Highway Trust Fund: Then, Now and into the Future

By Reid Dagul, NSSGA, Director, Government Affairs

THE ESTABLISHMENT OF THE Highway Trust Fund (HTF) in 1956 was a strategic move to ensure a stable influx of federal funds for the development of the interstate highway system. The certainty that this was intended to establish is now in danger, as the future of the HTF continues to be debated.

While the bulk of financial responsibility for surface transportation falls on state and local governments in the U.S., the HTF still plays a critical role in supporting infrastructure projects. For instance, in 2017, state and local entities were responsible for funding the lion’s share—approximately $131 billion or nearly 75%—of the expenditures for highways. In the same year, the federal government’s contribution from the HTF was substantial, providing $46 billion for highway infrastructure, with 95% of that allocation directed to specific capital projects, including those related to the Interstate Highway System.

"The divergence in views range from fundamental issues, such as federal involvement in transportation financing and the balance of spending between highways and mass transit, to specific policy suggestions."

The primary source of the HTF’s revenue is the federal excise tax on motor fuels (18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel since 1993), often referred to as the "gas tax." In 2019, according to the Congressional Budget Office, this tax accounted for 82 percent of the HTF’s revenue, totaling $36 billion. To cover these shortfalls, the HTF has frequently relied on transfers from the general fund. Since 2008, these transfers have amounted to $275 billion, including the $118 billion authorized by the Infrastructure Investment and Jobs Act (IIJA) in 2021.

Options to Fund the HTF

The sustainability of the HTF is a subject of debate, with varied opinions on how to rectify its financial challenges. The divergence in views range from fundamental issues, such as federal involvement in transportation financing and the balance of spending between highways and mass transit, to specific policy suggestions. To ensure the HTF’s long-term viability, policymakers have only a few options. Some of the discussions happening on the Hill regarding the future of the HTF include:

• Increase the gas tax: The Congressional Research Service estimates that each additional penny in federal fuel taxes could yield between $1.7 billion and $1.8 billion annually for the HTF. However, this may not be a sustainable long-term fix given the trends toward greater fuel efficiency, reduced driving, and the rise of hybrid and electric vehicles—all of which could diminish gas tax revenues.
• Alternative revenue sources: Replacing or supplementing the gas tax with a different form of revenue is another approach. For instance, a sales tax model where the tax is a percentage of the fuel’s retail price could allow tax revenues to increase with the price of fuel, independent of consumption levels.

Another alternative revenue source is addressing the increase in electric vehicle (EV) usage, including S. 2882 "the Stop EV Freeloading Act." Introduced in the Senate by Sen. Deb Fischer (NE), the bill aims to stop EV freeloading by instituting a one-time fee of $1,000 on EVs at the point of sale, ensuring that EV owners also contribute to the upkeep of the highways that they utilize.

• Vehicle Miles Traveled: One contentious proposal involves the implementation of a vehicle miles traveled (VMT) tax specifically targeting EVs. Under such a system, EV owners would be taxed based on the number of miles driven. The virtual vehicle miles traveled proposal consists of each driver paying for an average of miles driven across the country each year. Yet another idea is to focus on commercial vehicles and then there is also the VMT national pilot program, which is included in IIJA.
• Cut spending: Another solution would be to scale back spending to match the current revenue levels of the HTF. This would involve funding only the projects that can be covered by existing revenues, thereby eliminating deficits. However, this could significantly limit the number of federal projects and increase the financial burden on state and local governments to support vital infrastructure initiatives.
• Annual appropriations: This idea would consist of highway and transit funding being included in yearly appropriations bills, fighting for the same dollars as low-income housing and defense dollars. Instead of states knowing how much money they will receive over five years, they would only know year to year. The uncertainty this would cause the program is disastrous.

While the future of the HTF is yet to be determined, it currently plays a critical role in funding infrastructure that the aggregate industry directly supplies. It’s clear that securing the continuity of the HTF is not just a transportation issue, but a significant concern for all Americans. As lawmakers explore various options, NSSGA will be at the forefront advocating for solutions that recognize the essential contributions of the aggregate industry and the continuation of the HTF.