’s construction and maintenance. Eisenhower’s goal was to have user fees (fuel taxes) pay for all of the construction and maintenance costs making sure that the system’s cost would not contribute to the federal deficit. As we have all seen over the years, this is not the case. Congress supplements the Highway Trust Fund from the General Fund rather than developing a viable and sustainable funding source. As the Congressional Budget Office has said, “spending from the Highway Trust Fund exceeds it revenue.”

In the past 10 years, outlays from the Highway Trust Fund have exceeded revenues by more than $52 billion, and outlays will exceed revenues by an estimated $167 billion over the 2015 to 2024 period if obligations from the fund continue at the 2014 rate (with adjustments for future inflation) and if the expiring taxes on fuel and heavy vehicles are extended at their current rates.

Funds are diverted from the Highway Trust Fund to pay for out-of-scope programs. The funds should be utilized for the interstate highway system, and other projects should be financed as standalone programs. In 1982, Congress approved the use of funds from the Highway Trust Fund to be used for mass transit systems in major metropolitan areas. As noted in the CBO’s report, the fuel tax income cannot support all of the current programs.

Public/private funding is not the answer. The U.S. highway system must remain under the control of the federal and state governments. We need to focus our efforts on a sustainable and efficient funding program through the originally proposed and established tax structure.

Everybody wants to see more fuel-efficient vehicles on the road. And we all want to reduce pollution. I am a huge supporter of GHG2 and the environmental achievements that we have made in the past few years. Just as the automakers stepped up to take cars from eight miles-per-gallon to close to 40 miles-per-gallon, I believe we also are going to see significant gains in the fuel economy of heavy trucks.

However, the improved fuel efficiency of cars and trucks is a double-edged sword when it comes to the funding of our roads. While it certainly is good for the environment, more mpgs means less fuel used and less fuel tax collected to fund infrastructure development and maintenance.

To put it in perspective, in 2007, the U.S. consumed 142.54 billion gallons of gasoline. In 2015 that number was 140.43 billion gallons — a 1.5% reduction in the overall amount of fuel used. At the current federal tax rate of 18.3 cents per gallon of gasoline, that adds up to $387 million less in revenue that the government received in 2015 compared to 2007 on the gasoline tax.

It gets worse when you factor in trucks because their tax rate is 24 cents per gallon. As trucks become more fuel efficient and burn less fuel, there is going to be an overall fuel tax revenue decline.

The question is how do we make up for that shortfall?

There are only two ways to do this. Either Congress needs to reduce spending or it needs to increase revenues.

Our highway system is in dire need of maintenance and expansion, so the reduction of spending should not be an option. So what is the sustainable and efficient source of revenue for the Highway Trust Fund?

Many industry groups are in favor of an increase in the fuel tax, and historically tolling has been a viable option for the repayment of bonds issued to fund road projects. Both are considered use taxes and both make sense.

If the government does not institute an increase in use tax, we are going to see a decline in incoming funds for infrastructure projects and Congress will continue to dip into the General Fund to supplement the Highway Trust Fund, further expanding our budget deficits and overall national debt.

Come January, when the new president takes office, it will be interesting to see what importance he or she places on these important issues.

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