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Highway Funds Still Iffy

When it comes to paving America’s highways, it appears that Congress is working again—but that could just be a temporary illusion.

At about the same time the Senate approved a fast track trade bill late last week, it also extended surface transportation funding for two months, which will prevent “an abrupt suspension of highway and bridge projects during the busy summer construction period,” according to Mike Steenhoek, Executive Director of the Soy Transportation Coalition in Ankeny, Iowa.

The Senate passed the bill by voice vote on Saturday, May 23. The House had already approved identical legislation on May 19, by a vote of 387 to 35. President Obama is expected to sign it into law before a May 31 deadline.

That’s the good news. But Steenhoek, who worked eight years as a staffer for Senator Chuck Grassley (R-IA) before his current job, sees it only as a quick fix, not solution from Congress to a long term shortfall of revenue for highways.

“By doing this extension, they didn’t come up with any new money,” he told Agriculture.com in an interview Thursday.

The United States Highway Trust Fund isn’t expected to run short of revenue until mid-summer, so Congress simply re-authorized the fund. 

The Highway Trust Fund is financed via a federal fuel tax of 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel.

As Steenhoek explained earlier this week, “The fundamental flaw in how we finance our transportation system is that we have a fixed source of revenue trying to meet the needs of an escalating cost.  Everyone can concede that the cost of building and maintaining roads and bridges increases with time.  However, we have a fixed 18.4 cent tax per gallon of gasoline and a 24.4 cent tax per gallon of diesel fuel.  It may be unintentional, but the inevitable outcome of such an approach is a funding shortfall over time.  The Highway Trust Fund annually generates approximately $35 billion.  It is estimated the nation needs approximately $50 billion to keep the system in a state of good repair.”  

The federal tax on gasoline and diesel fuel has not been adjusted since 1993, Steenhoek pointed out. According to research funded by the Soy Transportation Coalition, if Congress had indexed the fuel tax to inflation in 1993 – the last time it was adjusted – an additional $133 billion would have been available for improving our nation’s roads and bridges. 

“You have to do something. That’s why we talk about indexing the tax to inflation,” Steenhoek told Agriculture.com.

Indexing the tax might result in an annual average increase to American motorists of $2 to $3 per year, Steenhoek said. That would seem barely noticeable when consumers spend an average of $600 a year for their mobile phones. 

“Spending a little more, that seems to me like a prudent thing to do,” Steenhoek said.

Even though members of Congress are very aware of the nation’s need for better roads and bridges, taking that logical step of charging road users a bit for fuel makes those Representatives and Senators nervous.

Any tax increase can be used to attack them in the next election. 

“The reality is, in this country, elections are based on sound bites,” Steenhoek said. No one likes taxes and any increase can be used against incumbents.

“It’s a political headwind, not an economic headwind,” Steenhoek said.

For surface transportation, predictability of funding is almost as important as volume of funding, Steenhoek argues.   Most states develop a five year plan for maintaining and improving their system of roads and bridges.  Much of this construction work is reimbursed to the states by the federal government.  If the federal government is not a reliable partner in funding transportation, states will be less confident to proceed with planning and executing many essential and expensive infrastructure projects.

So far, states have been proceeding on the assumption that Congress will somehow find the money to keep the trust fund going, Steenhoek said. Although it might seem that federal funds go mostly to Interstate highways, they are used throughout state highway programs.

If the trust fund ever runs short, “it’s going to have an impact on your entire system, including rural roads,” Steenhoek said.   

 

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