Campaigning this week for more federal transportation spending, President Obama said, “There’s something called the Highway Trust Fund [HTF]—I suspect this crew is familiar with it. It helps states support transportation projects. If Congress fails to fund it, it runs out of money.”
Indeed, the House just passed a $10.8 billion bailout of the HTF that relies on questionable tactics, and the Senate will vote on similar bailout proposals soon. Obama failed to mention the flipside: Because Congress has spent too much, the trust fund is set to run out of money this summer.
He did get it right, though, when he described the HTF as a mechanism that helps the states pay for highway, bridge, and transit projects (buses, subways, etc.). Helps—as in aids or supplements. It does not act as the sole source of funding for states such that all construction projects would shut down if Congress lived within its means and limited HTF spending to available revenue.
All states have state fuel taxes or a related source of revenue for transportation projects. Pennsylvania and Utah have made it clear that they would remain on sound financial footing and continue construction, even if federal payments to states slowed down starting in August.
As a Pennsylvania official stated, “We’re in a position where we don’t have to alter our plans; we can weather this immediate crisis.”
In Utah, a state official said, “There may be a delay in reimbursement from the feds, but we have enough in our reserve that we will be able to take care of that and pay our contractors on time.”
Federal funding makes up only 25 percent of Pennsylvania’s annual transportation budget and only 20 percent of Utah’s transportation budget.
In addition, a number of states have implemented substantial, alternate sources of funding, which are now helping buffer them from the uncertainty emanating from Washington. Last year, Pennsylvania approved a five-year, $2.3 billion measure to raise additional transportation revenue by lifting its limit on the wholesale-level gas tax. Elsewhere, Oregon began pursuing a voluntary system that charges users based on mileage, and Ohio plans to move forward with a $1.5 billion, toll-backed bond issue to pay for highway and bridge improvement projects. Transportation policy expert Ken Orksi, who publishes Innovation Briefs (e-mail subscription required), writes:
State officials we have talked to are quick to remind that “we cannot do it all.”… But they concede that the recent revenue initiatives by various state legislatures are helping to relieve concerns about a slowdown in highway construction and cushion the impact of any eventual reduction in federal funding.
Congress needs to wake up to the fact that the states are already in the driver’s seat when it comes to transportation funding. They want to assume more control over their transportation funding and spending decisions. Congress needs to let them.