GAO says higher taxes would keep Highway Fund afloat

| 3/11/2009

The U.S. Government Accountability Office has entered the debate over how to shore up the Highway Trust Fund.

The fund that pays for federal and state transportation programs has taken a significant hit since 2007 because of fewer retail truck sales and a decline in fuel consumption and miles traveled.

GAO officials stated in a recent report that creating a new tax on vehicle miles traveled and increasing other user fees would lead to solvency in the fund.

“We have reported that other user-pay mechanisms – for example, charging according to vehicle miles traveled, tolling, implementing new freight fees for trucks, and introducing congestion pricing – may better recoup costs,” GAO officials stated in the February report prepared for the U.S. Senate Committee on Environment and Public Works.

The Owner-Operator Independent Drivers Association believes the report jumps straight to suggested tax increases and doesn’t go far enough to address spending and accountability.

“I’m a bit disappointed that the GAO didn’t focus a bit more on how revenue expenditures are used today, but that may have been outside the scope of their reporting,” said OOIDA Director of Legislative Affairs Mike Joyce.

The Highway Trust Fund declined $1.37 billion, or 5.4 percent, from fiscal year 2007 through fiscal year 2008 according to the Federal Highway Administration.

The decline was significant enough for former DOT Secretary Mary Peters and federal lawmakers to call for emergency legislation in September 2008 to restore $8 billion to the fund that had previously been diverted.

Peters stated repeatedly at the time that the shortfall was attributed to Americans driving fewer miles and turning to fuel-efficient vehicles.

Recent FHWA data show fuel consumption – often reported in the media simply as “miles traveled” – accounted for a $580 million portion of the $1.37 billion shortfall.

Tax revenue from the 12-percent excise tax on retail truck sales was down 32.8 percent – or $763 million – a much higher number.

The decline in truck sales was based on a number of economic factors, FHWA officials said, including a 2007 pre-buy leading up to new emission standards, and a rising cost of diesel fuel.

The trust fund decline also included a $29.8 million drop in taxes from tire sales and a $1.3 million decline in Heavy Vehicle Use Taxes – all indicators of tough economic times for trucking companies.

Even with the $8 billion infusion by Congress in 2008, the trust fund still faces a tough road ahead, said GAO officials. Officials estimate the fund could be broke again by summer of this year.

GAO called for a “fundamental re-examination” of current transportation programs and urged better communication among all parties associated with the handling and distribution of Highway Trust Fund dollars to avoid costly surprises.

Another task lies ahead that will have a significant impact on the Highway Trust Fund.

Transportation leaders in the U.S. House and Senate are in the process of drafting the next highway funding bill to replace the current transportation policy and funding model known as SAFETEA-LU, signed in 2005 by then-President Bush.

Members of Congress hope to address long-term funding needs by taking into account the work of lawmakers, government agencies, public and private interests and two federally appointed commissions.

OOIDA is counting on being a part of the dialogue by continuing to educate lawmakers about trucking.

“Truckers pay their fair share for highways,” OOIDA’s Joyce said. “Trucks pay for 36 percent of the Highway Trust Fund while contributing only 7 percent to highway congestion.”

Joyce said the Association does not support the tolling of existing highway capacity or the leasing of roadways to the private sector.

“This push for PPPs and tolling – I feel that this is another opportunity passing us by where we’ve failed to address the hole in the bottom of the bucket,” Joyce said of the GAO report.

“Even during this crisis this past September, the DOT asked states to send back unspent highway dollars. These sorts of things should be happening on a regular basis.”

– By David Tanner, staff writer