Obama stressed the job-creating power of federal transportation projects. As part of his promise to take action where Congress won’t, he also announced a $600 million competition for federal grants to help local governments pay for infrastructure projects.
The primary sources of revenue for the Highway Trust Fund are the federal 18.4 cent-per-gallon gasoline and 24.4 cent-per-gallon diesel taxes, which haven’t been increased in 20 years. While highway construction costs have risen over the decades, revenue going into fund has declined. Among the reasons for the decline are that vehicles are getting more miles per gallon and people are driving less on a per capita basis.
The fund experienced its first shortfall in 2008. Since then, Congress has shifted tens of billions of dollars from the general treasury to make up continuing shortfalls. Some of the transfers have been paid for through spending cuts or tax increases elsewhere in the federal budget, while others have not.
Earlier this month, the nonpartisan Congressional Budget Office estimated that the trust fund again will not have enough money to meet its obligations to states by the end of the federal budget year on Sept. 30.
Even if Congress transfers enough money into the fund to keep transportation aid flowing, it’s generally acknowledged that current spending levels are insufficient to keep up with repair and replacement of the nation’s aging infrastructure. Three blue-ribbon commissions have called for raising the gasoline tax and indexing it to inflation. But congressional leaders and the White House have shied away from a fuel tax increase, considered a politically dangerous move.
Kathleen Bower, AAA vice president of public affairs, called a gas tax increase “the most viable, responsible and effective near-term solution” for keeping the trust fund solvent.
The association will continue to discuss long-term funding remedies, such as corporate tax reform or other fixes, Bower said, but added that “immediate action is necessary” on a short-term funding solution for the transportation system.