Southern California Transit Advocates is a non-profit organization dedicated to the promotion, development and improvement of public transportation in the Los Angeles metropolitan area.
Outlook for Federal Transportation Funding|
2010 update: Despite some four years passing since the below memo was first written, the situation with the trust funds it describes sadly is mostly unchanged. A resource for following the status of progress in initiatives to restore the trust funds during the process of adopting federal transportation funding reauthorization is via posts on Streetsblog Capitol Hill:
Text of memorandum by the L.A. City Council Chief Legislative Analyst's office on the outlook for federal transportation trust funds.
April 3, 2006
TO: Honorable Members
FROM: Gerry F. Miller
Chief Legislative Analyst
SUBJECT: Federal Highway Trust Fund (HTF)
CLA RECOMMENDATION: Instruct the Department of Transportation to participate in discussions relative to regional, state and national efforts to assist the federal government in the development of new, innovative methods to address the potential deficit in the federal Highway Trust Fund (HTF) and to report back to Council with recommendations for adopting appropriate City legislative positions relative to this matter.
On March 17, 2006, Councilmember Greuel introduced a motion that directed the Chief Legislative Analyst to report on the Federal Highway Trust Fund's projected deficit and the implications for the City's transportation infrastructure, as well as an analysis of options that are being discussed.
The Highway Trust Fund (HTF) was established by the Highway Revenue Act of 1956 as a mechanism to finance the nation's highway program, including construction of the Interstate Highway System. Funding in the HTF helps pay for the maintenance and expansion of the nation's transportation infrastructure.
There are two accounts within the HTF, the Highway Account and the Mass Transit Account. The Federal programs are structured on a pay-as-you-go basis, using dedicated user fees, primarily Federal motor fuel taxes. This tax has lost about one-third of its purchasing power since it was last adjusted in 1993 because it was not indexed to inflation. Congress has long expressed concern that the current system of funding the Highway Trust Fund is not sufficient to meet future transportation infrastructure needs. The idea of raising the tax, currently set at 18.3 cents per gallon, has been raised by some lawmakers in the last couple years but has never received serious consideration in Congress.
Last summer, Congress passed and President Bush signed into law the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the $286 billion, five-year surface transportation law. Congress approved SAFETEA-LU, under the assumption there would be enough money in the trust fund to pay for the legislation. It is now projected that the HTF will run a $2.3 billion deficit at the end of fiscal year 2009, which is the final year of the bill. The United States Treasury Department has anticipated that, in addition to the flat federal gasoline tax, countervailing conditions like the rising price of crude oil, demand for fuel-efficient hybrid and alternative-fuel vehicles, as well as the federal budget deficit all raise serious concerns about the HTF's ability to maintain, much less grow, the nation's road and transit systems.
The United States Department of Transportation (USDOT) has said it would not allow the fund to run at a negative balance, which indicates that if the projections hold true, Congress would need to adjust the spending formula in SAFETEA-LU. At a Congressional hearing on the HTF in February 2006, Transportation Department officials questioned the reliability of the projections and said they are optimistic funding will hold up through the bill. Still, it is anticipated that USDOT will launch several pilot programs to identify alternative ways to pay for highway spending.
In order to ensure the long-term viability of the highway trust fund, the following are some of the proposals currently being discussed in the transportation industry:
- Indexing Federal motor fuel taxes, which is equivalent to an increase of about one-half cent per gallon each year.
- Indexing Federal motor fuel taxes retroactively to 1993 (the date of the last increase), which is equivalent to an increase of about six cents per gallon in 2005 and an increase of about one-half cent per gallon each year thereafter.
- Eliminating current HTF user fee exemptions and recapturing interest earnings on the HTF balances.
- Increasing use of tolling for new infrastructure, including Federal authorization of tolling on Interstate highways.
- Continuing the use of Transportation Infrastructure Finance and Innovation Act (TIPIA) credit instruments and Federal authorization of tax-exempt private activity bonds.
- Dedicating five to 10 percent of current U.S. Customs duties for investment in port and intermodal freight projects.
- Granting investment tax credits to equity investors in new freight-related capital improvements.
House lawmakers have said they have no immediate plans to address the projected shortfall, though that could change depending on future Treasury projections and input from the transportation industry. Beginning in April 2006, House lawmakers intend to examine the reasons federal projections for highway construction revenues appear to fall significantly below anticipated levels just a few months after Congress approved the six-year transportation bill. Officials from the Treasury Department, the Office of Management and Budget and the Congressional Budget Office are expected to testify.
SAFETEA-LU contains provisions to establish national commissions to examine innovative finance and transportation funding. For example, the Future of Surface Transportation System Study Commission wi1l examine current conditions and future needs of the surface transportation systems and develop a conceptual plan with alternatives. Additionally, the National Surface Transportation Infrastructure Financing Commission wil1 study HTF revenues and the impacts of these revenues for future highway and transit needs, consider alternative approaches to generating HTF revenues and recommend policies to achieve revenues that will meet future needs.
While there is no immediate threat to transportation projects in Los Angeles, it is advisable for the Los Angeles Department of Transportation to participate in discussions relative to regional, state and national efforts to assist the federal government in the development of new, innovative methods to address the potential deficit in the federal HTF and to report back to Council with recommendations for adopting appropriate City legislative positions relative to this matter.
One can follow the issue of restoring the trust funds via posts on Streetsblog Capitol Hill: http://dc.streetsblog.org/