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Highway Trust Fund 'unsustainable,' official testifies at House hearing

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The Trucker Staff

7/24/2013

WASHINGTON — If Americans are trusting in the Highway Trust Fund to pay for new highways and improvements to existing one, they better think again.

Such was the message delivered to lawmakers July 23 during a hearing before the House Subcommittee on Highways and Transit.

“The current trajectory of the Highway Trust Fund is unsustainable,” Kim P. Cawley, chief of the Natural and Physical Resources Cost Estimates Unit of the Congressional Budget Office told the committee, adding that starting in fiscal year 2015, the trust fund — which is divided into separate accounts for highways and mass transit — will have insufficient resources to meet all of its obligations, resulting in steadily accumulating shortfalls.

Receipts from taxes on gasoline (18.4 cents per gallon) and diesel (24.4 cents per gallon) account for 85 percent of the revenue for the fund with the remainder coming from interest on accumulated balances, Cawley told the panel.

However, beginning late in Fiscal Year 2008, the U.S. Department of Transportation announced that there was insufficient cash to cover outstanding bills, which generated a series of transfers from the governments General Fund to keep the trust fund solvent.

In the years since, those transfers have totaled $41 billion, and Congress has enacted an additional transfer of $12.6 billion in 2014.

“If lawmakers chose to continue authorizing such transfers, they would have to transfer an additional $15 billion in 2015 and increasing amounts in subsequent years to prevent future shortfalls, if spending was maintained at the 2013 level, as adjusted for inflation,” Cawley said.

 Polly Trottenberg, the DOT’s undersecretary for policy, pointed to short and long term factors that have contributed to the current state of the trust fund: a structural deficit “that is not project to subside.”

She noted that beginning with sharp increases in fuel prices in the last decade, the rate of growth of vehicle miles traveled (VMT) declined as Americans began to economize their fuel consumption, a trend that was exacerbated by the “Great Recession” in late 2007.

Per capita VMT peaked in 2005 and continues to fall and annual VMT dropped from approximately 3.03 trillion in 2008 to approximately 2.95 trillion as of April 2013, she said.

“It is generally recognized that the decline in VMT, and the corresponding decrease in fuel tax revenue between 2007 and 2009, was partially a reflection of fewer people and goods moving on our nation’s highways as economic activity slowed,” she said. “However, evidence suggests that the flattening or decline of VMT is a long-term trend independent of the recession, as VMT has generally continued to decline annually since 2009 when the economy began to recover.”

A second fundamental factor is a generational shift in travel preferences in the Millennial Generation (those born between the early 1980s and the early 2000s) and among retiring Baby Boomers (those born between 1946 and 1964), she told lawmakers.

“Increasingly these cohorts are moving into mixed-use urban cores where the need for driving is reduced,” she testified. “The 2010 Census saw for the first time more than 80 percent of the population living in urbanized areas. Study after study has shown this market trend to be real and continuing to impact real estate demand. Some choose to get rid of their car for economic reasons, some for social reasons, and some decide to never get a car in the first place.

“This has also resulted in an increasing demand for alternative forms of transportation, including transit, rail, walking and biking, which has larger policy implications for future transportation planning and investment.”

The message both Cawley and Trottenberg gave lawmakers about the future of the trust fund was find new revenue sources (fuel taxes have not been increased since 1993), cutback on project spending and maximize the efficiency of current investments.

Bringing the fund into balance in FY 2015 would require the government to eliminate authority that year to obligate funds (projected to be about $51 billion), raise the taxes on motor fuels by about 10 cents a gallon or undertaking some combination of those approaches.
The Obama administration has also proposed taking some of the savings from the military drawdown in Iraq and Afghanistan and putting that money in the trust fund, a move that Rep. Nick Rahall, D-W. Va., called a “Band-Aid” approach.

Rep. Tom Rice, R-S.C., said he was adamantly opposed to raising taxes.

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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