Highway robbery in plain sight and how to fix the Highway Trust Fund

Established to provide a dedicated, user-financed stream for highway investment, the Highway Trust Fund (HTF) was once a model of fiscal alignment between revenue and spending. That alignment has taken a U-turn into oncoming traffic.

The HTF has been functionally insolvent for years. It has been propped up by tens of billions in general fund bailouts as spending continues to outpace dedicated revenues. It has instead become a source of deficit spending.

What was once a self-sustaining mechanism is now a fiscal liability. A new report from David Ditch at the Economic Policy Innovation Center (EPIC) shows how far the HTF has drifted from its original purpose.

What’s driving the Trust Fund’s decline

Ditch traces the HTF’s decline to a growing mismatch between revenues, spending, and program scope. The federal gas tax has been frozen since 1993, and improvements in fuel economy have further reduced per-mile revenue. By 2008, revenues could no longer support authorized spending levels. Since then, Congress has appropriated $271 billion to keep the HTF afloat.

Meanwhile, the HTF has drifted from its original user-pay model. Like utility bills or tolls, users fund services based on how much they use them. In this case, drivers paid fuel taxes to support highways.

More HTF dollars have gone to transit and other non-highway projects. This share of non-core spending increased from 21 percent in 2014 to 30 percent in 2024, or $22.4 billion. This trend turned the HTF into a wealth transfer from drivers to non-drivers and unrelated transportation programs.

This shift intensified under the Infrastructure Investment and Jobs Act (IIJA), which expanded federal support for passenger rail, electric vehicle charging infrastructure, climate-related programs, and multimodal discretionary projects. The growth in transit subsidies under the HTF is more notable given that ridership has not recovered from pre-pandemic figures.

At the same time, the maintenance backlog grows as core highway needs compete with an expanding list of federally funded projects. Billions in deferred repairs continue to accumulate, which raises long-term costs and puts additional strain on the system drivers rely on most.

Together, stagnant revenues, expanding commitments, and mission drift have locked the HTF into a cycle of chronic deficits and weakened budget discipline.

Modernizing the HTF

Fixing the Highway Trust Fund begins by restoring the principle that originally justified it: users should pay for the infrastructure they use. As Ditch emphasizes, the HTF’s current dysfunction stems from the gradual erosion of that link between revenue and spending.

Former CEI Fellow Marc Scribner recommended narrowing the Fund’s focus to core national highway and freight corridors, with non-core and expansion-oriented projects relegated to the states. This would better align decision-making authority with responsibility for outcomes and reduce the incentives for federal overreach into locally oriented transportation priorities.

Building on that foundation, transportation spending should be simplified in structure. Ditch proposes rolling back programs expanded under the IIJA, reducing reliance on discretionary grant programs that increase administrative complexity, and streamlining the types of projects eligible for federal support. A greater emphasis on formula-based funding would improve predictability while reducing bureaucratic costs at multiple levels of government.

Beyond changes to program design, long-term reform requires rethinking how highways are financed. Scholars at the Reason Foundation have endorsed the idea of converting Interstate highways from federal funding to a per-mile tolling model that directly links usage to payment. Alternatively, a CEI paper written by Virgil Payne proposes a “quant” framework that reflects the long-run cost imposed on the highway system that can provide stabler infrastructure financing.

Restoring trust in the Trust Fund

The HTF no longer functions as a true trust fund. What began as a self-financing system has become dependent on repeated taxpayer bailouts to cover a widening gap between revenues and obligations.

Whether through tighter program focus, state-led decision-making, or more direct pricing systems, the path forward points in one direction: aligning costs more closely with those who use the system.