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Federal Highway Fund Is Running on Fumes

Last week, lawmakers in Congress approved a bill that keeps highway and transit spending at current levels for the next two years, but there was a catch: They came up nearly $20 billion short. Rather than cut spending or raise taxes to make up the difference, they tapped the U.S. Treasury, something theyu2019d done three times already.

WASHINGTON — Last week, lawmakers in Congress approved a bill that keeps highway and transit spending at current levels for the next two years, but there was a catch: They came up nearly $20 billion short. Rather than cut spending or raise taxes to make up the difference, they tapped the U.S. Treasury, something they’d done three times already.

Transportation and budget experts say lawmakers can’t have it both ways: The once-self-sustaining mechanism for highway spending no longer works the way it was intended.

For half a century, revenue from federal taxes on gasoline and diesel fuel paid for the nation’s highway projects. But since 2008, lawmakers have transferred $35 billion in general funds into the Highway Trust Fund to keep it from going bankrupt.

Negotiators who sorted out the differences between the Republican-majority House of Representatives and the Democratic-controlled Senate call it a necessary compromise; fiscal conservatives call it deficit spending.

“We have a shell game up here,” Sen. Rand Paul, R-Ky., said Friday before he voted against the bill. “We say one thing’s going to pay for it. Now this is going to pay for it. Money disappears.”

There are potential solutions on the table, including increasing the gasoline tax or replacing it with another dedicated source of funding. Other proposals would shift more responsibility for funding transportation projects to the states. Some states have acted already. But it took three years for Congress to agree to a two-year bill, and transportation experts say it’s a shortsighted measure that delays making hard choices.

“We’d all love to budget by pretending we can pull money out of thin air,” said Erich Zimmermann, a senior policy analyst for transportation at Taxpayers for Common Sense, a Washington budget watchdog. “This is clearly going on the nation’s credit card.”

The Highway Trust Fund was designed to pay for roads with fees from their users, in the form of a tax on every gallon of motor fuel. But the current tax of 18.4 cents took effect in 1993 and has lost a third of its spending power since then, according to a report last year by the Carnegie Endowment for International Peace. And construction costs have gone up.

Meanwhile, cars have become more fuel efficient. Rising gasoline prices and a weak economy have led Americans to cut back on driving. Both mean less money for road construction and maintenance under the current structure.

“We’ve stepped very far away from the user-pays principle,” Zimmermann said. “We think it’s important to do what we can to get back to that.”

A major obstacle to getting there is the reluctance by many in Congress and President Barack Obama to raising the gasoline tax. A bipartisan deficit-reduction commission in 2009 proposed raising the tax by 15 cents a gallon. A Senate proposal would index the tax to inflation. Another plan would authorize a study of a tax based on the miles people drive instead of the fuel they consume, known as the vehicle mile tax.

“It’s imperative that we identify alternative funding sources,” said John Horsley, the executive director of the American Association of State Highway and Transportation Officials, which is studying the vehicle mile tax, among other solutions.

While all these ideas have been discussed in the three years since the last transportation bill expired, none made it into the legislation Congress approved last week.

“That’s why it’s taken three years to pass a bill,” Horsley said. “No one has the courage to raise taxes.”

In the absence of a solution from Washington, several states have raised their own gasoline taxes over the past decade.

Minnesota is raising its tax by 8.5 cents a gallon in increments after the fatal Interstate 35 West bridge collapse in Minneapolis in 2007. Republican then-Gov. Tim Pawlenty vetoed the tax increase, but state lawmakers overrode him.

“It took a crisis to move the Legislature to do what it did,” Horsley said.

A 6-cent-a-gallon increase took effect in Oregon last year. Washington state voters approved a 5-cent-a gallon increase in 2003, and the Legislature raised the tax again by 9.5 cents over four years starting in 2005.

Part of a 1-cent state sales tax increase in Kansas will go toward transportation projects, and neighboring Missouri has discussed a similar measure.

Other states are trying tolls and public-private partnerships to finance road construction and maintenance. Indiana leased its toll road to a private company for 75 years, and Pennsylvania considered a similar arrangement for its famous turnpike. Missouri, North Carolina and Virginia are moving toward collecting tolls on major portions of free interstate highways in order to add lanes and rebuild interchanges.

California and Georgia are trying another approach, letting voters decide whether they want to pay for local highway and transit projects.

Raising taxes may not be universally popular, but transportation spending is. Lawmakers can point to new highways as tangible evidence that they’re doing something for the people they represent.

But Deron Lovaas, the federal transportation policy director at the Natural Resources Defense Council, an environmental group based in New York, said the era of “gold-plated” infrastructure projects was over.

“If you have scarce federal dollars and you need to make smart investments, you need to focus on repairing and maintaining existing infrastructure before you build anything new,” he said.

Lovaas said the federal Department of Transportation should apply more scrutiny to projects that receive federal funds. According to the Carnegie Endowment report from last year, most federally funded highway projects get little or no federal oversight.

Although lawmakers have moved away from the costly special-interest earmarks that bloated past transportation bills – the 2005 legislation contained nearly 6,300 of them – the nation’s roads and bridges need to be rebuilt or replaced, and Lovaas said that was where the money should go.

Lovaas floated the idea of a bipartisan commission to examine transportation projects across the country and evaluate whether they’re really needed.

“This is a particularly good time for us to revisit our policy on infrastructure,” he said.

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