Who Cares About the Highway Trust Fund?

Rep. John Lewis (D-GA) is proposing today to make a small but crucial change in federal transit policy by requiring the nation’s Highway Trust Fund to keep the interest money it accrues, rather than give it up for the government’s general use.

ga_rep_john_lewis.jpgRep. John Lewis (D-GA) Photo: politicalkudzu.com.

Which brings up an even more crucial question: Why is it a good thing to give the Highway Trust Fund more cash?

For starters, the name of the 53-year-old fund is pretty misleading. Funded by the 18-cent-per-gallon gas tax, the highway trust fund (HTF) provides money not only for new roads, but also for mass transit.

Though public transportation receives a criminally paltry 2.86-cent share of gas tax proceeds, the HTF accounts for about 80 percent of the government’s total spending on mass transit. Strange as it sounds, then, keeping the HTF fiscally healthy is an important first step in giving Washington’s transportation policy a much-needed 21st-century shakeup.

In fact, the mass transit account of the HTF is at risk of exhaustion by 2012 — and that still puts it in better shape than the general highways account, which faces insolvency as soon as this fall.

Lewis’ bill would keep all transportation money from being diverted to patch other budget needs, thus strengthening the mass transit account and increasing the likelihood that the HTF funding crisis doesn’t scare Congress into postponing the entire debate over federal transportation reauthorization.

In short, the more quarters that can be scrounged from between the nation’s couch cushions for the HTF, the more likely we are to see a congressional transportation bill that reorders the nation’s priorities to reflect 21st-century reality.

  • Ken

    John Lewis is my hero. I actually live about two blocks from him in Washington, DC, but I never have the courage to approach him for a quick chat when I see him on the sidewalk (which is often!). This bill is a small but crucial step in the right direction. Kudos to Elana for making the brilliant point about this bill having the potential to discourage a postponement of the reauthorization debate.

    Even though there is almost unanimous agreement that authorization wont get done by this September’s deadline (thereby requiring an extension using general funds), all transportation stakeholders should not be resigned to that fact. Remember, 2010 is a big election year, and election years never produce good bills. We need to get this thing done ASAP!

    One more point: when general funds are used to keep this program going, it undercuts the philosophy that gas taxes and other related sources of revenue are user fees. Driving hard the idea of a “user fee” for our transportation networks is critical to having a sensible plan moving forward. If you use it, you pay for it! How novel!

  • WhyNot

    Yeah, but what about the rest of the budget? Every dollar we don’t siphon off into the general fund is either a dollar of general fund deficit or a dollar of tax increase. So what do you want congress to do, steal some gas tax money, or increase the income tax? Most of America would prefer the former.

    This whole notion of the various special purpose Federal “trust funds” is fiction. Ultimately, the Federal government as a whole has revenue and expenses, and if a big enough gap between the two develops, a problem. To us, the taxpayers who have to pay for that problem, it doesn’t matter that certain pockets of the Federal program are by virtue of accounting tricks nominally more solvent than others. What matters is the state of the whole, which is what determines how we pay in taxes, and or pass on to the future as debt.

    I’d rather just see everything in one pot of money, on one set of books, and an honest debate on how the nation ought to spend that pot. Trust funds confuse the issue without really preserving a level of investment in the assets they theoretically are supposed to support.

  • Mike

    Maybe someone should inform Rep. John Lewis (D-GA) that the so called trust fund receives NO interest.

    …generally known as TEA21. The revenue portion of this Act (Title IX) was titled the Surface Transportation Revenue Act of 1998.
    This Act provided that the Highway Trust Fund no longer earns interest on unspent balances (effective September 30, 1998). The balance of funds that exceed $8 billion in the Highway Account was canceled on October 1, 1998.
    [Congressionsl Research Service – RL30304: The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History ]

    While informing him one might ask why $29 BILLION of those special obligation bonds were cancelled and not spent on highways or bridges?

    “As part of the agreement worked out by then chairman of our committee, Bud Shuster, with House Republican leadership, the Speaker, the Appropriations Committee, the Budget Committee, and on our side with the Clinton administration, we agreed to give up $29 billion of surplus in the highway trust fund for long-term debt reduction and short-term deficit reduction, and also to give up interest paid on revenues deposited in the highway trust fund from the collections every 3 months–as is the practice–it would give that interest up as well. Eight billion dollars was transferred to make the deficit look smaller, and the rest went to long-term debt reduction.”
    [ Mr. (bridge collapse and death) OBERSTAR – Mn. – July 23, 2008 – H.R. 6532 – AMENDING THE INTERNAL REVENUE CODE OF 1986 TO RESTORE THE HIGHWAY TRUST FUND BALANCE ]

  • Mike’s beef is clearly more with Rep. Lewis than with the merits of Lewis’ bill. Lewis couldn’t have possibly introduced this bill if he wasn’t aware that the Highway Trust Fund does not receive interest. Mike is missing a crucial word here: accrue. The HTF ACCRUES interest, but does not receive it. The point of Lewis’ bill is to allow the HTF to keep the interest it accrues.

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