What Happens If Highway Trust Fund Goes Broke
(WASHINGTON) -- President Obama has been griping a lot lately about gridlock in Congress. Now, he has a new worry: gridlock on the nation’s highways.
The Highway Trust Fund, or HTF, which finances transportation-related construction, is headed for insolvency -- threatening to delay as many as 112,000 roadway projects, eliminate hundreds of thousands of jobs, drive up costs at the pump and the mechanic’s shop, and cause worsening traffic jams nationwide.
Unless Congress acts soon, the fund will be fresh out of money by the end of September.
What Is HTF Anyway?
The HTF is funded in large part by an 18.4 cent-per-gallon federal gas tax (along with a 24.4 cent-per-gallon diesel tax and excise taxes levied on particularly heavy tires, trucks and trailers.)
But the gas tax, which accounts for about 72 percent of HTF’s revenue, hasn’t been adjusted in over 20 years, and inflation -- along with increased fuel efficiency standards -- have caused both the gas tax’s buying power and its overall revenue to fall.
According to the nonpartisan Congressional Budget Office, HTF collects about $34 billion per year (including about $98 in gas taxes per vehicle, according to the American Road & Transportation Builder’s Association). But it pays out more than $50 billion per year -- its expenditures far exceeding its dedicated revenue.
In the past, Congress has diverted money from the Treasury’s general revenue to cover the gap -- but that money (along with the legal authority to collect the gas tax) could expire soon.
Both the Senate and the House are considering stopgap measures that would transfer additional money into HTF -- but they’re quibbling over the technicalities. Meanwhile, Obama is pushing for a more long-term $302 billion solution.
But while politicians debate the merits of the various plans, the HTF balance creeps lower and lower.
What Happens If It Runs Out of Money?
1. Infrastructure Grinds to a Halt (Maybe)
When it comes to building roads and bridges, the federal government doesn’t foot the bill entirely -- state and local governments also chip in, typically paying anywhere from 2 percent to 65 percent of project costs.
But if HTF runs out of money, the federal government would be forced to stop reimbursing the states for its share of the construction costs, meaning state governments will have to either fund projects entirely out of pocket -- or suspend them altogether.
According to the White House, an HTF insolvency would jeopardize as many as 112,000 road-building projects and 5,600 transit projects.
This means that new road and bridge projects might halt mid-construction, and maintenance on existing infrastructure could be stalled indefinitely.
Without necessary maintenance in the long-term, aging roads and bridges can crumble -- causing inconvenient emergency closures, or worse yet, catastrophic failures -- like the 2007 collapse of the I-35W bridge in Minnesota and the 2013 collapse of I-5 in Washington state.
2. 700,000 (Might Be) Out of Work
The road and bridge construction industry employs about 1.7 million workers, according to the American Road & Transportation Builder’s Association. But without the trust fund, some of those men and women might be temporarily out of work. A trust fund insolvency could cost a whopping 700,000 jobs, Transportation Secretary Anthony Foxx said, impacting the entire American economy.
3. Higher Prices at the Pump
Though federal lawmakers are reluctant to pass a gas hike -- especially during an election year -- many state-level lawmakers, frustrated with Congress’ inaction, have sought to raise funds on their own.
Since the beginning of 2013, more than half a dozen states, including Maryland, Massachusetts, New Hampshire, Pennsylvania, Vermont, Virginia and Wyoming, have increased their gas tax.
Several others, including Iowa and Utah, are considering hikes -- and in the event of an HTF insolvency, more conservative states might be forced to consider hikes as well.
4. Higher Prices at the Mechanic’s Shop
Americans spend an average of $324 per year on repairs and maintenance due to poor road conditions, according to AAA. (Nationwide, that’s $6.4 billion on damage from pot holes alone, AAA says.) A lack of federal funding for repairs would only make matters worse.
5. Traffic Ebbs and Flows
The one silver lining is a short-term reduction in congestion in some construction zones. With road- and bridge-building projects postponed, crews and equipment wouldn’t be blocking traffic, CNN points out.
But congestion in areas slated for expansion -- including highways set to receive additional lanes -- will remain tight, and frustrated commuters will be left honking their horns in bumper-to-bumper traffic.
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