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It's time for yet another looming transportation crisis.
States and local governments may have to halt some $47 billion worth of road, highway, and mass-transit projects starting in August — unless Congress can figure out how to replenish the federal Highway Trust Fund. If that sounds familiar, it's because this situation has been popping up fairly regularly of late.
For decades, transportation spending in the United States was financed by a mix of federal, state, and local sources. Up until recently, the federal gas tax — 18.4 cents per gallon — covered much of that federal share.
But that's changed dramatically in the last decade: Americans are now driving less and less, causing federal gas-tax revenues to plummet. And so, since 2008, the federal Highway Trust Fund has faced a perpetual cash crunch.
Back in 2012, Congress cobbled together enough funding from outside sources to keep the Highway Trust Fund solvent for another two years. But now the fund is nearly depleted — and will likely be empty by August. And, since lawmakers are reluctant to either slash federal transportation spending or raise the federal gas tax, they have to come up with increasingly convoluted gimmicks to keep the fund intact.
That's the short version. Below is the slightly longer, chart-heavy tale of how we got into this mess. (Many thanks to the Pew Charitable Trusts for the charts below.)
1) The federal government currently provides about 27% of US transportation funding
Pew Charitable Trusts
The federal government provides around one-quarter of funding for the nation's roads, bridges, highways, subways, and bus systems — about $55 billion per year. Congress approves this spending through transportation bills every few years. Much of this money is used to match state and local spending on specific projects.
The federal share of transportation spending has actually increased over time, especially as states and localities have cut back on their own programs during the recession. (Overall transportation spending in the US, adjusted for inflation, is currently lower than it was in 2003.)
2) Most of that federal money goes toward highways
Pew Charitable Trusts
Ever since 1982, roughly four-fifths of federal transportation spending has gone toward highways, while one-fifth has been specifically set aside for mass transit projects.
In recent years, some Republicans have pushed to eliminate the fixed share of federal money for transit, arguing that local bus and subway projects should be financed by user fees rather than federal gasoline taxes. (Critics also note that transit gets 20 percent of the money but is only used by 5 percent of commuters.*) These challenges have been unsuccessful so far, though, and mass transit has maintained its dedicated funding stream.
3) Some states are more reliant on federal money than others
Pew Charitable Trust
Historically, federal transportation money has been doled out to individual states by flat formulas — under the Equity Bonus program, for example, states get at least 92 percent of what they collected in federal gas taxes.
For some states, however, federal spending makes up a hefty share of their overall transportation spending. In Georgia and South Carolina, federal programs provide more than 40 percent of all spending on roads, bridges, and transit projects. These states would be disproportionately affected by a shortfall in the Highway Trust Fund.
4) The federal gas tax only covers about 72% of federal transportation spending
Pew Charitable Trusts
For decades, federal highway spending was largely financed by the Highway Trust Fund, paid for by federal gas taxes. The idea was that roads and highways would be paid for by the people actually using them. But this is no longer the case.
As the first column shows, the federal gas tax only covered about 72 percent of all federal highway spending in 2011. Congress had to scrounge up the rest from the general fund.
Indeed, every single state now receives more in federal highway money than it pays in federal gas taxes — with some states receiving significantly more.
(By the way, as the second and third columns show, states and localities raise the rest of their transportation funds through a hodgepodge of different measures — state and local gas taxes, property taxes, bond issues, and so on.)
5) And federal gas tax revenue keeps plummeting...
Pew Charitable Trusts
The hole in the trust fund is only getting worse — in part because gas tax revenues are shrinking.
The federal gas tax has been stuck at 18.4 cents per gallon since Bill Clinton last signed an increase in 1993. Since then, it hasn't kept up with inflation. What's more, in recent years, Americans have been driving less and buying more fuel-efficient cars — further eroding the amount of gas tax that gets paid.
At the same time, federal highway spending has been growing — and Congress shows no sign of cutting back. (Indeed, House Republicans tried to cut transportation spending sharply in 2012, and ended up backing down under criticism from state officials, Democrats, and even a few members of their own party.)
That means Congress has to find other ways to supplement the federal gas tax. In 2012, for instance, lawmakers filled a $10 billion hole in the Highway Trust Fund through a combination of money from a separate trust fund set up for leaking storage tanks, new tariffs on imported cars, and revenue from the general fund. But that fix only lasted for two years…
6) So the shortfall in the Highway Trust Fund keeps growing
Pew Charitable Trusts
That brings us to where we are today. The Department of Transportation predicts that the Highway Trust Fund will be fully depleted by the end of July 2014.
What does that mean? Once the trust fund is depleted, the federal government can only spend what it takes in gas taxes (which aren't enough to maintain current spending levels). That means suddenly cutting back by about $19 billion in fiscal year 2015 — and more in the years ahead.
That would be a sudden shift. Since the federal government and states partner on many projects, that would affect some $47 billion worth of road and transit projects around the country next year. (Already, many states are bracing for this prospect by scaling back on construction.)
There are a few vague proposals floating around right now to patch up the Highway Trust Fund. The Obama administration, for instance, has proposed spending $302 billion in federal transportation spending over the next four years, paid for by closing unspecified tax breaks for corporations. And Congress has its own equally complicated proposals.
Lawmakers could also patch the growing hole in the Highway Trust Fund by raising the federal gas tax. But occasional proposals to do so never seem to get very far.
* Update: Added in a sentence on why there was conservative opposition to transit funding — which Marc Scribner fleshes out more fully here.
