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Follow TURFWSJ: Highway Trust Fund Is Running on Fumes
Highway Trust Fund Is Running on Fumes
By Damian Paletta
Wall Street Journal
May 8, 2014
Sometime this summer, the Transportation Department is expected to begin delaying payments to states for road and bridge projects because the Highway Trust Fund is rapidly exhausting its reserves.
Congress has tackled or punted many of the “must pass” bills of 2014, but evaporating highway money looms like a pothole on the road to the midterm elections. Resolving the issue is important for lawmakers because constituents care about their local roads and bridges–but they also pay close attention to any changes in tax and spending rules.
The highway trust fund’s balance will be just $2 billion at the end of September, because gasoline-tax revenue isn’t keeping up with spending. That figure assumes payments are delayed in the coming months, a prospect that could infuriate governors, mayors and a number of businesses depending on the funds. Much of this money is disbursed by the federal government to states and local governments.
The highway fund provides nearly a quarter of the $216 billion annual total public spending on highway and mass-transit construction, which translates to roughly $1 billion a week funneled to states to pay contractors, Josh Mitchell reports.
Directing money for roads and bridges is a bipartisan pastime, but lawmakers are very divided on how to come up with money to pay for these projects. They could raise taxes, like the 18.4-cent-per-gallon gas tax, a prospect that is considered very unlikely given GOP control of the House. They could redirect money from other government programs, which is what they’ve done before, though options in a tight budget environment are limited. Or, they could cut highway spending, which many Democrats and some Republicans could try to block.
Even with the expected delays, the $7 billion shortfall between trust fund revenues and total spending in 2013 is expected to keep widening because tax revenue will continue falling far short of projected spending levels.
Lawmakers from both parties are flummoxed on how to proceed, particularly during an election year when every vote is viewed under a political microscope.
A number of lawmakers and analysts believe that policy makers will try to come up with a temporary fix that will at least buy Congress time until sometime next year, when they might be able to make more structural changes to put the program on firmer footing. But, as both parties have learned, votes on tax and spending measures are very unpredictable.
“There is not a silver bullet, other than the most obvious (raise the gas tax and index to inflation),” writes Chris Krueger of Guggenheim Securities LLC in a research report. “A temporary extension of the Highway Bill would likely create a headwind for all companies that rely on federal infrastructure investment ” until a new bill is signed into law.
And the longer they wait, the bumpier the road could become.