Gas prices tax government as highway fund runs short
Could be in red by $3.2b next year
WASHINGTON - Soaring gasoline prices are hurting Uncle Sam in the wallet, too.
As motorists cut back on their driving and buy more fuel-efficient cars, the government is taking in less money from the federal gasoline tax.
The result: The principal source of funding for highway projects will soon hit a big fiscal pothole. The federal highway trust fund could be in the red by as much as $3.2 billion or more next year.
The fund, due to finance about $40 billion in transportation projects next year, has become increasingly strained. But the problem has taken on greater urgency as lawmakers face a backlog of projects to maintain the nation's aging interstate highway system and ease traffic congestion.
"The situation has only been exacerbated by rising fuel prices, which are causing motorists to drive less and resulting in less revenue for transportation improvements," said David Bauer, senior vice president for government affairs at American Road & Transportation Builders Association.
In the short run, lawmakers are scrambling to figure out how to close the funding gap. Federal highway spending nationwide could be cut by one-third beginning Oct. 1, according to the American Road and Transportation Builders Association.
"The condition of the Highway Trust Fund has been deteriorating for years, but skyrocketing gas prices have made an already dire situation worse," said Senator Patty Murray, a Washington Democrat, who chairs the Senate transportation appropriations subcommittee. "We are now less than a year away from a bankrupt trust fund which would leave critical construction projects in peril."
In the long run, lawmakers must figure out whether the 18.4-cent-a-gallon federal gasoline tax, which helped bring in money when fuel-hungry SUVs were hot, is still a viable way to fund transportation projects amid heightened concern about gasoline prices, US dependence on foreign oil, and global warming.
The federal gasoline tax is tied to every gallon sold, not every dollar spent, so federal gas tax revenues go up only if consumption increases. This year, consumption is projected to drop for the first time since 1991. Vehicle miles traveled on US roads are trending downward for the first time since the oil shocks of the late 1970s and early 1980s, the
Highway trust fund receipts, meanwhile, were down more than $2 billion through May, compared with the same period a year ago, a Treasury Department report said.
The shortfall was projected at $3.2 billion earlier this year, but it is expected to be higher when the White House budget office issues a revised estimate later this month. The shortfall was a major reason that Republican presidential candidate John McCain's proposal for a gas tax holiday to ease the public's pain at the pump has faced bipartisan congressional resistance.
The federal highway trust fund was facing problems even before the run-up in gas prices because of higher costs for asphalt, concrete, and steel. But its condition has been "exacerbated by the high price of fuel, and people changing their driving habits," said Stephen E. Sandherr, chief executive officer of the Associated General Contractors of America.
Lawmakers are eager to find a way to fund politically popular transportation projects. An increase in the gas tax, which was raised last in 1993, is considered unrealistic in an election year.
A proposal to shift $8 billion from the general fund to the highway trust fund enjoys considerable support in the Senate but faces opposition from a number of Republicans who say it would trade one problem for another by deepening the federal budget deficit.
