SPECIAL REPORT: The real reason behind the Highway Trust Fund decline

| 2/25/2009

Wednesday, Feb. 25, 2009 – Question: What affected the Highway Trust Fund more in 2008 – the fact that Americans drove 100 billion fewer miles or that trucking companies bought less equipment? The answer might surprise you.

The U.S. Department of Transportation has had the public believing that a decline in fuel consumption was the leading cause of a $3 billion decline in the Highway Trust Fund, which pays for federal and state transportation programs.

Former Transportation Secretary Mary Peters used mileage statistics to downplay the fuel tax as a viable funding source. She also used the stats to promote tolling and public-private partnerships on America’s highways.

But mileage decreases alone did not cause the $3 billion shortfall. In fact, mileage accounted for only about $600 million or 20 percent of the decline, according to the U.S. Treasury.

The other 80 percent, or $2.4 billion, can be attributed to the fact that trucking operations bought fewer trucks, trailers and tires, according to U.S. Treasury data published in a December 2008 analysis by the American Road and Transportation Builders Association.

“In summary, while revenues into the Highway Account were indeed $3 billion less in FY 2008 than in FY 2007, it was not due to the decline in (vehicle miles traveled) as U.S. DOT claims. The U.S. DOT misused that data to suggest the federal motor fuels tax can no longer finance federal investments in highway and mass transit improvements,” stated ARTBA Vice President of Economics and Research William Buechner.

“The data in fact suggest that the federal motor fuels taxes can remain a viable source of revenues for highway investments for the foreseeable future. The trust fund’s real problem is not the decline in VMT, but rather the economic slowdown and the fact the federal motor fuel tax rates have not been changed since 1993.”

When truckers and fleets are not buying equipment for whatever reason – most likely economic – the federal government misses out on collecting a 12 percent federal excise tax.

The Highway Trust Fund received $2.4 billion less from truck and equipment taxes and another $74.4 million less in truck tire taxes than it had the previous year according to the ARTBA report.

Trust-fund receipts from diesel fuel were actually up in 2008 by $256.2 million compared to 2007. Revenues from gasoline taxes declined by $70.9 million, or 0.3 percent, but the total amount was still $21 billion.

Officials with the Owner-Operator Independent Drivers Association say a 0.3 percent drop in gasoline-tax revenue should not have been enough to trigger the response by Secretary Peters.

“It is not, as Secretary Peters claimed, a direct correlation between miles traveled being down, with a combination of hybrid vehicles and better fuel efficient cars; it is because nobody is buying trucks and paying the 12 percent excise tax, to the tune of $2.4 billion,” OOIDA Director of Legislative Affairs Mike Joyce told Land Line.

“In fact, diesel fuel revenue was up some $256 million in the same year as the $3 billion shortfall.”

The Highway Trust Fund has been a hot topic in transportation circles and on Capitol Hill in recent months.

Top House and Senate leaders are preparing to draft the next surface transportation reauthorization bill this year to replace the current program known as SAFETEA-LU, which has been in effect since 2005.

A federal commission is scheduled to issue recommendations on Thursday, Feb. 26, for Congress to consider when writing the bill.

Other commissions and organizations from all corners of the transportation industry are weighing in on the topic.

OOIDA officials continue to say that the easiest and fairest way to fund transportation is through a federal tax on motor fuels, while acknowledging that alternative proposals such as a tax on miles traveled could someday replace the per-gallon fuel tax.

– By David Tanner, staff writer