February 28, 2024

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New strategies emerge as Highway Trust Fund dwindles

4 min read
New strategies emerge as Highway Trust Fund dwindles

The slow rolling demise of the Highway Trust Fund combined with uncertainty about an eventual Bipartisan Infrastructure Law reauthorization has states and industry leaders exploring new funding and financing options.

Sales tax charged on gasoline and diesel fuel remain the main engine powering the funding stream that states use to maintain roads, bridges, and public transit. The rise of electric vehicles and inflation is shrinking the pool of dollars every year which is spurring new legislation. 

“Our state legislature in 2023 had a quite historic transportation bill that provided a lot of revenues for transportation,” said Nancy Daubenberger, commissioner, Minnesota Department of Transportation.  “Our gas tax is going to be indexed to inflation, there’s an adjustment to our motor vehicle registration fees, an increase to our motor vehicle sales tax, as well as a delivery fee for deliveries over $100.” 

“Our state legislature in 2023 had a quite historic transportation bill that provided a lot of revenues for transportation,” said Nancy Daubenberger, commissioner, Minnesota Department of Transportation.  “Our gas tax is going to be indexed to inflation, there’s an adjustment to our motor vehicle registration fees, an increase to our motor vehicle sales tax, as well as a delivery fee for deliveries over $100.” 

MnDOT

The same legislation also authorized $217.6 million in trunk highway bonds that will pay for department facilities, high priority bridges, and the Corridors of Commerce program which is designed to eliminate traffic choke points.

The comments came during the American Association of State Highway and Transportation Officials Winter Meeting being held in Washington DC this week.  State-based DOT heads, lawmakers, and industry leaders are also trying leverage funding that’s still coming in from the Bipartisan Infrastructure Bill. 

“You don’t need me to tell you the infrastructure law from 2021 was a significant departure from the status quo process that we’ve been in for a long time,” said Dave Bauer, president and CEO of the American Road and Transportation Builders Association. “As meaningful as that was, nobody suggested that it’s going to solve all the nation’s problems.” 

In fast growing Utah, the state is thinking big about transportation and moving beyond traditional thinking tied to the gas tax. 

“We’re seeing the general fund monies flowing in,” said Carlos Braceras, executive director, Utah DOT. “We need to break away from this fixation on how it has to be user pay. This idea that we will be completely funded by gas tax revenues. That 18 cents a gallon hill, it’s not going to be conquered.”

The federal gas tax is 18.4 cents per gallon on gas, 24.4 cents on diesel, neither is indexed to inflation and they haven’t changed since 1993. States add on their own taxes ranging from just over 14 cents in Alaska to nearly 67 cents in California. 

In September of last year Utah passed legislation sending over $14.3 billion from the general fund to their transportation department. The state is flush enough to also cut $400 million in taxes last year. Higher than expected tax revenues in 2022 allowed Utah to replace bonding authority aimed at transportation projects with cash, but trust fund money is still playing a role. 

“The gas tax is going to continue to be the backbone and foundational element within it, but there needs to be other sources of funding,” said Braceras. 

Other sources being tinkered with in other states include a per mile fee being added on to EV owners in Hawaii, toll lanes in Tennessee, and retail delivery fees in Colorado similar to what’s happening in Minnesota.  

The possibility of reauthorizing the BIL before it sunsets in 2016 and providing a continuing flow of transportation dollars is already being championed by AASHTO. The BIL pumped $118 billion into the Highway Trust Fund to help stabilize it. 

The trust fund props up mass transit operations as well as highways and bridges.  For fiscal year 2024 the funds show about $85 billion in the highway account with over $25 billion in the transit account.

Bauer believes trying to peel off the transit money in a reauthorization attempt is a non-starter. “There will not be a reauthorization of surface transportation programs without transit,” he said.  “We’ve seen it tried and it doesn’t work. Highways, public transportation, and rail are complementary, mutually beneficial partners of the national transportation network. One doesn’t work as well without the other.” 

Budget projections by the Congressional Budget Office show the trust fund could have a deficit of $240 billion by 2030. Raising the gas tax comes at political peril. “Anytime you talk about raising $240 billion, we’re going to bother somebody with that amount of money,” said Bauer. “Members of Congress want to be integrally involved in how that decision is made.”