Economy & Jobs

Will Lawmakers Continue Pumping the Highway Trust Fund?

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Congress’s role is pretty simple to understand. As a legislative body, it passes laws, designates funds, and works with the other two branches of government to keep the country running smoothly. Each time you drive on a highway, you can thank Congress and the Highway Trust Fund. However, since 2008, Congress has spent more than it takes in for the fund—and has avoided making a long-term decision that would resolve this issue.

What Is the Highway Trust Fund?

Each day, motorists drive from city to city and from state to state via highways. This Interstate Highway System, set up under President Dwight D. Eisenhower in 1956, has been called the “greatest public works project in history” since its beginnings. The Highway Revenue Act, also established in 1956, provides funding for highway maintenance through the Highway Trust Fund, which is supported primarily by taxes on gasoline purchases. When you fill your gas tank, approximately 18 cents per gallon goes to keeping the highways in good condition.

Sinking More Money Into a Pothole

Each state receives money from the Highway Trust Fund to pay for highway projects and maintenance, such as patching potholes. A pothole on a highway, where motorists reach speeds of 65 miles per hour or higher, can cause traffic jams as well as major damage to cars and serious injuries to people. In New Mexico, for example, a pothole on Interstate 40 may have caused a motorcycle crash that occurred in early May. Another New Mexico driver blames a pothole on I-40 for $1,300 worth of damages to his vehicle. Reports claim that the same potholes return year after year on this road.

Who’s to blame? It’s easy to point fingers at the Department of Transportation in the state where damaged roads are located. However, the buck stops with Congress, which influences the Highway Trust Fund’s balance and allocation. Spending more than the fund takes in has required Congress to make up the difference. In October 2014, for example, net tax receipts totaled $728.5 million, while outlays (spending) numbered approximately $4.4 billion. Each month, expenses have outweighed receipts, causing the fund to rapidly approach insolvency.

What’s the Solution?

Should the federal government take such an active role in maintaining the interstate system? Each state might be able to find the resources needed to maintain its own roads, but what about states that are bankrupt? If Highway Trust Fund levels dip low enough, states may not receive reimbursements for highway projects. In such a situation, there are a few options for the Federal Highway Administration: move from daily to weekly reimbursements, align reimbursements with Trust Fund deposits twice per month, or make proportional payments to states based on available Trust Fund cash. Alternatively, Congress may step in and allocate funds to keep the account balance high enough to sustain it for another year.

The decision to maintain the greatest public works project is a simple one, but finding funding for that maintenance is a tougher question. Will Congress continue to patch the same pothole with a temporary solution? Or will they reevaluate the federal government’s role in transportation spending? Let’s hope for the latter.

LaTisha Styles is a motivational speaker, millennial money expert, and spokesperson specializing in simple finance for millennials. LaTisha is the producer and host of Young Finances TV, a weekly series featuring funny, insightful videos on the basics of personal finance. LaTisha has been quoted in Forbes and Mainstreet, featured in The Economist, and mentioned in US News as a top personal finance expert to follow on Twitter. You can follow LaTisha on Twitter for daily millennial money tips to budget, invest and achieve success!