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Statement of the American Road &
Transportation Builders Association
“New Routes for Funding and Financing Highways and Transit”
Senate Finance Committee
May 6, 2014
Chairman Wyden, Senator Hatch and members of the Committee, we appreciate you
scheduling today’s hearing to discuss the status of the Highway Trust Fund. After nearly three
years of temporary extensions of the federal highway and public transportation programs,
Congress approved in 2012 the Moving Ahead for Progress in the 21st
Century Act (MAP-21).
While MAP-21 certainly initiates many much-needed reforms in the structure and operation of
the federal surface transportation programs, the simple truth remains that the Highway Trust
Fund’s beleaguered revenue outlook was the primary obstacle that had to be overcome in this
The leadership of the Senate Finance Committee ended this cycle of short-term
measures. The members of this Committee developed a bipartisan plan to supplement trust
fund revenues to preserve existing levels of highway and public transportation investment in
February of 2012 and, as a result, MAP-21 was able to move forward. Roughly four months
after you produced a revenue title for the Senate reauthorization proposal, MAP-21 was signed
Your hearing is particularly timely as MAP-21’s revenue provisions created a short-term
stabilization for the trust fund supported programs. The U.S. Department of Transportation
now projects that it will have to slow down reimbursements to states in August for already
approved federal-aid projects to preserve a positive balance in the trust fund. Furthermore,
the Congressional Budget Office (CBO) forecast last year that without additional resources all
incoming trust fund revenues in FY 2015 will be dedicated to projects already underway. This
means the Highway Trust Fund would be unable to support any new highway or public
transportation investment in FY 2015. As a result, policy makers will have three straight
forward choices: dramatically cut federal highway and public transportation investment and
threaten hundreds of thousands of jobs; continue the recent trend of supplementing trust fund
revenues with general funds and, in so doing, add to the deficit; or generate new revenues.
Highway Trust Fund Revenue Shortfalls
The current crisis facing the Highway Trust Fund should not surprise anyone. The Bush
Administration first projected a negative trust fund balance in February of 2006 when it
released its FY 2007 budget proposal. This projection became a reality in 2008 when Congress
was required to infuse the trust fund with $8 billion in supplemental resources. Three
additional trust fund preservation measures were needed in 2009, 2010 and 2012 (MAP-21).
The simple reality is that this situation will continue to repeat itself as long as the underlying
structural deficit in the Highway Trust Fund is allowed to persist.
While the Highway Trust Fund’s revenue challenges are well understood, the cause of
this dilemma has been the source of much confusion and, in some cases, outright distortion. To
ensure a viable and appropriate solution to the trust fund’s structural revenue shortfall can be
identified, all parties must be clear on how this situation occurred:
The Highway Trust Fund was established in 1956 to assure that taxes paid by highway
users, not general taxpayers, financed federal investment in highways and bridges. The
trust fund has also supported public transportation investment since 1982.
The main source of revenues for the Highway Trust Fund is the federal excise tax on
gasoline, currently 18.3 cents per gallon, and diesel fuel, 24.3 cents per gallon. Revenues
from three taxes on large trucks are also credited to the Trust Fund.
The trust fund’s revenue base has not been adjusted since 1993. Since that time,
federal surface transportation investment has increased substantially to correspond
with Americans’ increasing reliance on the U.S. surface transportation network.
Highway Trust Fund revenues financed all federal highway and most transit investment
until 2007, when the recession of 2007 to 2009 reduced freight and truck-related
revenues significantly below initial projections.
VMT clearly declined during the recession, but it should be noted the variance between
when travel levels peaked in 2007 and the period’s lowest point in 2011 was 2.8
percent—a decline far less dramatic than the recurring assertions of a shift in U.S.
societal behavior. Further belying these claims, U.S. VMT has remained above 2.95
trillion miles for 10 consecutive years.
The economy is now improving. With employment rising and unemployment declining,
growth of highway travel is resuming. In 2012 and 2013, vehicle miles traveled on the
nation’s highways rose more than 26 billion miles, offsetting almost one-third of the
While revenues are approaching pre-recession levels (see Figure 1), the Highway Trust
Fund has been on an unsustainable path for the past 10 years and, as a result, the
federal surface transportation programs are now at a dangerous crossroads.
Congress has three options for addressing the revenue shortfall:
Permit highway and transit program funding to fall to the levels that can be supported
by existing revenues. According to CBO, this would require complete elimination of
highway investment and all trust fund supported transit spending beginning in October.
Continue MAP-21 highway and transit investment levels by making annual transfers
from the general fund. CBO projects preserving existing levels of surface transportation
investment by this means would require this Committee to find an average of $16 billion
Close the HTF revenue gap by raising rates on existing highway user taxes or enacting
new taxes. CBO testified in 2013 that this could be accomplished with a 10-cent per
gallon increase in the federal tax on gasoline and diesel fuel. Alternatively, Congress
could enact new highway user fees, such as a vehicle-miles-traveled (VMT) tax or link
infrastructure investment and energy production as some members of Congress
suggested in 2011 and 2012.
Clearly public-private partnerships and other innovative financing mechanisms can be a
great asset in moving individual projects forward. ARTBA, through its Public-Private
Partnerships Division, has been a leading advocate for federal policy in this area for 25 years.
However, there is a distinction between the annual programmatic funding that is provided by
the Highway Trust Fund and project financing tools. They work exceptionally well together, but
one is not a substitute for the other. One of the key things members of the Finance Committee
can support in this area is expanding or eliminating the cap on highway and freight Private
There is widespread awareness of the political obstacles to increasing Highway Trust
Fund revenues, but there is less awareness of what the trust fund delivers and the implications
of reducing federal transportation investment to the level of existing tax revenues.
State-by-State Impact of Federal Highway Investment
For almost 100 years, the federal government has shared the cost to the states of
capital improvements to highways that are important for the performance of the national
Our analysis of data from the Federal Highway Administration, covering the decade
2001-2011, shows that reimbursements to the states from the federal highway program
account for an average of 51.6 percent of all state capital investments in highways and bridges.
Since most federal aid program funds are used for capital outlays, this measure is an indicator
of how important this national program is to each state’s highway and bridge construction
Figure 2 shows how much each state relies on the federal highway program to finance
its highway infrastructure improvements, ranging from 35.3 percent for New Jersey to more
than 80 percent for Rhode Island, Alaska, Montana and Vermont. Thirty-two states rely on the
federal highway program to support more than half of their annual highway and bridge outlays.
How many states could fill the gap if Congress reduces federal highway investment to
the level of Highway Trust Fund revenues? How would Oregon and Utah make up the hundreds
of millions of dollars it would lose? How will states like South Carolina or North Dakota, which
are dependent on the federal highway program for almost 80 percent of their highway capital
spending, meet their highway investment needs if Congress slashes the federal highway
The most likely result is that state after state would cut its highway construction
program, allowing roads and bridges to deteriorate and foregoing improvements needed to
keep the U.S. transportation system and economy productive and competitive. Tens of
thousands of jobs would be eliminated in the construction industry, supplier industries and the
rest of the nation, further weakening the economy.
Contribution of the Highway Trust Fund to the U.S. Economy
A safe and efficient transportation system is one of the fundamental requirements of a
modern economy. Virtually every business and industry depends on the national transportation
system to obtain needed materials and labor and to get goods and services to customers. Every
household depends in some measure on the transportation system for access to work,
shopping, medical care, church, family and entertainment. Millions of workers depend directly
on the transportation system for jobs - auto workers, bus and truck drivers, airline workers,
auto mechanics and gas station attendants, and hotel employees, among others.
Jobs: Building and maintaining the nation's transportation infrastructure is itself a major
source of jobs in the U.S. Every $1 billion invested in highways supports 27,823 jobs, according
to the Federal Highway Administration, including 9,537 on-site construction jobs, 4,324 jobs in
supplier industries and 13,962 jobs throughout the rest of the economy. Investment in other
modes would support a similar number of jobs.
In 2012, almost $119 billion worth of construction work was performed on
transportation projects, including highways, bridges, subways, light rail systems, freight rail,
airports and water ports. This investment supported more than 3.3 million jobs in the U.S.,
including just over one million construction jobs.
But focusing just on the jobs supported by the Highway Trust Fund sells its importance
short. Far more important in the long run is the contribution of highways to economic activity
and jobs throughout the entire economy.
The simple fact is that more than 70.9 million American jobs in just tourism,
manufacturing, transportation and warehousing, agriculture and forestry, general construction,
mining, retailing and wholesaling alone are dependent on the work done by the U.S.
transportation construction industry. These dependent industries provide a total payroll in
excess of $2.67 trillion and their employees contribute more than $230.7 billion annually in
state and federal payroll taxes.
Freight: In 2010, according to the Federal Highway Administration, more than $16.0
trillion dollars of freight was shipped in the U.S. including $13.0 trillion of domestic shipments
and $3.0 trillion of exports and imports. Two-thirds of the total, or $10.8 trillion, was shipped by
truck on the nation's highways. Another 17 percent, or $2.7 trillion, involved multiple modes
including trucks, which means trucks were involved in 82 percent of all freight shipped in the
U.S. in 2010. Rail, air, water and pipelines accounted for the remaining 18 percent of freight
The Federal Highway Administration estimates that the volume of freight shipments will
more than double between 2010 and 2040 to almost $39.5 trillion in constant dollars, with
$21.8 trillion of that carried by truck and $10.3 trillion by intermodal combinations that include
trucks. The growth will put enormous pressure on every element of the nation's transportation
Benefits to businesses: Businesses have always depended on the nation's transportation
system to connect to suppliers and customers, but during the past 25 years improvements in
transportation have also been a major source of productivity increases and reduced costs for
many U.S. businesses. Manufacturers and retailers today use the just-in-time delivery system to
assure materials are available when needed in the manufacturing and production process and
finished goods arrive at retail stores and customers' docks in a timely manner. This has greatly
reduced the need and expense of warehousing inventory, freeing up scarce capital to invest in,
and make improvements to, other business activities like technology, product quality and
Just-in-time logistics, however, require a dependable transportation system, which is
threatened by the ever-growing problem of congestion on our highways, rails, airports and
water ports. Congestion makes transportation slower, more costly and unreliable. Adapting to
congestion requires scheduling more time for trips, which raises labor costs, or holding more
inventory which ties up capital. When that happens, the economy becomes less productive,
costs increase and living standards decline.
Personal mobility: Americans are among the most mobile people on earth. In 2009, the
latest year for which data are available, Americans traveled a total of 4.85 trillion miles by all
transportation modes, or an average of 15,791 miles per person. Most of the travel, 3.9 trillion
miles, or 81.1 percent, of the total, was by automobile, truck or motorcycle, an average of
13,799 miles per person.
Virtually every trip has an economic purpose or impact on the economy. Most obvious is
the daily commute to and from work for the nation's 136 million workers. But every trip to the
grocery store or shopping center has an economic impact, as do trips to restaurants, to the
movies, to vacation spots, to school, even to church where the weekly offering helps maintain
the building and clergy. And many trips are essential to our quality of life, including visits to
family and friends, a night out after a hard day's work, or an emergency trip to the hospital.
Defense and security: The U.S. transportation infrastructure network is critical to our
national defense and homeland security. More than 60,000 miles of roads have been
designated part of the Strategic Highway Network, including the entire Interstate Highway
System, because of their important role in transporting military equipment and personnel.
Roads also comprise the primary evacuation routes in the event of an attack by a foreign enemy
such as that on the World Trade Center in 2001, or a natural disaster like Hurricane Katrina in
2005 and Hurricane Sandy in 2012. These disasters pointedly showed the need for both
adequate capacity and redundancy in the nation's transportation system.
Can Devolution Achieve an Equivalent National Highway System?
Periodically, members of Congress and outside groups suggest drastically scaling back
the federal highway program, devolve responsibility for highways almost entirely to state and
local governments and reduce the federal gasoline tax to a few cents per gallon. Such
legislation has been introduced in this Congress by Representative Tom Graves (R-Ga.) and
Senator Mike Lee (R-Utah). The thinking behind this concept is that state and local governments
have better knowledge of their highway investment needs than the federal government and
thus can make better investment decisions. Proponents of this concept also claim states have a
better sense of the willingness of local taxpayers to finance highway improvements and thus
could do a better job of determining how and by how much to replace the lost federal aid.
First, there is a practical consideration. To make up for the loss of federal highway
funds, every state would have to increase its own gas tax or generate other revenue sources—a
fact former Senator James DeMint (R-S.C.) promoted when introducing a previous version of
the Graves-Lee legislation to devolve the federal surface transportation programs. Although
some states have recently raised their own highway taxes, in most states there is no more
political will to increase taxes than in the U.S. Congress, which has failed to increase the federal
gas tax since 1993 despite growing highway traffic, increased congestion, higher construction
costs and the widespread recognition that current revenues are woefully inadequate to support
needed federal highway investment. To make up for the federal investments that would be lost
under the Graves-Lee proposal, the average state would have to increase its gasoline tax by 21
cents per gallon and its diesel tax by 27 cents per gallon or identify commensurate revenues
At a more fundamental level, however, there would not be an incentive for state and
local governments to replace lost federal funds. The national benefits that accrue from federal
surface transportation investments are a spill-over and are not taken into account when
state/local officials compare the costs and benefits of highway improvements. When judging
whether specific improvements should be undertaken with non-federal funds, only these
specific benefits and costs would be considered. Many projects whose total benefits, including
national benefits, exceed costs and thus would be undertaken under the federal highway
program, would not pass muster when only local benefits are considered and thus would not be
undertaken. Under devolution, thus there would be less total highway investment because
state and local officials would put less value on improvements that have spill-over national
Devolution thus would have the impact of reducing total investment in highway
improvements and result in a deterioration of the ability of our highway system to serve the
transportation needs of the national economy.
Time to Act is Now
Mr. Chairman, members of the Committee, there are no illusions about how difficult it is
to get major legislation through Congress in the current environment. At the same time,
federal infrastructure investment is one of the few areas where both sides have repeatedly
demonstrated a willingness to find common ground. MAP-21 passed the House 373-52 and the
Senate by 74-19. Measures to reauthorize the Water Resource Development Act were
approved in each chamber by even greater margins.
At the same time, there is a broad array of stakeholders that are willing and eager to
support meaningful action to upgrade the nation’s surface transportation infrastructure
network. Groups like the U.S. Travel Association and the National Retail Federation have
recently engaged in the transportation policy arena in an unprecedented fashion. These groups
did not just flip a coin and decide to launch efforts to call for transportation infrastructure
improvements—the inefficiencies in the current system are forcing sectors across the economy
to become involved as a matter of self-preservation and remaining internationally competitive.
The Highway Trust Fund is not an auto pilot situation that can be addressed when the
time is right. In a matter of months, without congressional action federal reimbursements will
slow and the FY 2015 appropriations process will not have the resources to support new
investment in highway and public transportation improvements.
ARTBA has long supported increasing the federal motor fuels tax as a means to stabilize
and grow Highway Trust Fund revenues, but there is a host of ways to achieve the same goal.
Congress created two separate independent commissions as part of the 2005 surface
transportation reauthorization bill and these commissions furnished you with a multitude of
alternatives to support future federal highway and transit improvements. MAP-21 called for
the creation of long-term strategic planning and performance management processes. That
process will be fundamentally flawed unless a long-term revenue solution is established for the
Highway Trust Fund, as plans are meaningless without the resources to implement them.
There is no need for further studies or time to develop a trust fund solution. The
Highway Trust Fund has been facing the same problem with virtually the same alternatives for
action for more than five years. One thing has been proven certain in those five years—more
time has not made any of the choices before you easier.
No matter how difficult some may perceive the current Highway Trust Fund dilemma to
be, it pales in comparison to the incredible value the U.S. surface transportation network
provides all Americans and the nation’s economy. We urge you to focus on this value as you
work to develop potential solutions to the Highway Trust Fund’s revenue shortfall and stand
ready to assist your efforts in this regard.