Lawmakers are considering options for the Highway Trust Fund

The Highway Trust Fund is running out of money, but there are ways to replenish it.

With more Americans working from home due to the pandemic, state governments and transportation authorities have seen Decline in passenger numbers and revenue from gas tax. The gas tax is the main source of income for the Federal Highway Trust Fund, the is 49% lower in May 2020 than a year ago, according to Anirban Basu, chief economist for Associated Builders and Contractors. Additionally, projections from mid-2020 show that state departments of transportation will face an average revenue decline of 30% over the next 18 months.

“All of a sudden there are things like remote working. People commute less, when they commute less, they use less gasoline, less gasoline means less fuel taxes for the Highway Trust Fund,” Basu said during an online meeting of the 2021 Construction Financial Management Association Conference last month. “They also buy more online, we have meetings on Zoom. All of these things affect the demand for fuel and therefore the revenue that the Highway Trust Fund has available.”

For example the Washington Metropolitan Area Transit Authority reported roughly a 90 percent reduction in passenger numbers at the start of the pandemic, along with an estimated minimum revenue loss of $ 52 million, Basu said. While optimistic passenger traffic will recover over the long term, WMATA expects significant passenger traffic and revenue recovery will not begin until the third quarter of fiscal 2022.

The New York and New Jersey Port Authority reported a 75% decrease in the number of passengers on the PATH aerial tramway system. On the west coast, the Los Angeles County Metropolitan Transportation Authority reported a 55% decrease in passenger numbers and an estimated $ 35 million in additional labor and material costs.

In total, since the pandemic began, 16 states and 20 local governments have announced delays or cancellations of projects totaling approximately $ 9.6 billion, according to the American Road & Transportation Builders Association’s July 2020 review of public data. Ten states or local Territories have vetoed, canceled or postponed bills on transport financing. After all, 44 states, transportation authorities and local governments publicly expected a loss of income.

However, confidence in the industry remains high despite these delays and cancellations. The Senate recently voted to propose a bill that provides $ 550 billion in new federal funding for infrastructure, and specifically $ 110 billion for roads, bridges, and other large infrastructure projects.

“At the same time, I see some level of confidence from contractors, including hard-to-hire contractors, that the work will come back,” Basu said. “That it’s easy to get work done now that COVID-19 is clearing up, although I understand again that we’ve seen a pickup recently thanks to the Delta variant, but it’s not nearly as bad as it used to be. ” this year before many of us were vaccinated. “

On the edge

The loss of this public source of income across the country could result in less funding for infrastructure. In the absence of legislative action, the Highway Trust Fund will be depleted by the beginning of fiscal year 2022, which begins October 1st.

For this reason, Basu says lawmakers are considering several measures to increase the resources available in the Highway Trust Fund. These include:

  • The transfer of money from the Treasury’s general fund, which is gradually running out, Basu said.
  • Increase in fuel taxes. For example, a 15 cents per gallon increase in fuel tax in October 2022 and indexing it to inflation would remove the fund’s deficit and provide $ 95 billion in additional spending by 2031, the Congressional Budget Office predicts.
  • Adoption of new taxes. This can be a vehicle mileage tax on certain types of vehicles or freight. If a truck tax of 5 cents per mile had been introduced in 2017, it would have generated between $ 4 billion and $ 13 billion this year, according to the CBO.

“Neither of these is a perfect solution. Whatever you do to fund the infrastructure, someone is going to get upset,” Basu said. “Whether they’re people paying more gasoline tax, people paying extra heavy truck taxes, or people paying a new vehicle paying mileage tax that they haven’t paid in the past.”

Still, with bankruptcy looming, Basu remains certain that lawmakers will pass guidelines to resolve the issue. He adds that state and local government finances have been held much better than expected during the pandemic and that the U.S. will appear to be spending more on roads in the next few years.

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