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What is the Highway Trust Fund and Why Should You Care About It?

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Transportation Secretary Foxx talks about the need for the Highway Trust Fund. (Video: Erik Sulcs/U.S. Chamber of Commerce)

We rely on major highways to transport people, goods and services across the country. The Highway Trust Fund (HTF) finances necessary construction for the nation’s interstate highway and mass transit systems.  It is the primary source of funding for state projects that improve and maintain transportation. And, it's been in the news a lot lately. So what's happening to it and why? 

How does it work?

Every time a driver purchases fuel, they pay an excise tax per gallon. These taxes create the “user-supported” HTF, according to the Department of Transportation (DOT). Each fuel source has a distinct tax rate. The chart below features data from the DOT's Federal Highway Administration. 

Why does the HTF deserve attention now?

The HTF supports projects that upkeep not only a state’s transportation, but its local businesses and the national economy. These projects will no longer have the proper funds to continue work because the HTF is quickly running out of money. The DOT's Highway Trust Fund Ticker estimates the shortfall as early as September of this year. That's because the gas tax is not tied to inflation and has not been raised in more than 20 years. Basically, we are trying to run a 2014 transportation system on 1993 dollars. So, politicians, including U.S. Transportation Secretary Anthony Foxx (seen in the video above), businesses and unions are asking Congress to reauthorize Federal transit policy and provide long-term funding to support state needs.

How has the Trust Fund changed over time?

When consumers buy more fuel, the Trust Fund expands.

Data from the U.S. Energy Information Administration shows consumer behavior in the past 60 years.

While spending has increased, so has the gas tax. This is good.

The HTF was set up under the Federal-Aid Highway Act of 1956 at 3 cents per gallon. It has increased 15.4 cents per gallon since it was first established. But it has not increased since 1993. Differents laws influenced the increase in the excise tax over history, according to the DOT's "General Highway History" post.

Now, 21 years later, the gas tax remains at 18.4 cents per gallon.

 

While spending and the gas tax has increased over time, highway projects also require larger budgets. The Trust Fund will still receive revenue from people purchasing fuel, but highway maintenance projects require more money than fuel taxes provide.

What happens if the HTF runs out of money?

If Congress does not act, states should expect to see reduced and delayed reimbursements for projects. Some states have decided not to start construction, due to the probable chance that there will be bills they can’t afford and unfinished projects without funding. By failing to improve transportation systems, the conditions of roads will not improve, let alone be maintained. Not only will the population be in danger, but the economic opportunities that highways provide will suffer, too.

Take Arkansas, for example. In 2011, the state relied on the federal government for 45% of its highway and transit funding. This year, the Arkansas Department of Transportation suspended 10 highway projects valued at $60 million because of the Trust Fund's looming insolvency.

So what needs to be done?

States require a larger budget for projects as their population and economies grow. A bipartisan solution and reauthorization of federal funding and an increase in the gas tax is necessary to provide the most efficient transit systems that keep our highways efficient for transportation and commerce.

Find out what the Trust Fund isn't: Read 10 myths about the Highway Trust Fund here.

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