Sorry, but it never ceases to amaze me how completely dysfunctional our federal government can be. Washington can take the simplest concept and complicate it into oblivion.
Did you know the Federal Highway Trust Fund is going broke? Before the end of the current fiscal year on Sept. 30, it’ll go insolvent, barring some last-minute scramble this week before Congress goes on its well-deserved five-week break. Only in Washington can a fund — designed from its noble beginnings to be a pay-as-you-go depository — become insolvent. Like every other revenue stream, Congress has monkeyed with highway user fees and gas tax revenue to the point it needs to borrow more to prop up the account where those monies are deposited.
What happens if Congress doesn’t act this week? Well, the White House says up to 700,000 jobs may be threatened (though the Congressional Budget Office places it closer to 185,000). It could put the brakes on thousands of active highway projects, some here in Texas. Part of what moves America forward economically, it seems, is transportation construction.
The Federal Highway Act of 1956 established the Highway Trust Fund to pay for the interstate highway system. Construction of the interstate system was hitting a high gear; money was needed to pay for it. Prior to 1956, federal highway funding was taken from general revenue. A 3-cent federal gas tax existed prior to the Highway Trust Fund, but the 1956 law made this a dedicated revenue stream. It also hiked some user fees and established a few new ones, all dedicated to building highways.
As a safeguard, the federal gas tax (extending to all types of fuels) and user fees were set to expire every so often unless reauthorized by Congress. The first sunset window was 1972.
Simple, right? Let’s all pay a few pennies extra when pumping, dedicate it to building interstate highways and make sure it doesn’t get used for other things.
Oh, and let’s make sure Congress has to re-authorize the gas tax and user fees every so often, using catchy legislative titles that make for handy acronyms. For instance, the Surface Transportation Assistance Act (STAA) in 1982 raised the gas tax for the first time since 1959 — and broke off part of the revenue to establish the Mass Transit Account. (Read: Amtrak.)
The Omnibus Budget Reconciliation Act (OBRA) of 1990 hiked the federal gas tax by five cents to 14.1 cents. Half of the increase was dedicated to deficit reduction. And in 1993 another OBRA raised the federal gas tax yet another 4.3 cents, all dedicated to — guess what? — even more deficit reduction. That brought the federal gas tax to its current 18.4 cents.
By 1997, all federal gas tax revenues diverted to deficit reduction were returned to their original intent — the Highway Trust Fund.
Things changed with the mother of all acronyms. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) was the transportation blueprint model from 2005 to 2009. It changed the game in several ways. It guaranteed all states would receive at least 90.5 percent of the taxes they paid in, graduating to 92 percent. It guaranteed funding levels during its four-year authorization. Federal taxes and user fees bring in $38 million to $42 billion per year. SAFTEA-LU guaranteed $196 billion over four years for transportation funding. That’s almost $50 billion a year.
Whatever money was in the trust fund began to disappear in a hurry; by the time the new highway funding bill passed in 2012 (MAP-21, for those of you counting acronyms), the trust fund was destined for insolvency.
Now the bill for those political pluses enjoyed in 2005 is due. And with today’s political climate in Washington, there’s no solution in sight. What we want we don’t want to pay for. About one-third of Texas’ transportation funding comes from the Highway Trust Fund — just under $4 billion this year. If not replenished, Texas and every other state will face disaster.
Obviously, the Highway Trust Fund must get back to its roots and spend only what it brings in, moving away from debt financing: no guaranteed funding levels or return of taxes paid in.
Remarkably, since 1956 this fund has managed to somehow survive every bone-headed decision Congress hatched. But a trust fund only works when its revenue streams are strictly dedicated and its books balance each year. Now, with Congress divided over cutting the federal gas tax to next to nothing and turning over the fiscal burden to cash-strapped states, trouble is in the air. I do have an acronym ready, though it might not be publishable.