Highway Trust Fund’s Funding Guarantees are the Problem

Streetsblog laments incoming Republicans’ alleged attempt to “hoard” Highway Trust Fund dollars as a budget gimmick. At issue is a proposed change to House Rule XXI, clause 3, that would eliminate the mandate to spend all Highway Trust Fund account balances as scheduled:

The proposed new language still promises not to spend highway trust fund balances for non-transportation-related purposes. But it eliminates the part where they promise to spend all highway trust fund balances for transportation-related purposes.

Get the subtle difference there? The danger isn’t that the fund will be raided the old-fashioned way, to pay for other projects. The danger is that by keeping money in the fund, rather than spending it out, members of Congress can say they’ve reduced the deficit.

On their face, these objections seem justified. However, when one examines what is actually at stake, the objections fall flat. At least from a perspective that values sound transportation spending. Under a statutory provision (23 U.S.C. 117(b)) originally established by 1998’s Transportation Equity Act for the 21st Century (TEA-21), annual funding from the Highway Trust Fund’s Highway and Mass Transit Accounts under a surface transportation reauthorization act is equalized with annual tax revenues on users (most of which is captured by federal fuel taxes). This was later incorporated into 2005’s Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the most recent surface transportation reauthorization that expired 18 months ago.

The problem is that Congress makes this expenditure-revenue equalization determination by estimating future multi-year user-tax revenues. And — surprise, surprise! — Congress is not particularly good at predicting future tax revenues. As the Reason Foundation’s Bob Poole notes:

Thanks to higher oil prices and the recession, those fuel-tax projections were wildly optimistic this decade, to the point where the “guaranteed” spending in the last two years was 40% more than the revenue. And that is why Congress has poured some $34 billion in general tax money into the Trust Fund over the past three years.

General funding of the Trust Fund undercuts the users-pay/users-benefit principle. It therefore opens the door to attempts by the White House and other interested parties to divert Highway Trust Fund money to things like “livability,” “distracted driving,” and even high-speed rail (as many have advocated). If this continues, it will transform the Highway Trust Fund into a general public works fund, removing the link between users-pay and users-benefit.

A coalition of transit and road lobbies is opposing the proposed rule change, arguing that it would undermine transportation projects by creating additional risks to financing. Of course, it should not be surprising that those who rely on government checks to stay in business are in support of a policy that gives a near-certain picture of future government funding levels. Yet this should hardly be justification for throwing out the very fiscal principle driving the Highway Trust Fund: efficient user-generated revenue collection.

Now, if only Congress would get around to abolishing the Mass Transit Account — where Peter the Driver is robbed to pay for Paul’s train ticket, to the tune of about 15 percent of total Highway Trust Fund expenditures.