Wednesday, April 9, 2014

The truth about the Highway Trust Fund Shortfall


The United States Highway Trust Fund is a federal surface transportation fund which we pay into through our federal fuel and excise taxes. Our federal gas tax dollars are supposed to fund both transit and highway transportation infrastructure. It was established 1956 to finance the Interstate Highway System and other roads. The Mass Transit Fund was created in 1982 during the Reagan administration. Southern California citizens certainly pay a significant portion to the federal kitty, 18.4 cents for every gallon of gas purchased to be exact. So we expect that money to come back to us in the form of robust infrastructure and reliable transit operations.

There are reports that this fund is running into a fiscal problem. The kitty is expected to run out of money by the fall. The Desert Sun published an editorial last night addressing this issue with projects in the Coachella Valley. Thankfully, we've seen no reports of ill-advised proposals to eliminate transit from this account as in the past. We and just about every other transit advocacy group would like some of our federal dollars that we pay into returned for mass transit infrastructure and services. The reasons should be obvious.

Former Secretary of the U.S. Department of Transportation Ray LaHood believes fuel taxes should be raised and then indexed to inflation which is a very debatable solution. LaHood also mentioned that such fuel taxes fail to generate enough revenue given the fact that we have more fuel-efficient cars and per-mile driving is down. Some members in Congress appear not to be buying LaHood's argument--and for good reason.

LaHood was correct that American citizens are using less and less fuel from the pump and fewer gas guzzlers being driven. However, retail prices are still stubbornly high and both the state and federal government continue to take in records amounts of fuel taxes even with inflation factored in. It's safe to say that we are still paying record taxes at the gas pump.

Hard facts: Fuel Taxes Revenue and Inflation

State & Local fuel tax receipts nationwide are at record levels.
Source: U.S. Census Bureau
According the U.S. Bureau of Labor Statistics, the Federal Reserve was created in 1913 and the purchasing power of the dollar has since decreased over 95%. The spending power of the 1913 dollar was weakened to about 7 cents during the early 1990's. Today, just under five cents equates to the 1913 dollar. Doing the math and rounding the 2014 dollar value down to four cents, that adds up to about a 43% decrease in the spending power of the buck between the 1990's and 2014.

During the 1990's, the economy was robust and transportation infrastructure was therefore funded and built. That was the period that OCTA was able to quickly build out its massive freeway master plan, Los Angeles brought in urban rail, and Southland counties teamed up to introduce Metrolink rail service.

Bring in state and local fuel tax receipts reported by the U.S. Census Bureau. In 1992, the governments nationwide collected $23.6 billion in fuel taxes, worth $39.8 billion in 2014. In 2012, $42.5 billion was collected from the pump, a record.

At the federal level, fuel tax receipts for 2013 clocked in at just under $30 billion according to the Federal Highway Administration, another record with inflation. In '94, the feds collected about $13.9 billion.

It's quite clear that total fuel tax receipts have kept up inflation thanks to high gas prices even though we are consuming less and the tax rate of 18.4 cents has stayed flat for two decades. For the record, the first two quarters of 2013 added up to $21.3 billion.

Where's all that money going?

The issue is not whether the federal government is getting enough revenue, but how the money is being spent during a soft market economy. According to the Census Bureau, the federal government is getting more tax money than ever before in our history. Even with all that cash coming in, the surface transportation fund is headed toward insolvency and the national debt is more than $17.5 trillion.

Government waste and overspending at the state and federal level are certainly out of control and evidence shows that special interest pandering are the primary culprits of this serious issue. During a soft market economy where there are far more construction workers than jobs, the costs to build and maintain public works infrastructure should not be artificially bloated. Yes, public and contracted workers need to be treated and paid justly in the workplace and we're not dissenting labor unions as a whole; the Industrial Revolution teaches us that. But with the record amounts of gas tax revenue collected from the state and federal level under a soft Inland economy, we should be able to afford to build out and operate everything outlined in our Long Term Future Vision of Inland Empire Mass Transit.

Ending on a positive note, there may be some good news ahead for we the people. With a growing number of citizens fed up with the high gas prices and increasing electric bills and the taxes that go along with them, the marketplace has been responding swiftly. The solar panel market is becoming more affordable and more all-electric cars are being introduced into the marketplace. That could mean more self-reliance. If the government can incline private entrepreneurs to flood the market with these clean-energy products, get the supplies up to meet the demands which lowers prices, good things will happen to the economy as we won't be dependent on the monopoly powers of OPEC for fuel and Southern California Edison for electricity. What can the government do then to pay for transportation infrastructure? We'll talk more about it on Friday.

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