In less than a month, the federal government may not be able to pay for ongoing highway projects, which could dramatically increase congestion and put up to 700,000 jobs at risk.
The Department of Transportation announced last week that reserves in the Highway Trust Fund would fall to critical levels by August 1. At that point, the trust fund will not be able to fully pay for the highway construction and repair projects that have already been approved by the states, and will have to begin cutting back. These cuts could lead to job losses dramatically slow the movement of goods across the country, and cause disruptions in many businesses’ supply chains.
On Wednesday, Business Forward will host a free conference call with Transportation Secretary Anthony Foxx on the status of the Highway Trust Fund and the President’s Grow America Act to provide stable funding for the country’s transportation infrastructure. Register for the call here.
American Businesses Depend on Efficient Highways
Businesses depend on the nation’s road infrastructure for shipping goods, ensuring workers arrive on time, and allowing customers to visit their stores. About 82 percent of the 14.2 trillion tons of goods shipped every year is moved by truck. The country’s road network, especially the Interstate Highway System, is essential to the smooth operation of business. The efficiency of our nation’s highway system allows America’s businesses to move goods more quickly and cheaply than their international competitors.
The rise of just-in-time logistics, by which businesses are minimizing their inventory costs, has made a functioning transportation network even more important. (Business Forward detailed the fragility of this cost-saving tactic in its report on manufacturing and severe weather, which you can read here.) Inadequate road infrastructure may increase the frequency of logistics and supply chains disruptions, which have a significant impact on businesses’ bottom line. According to the Texas A&M Transportation Institute, traffic congestion cost the trucking industry $27 billion, which in turn raises shipping prices for American businesses.
Trust Fund Nears Insolvency
The Highway Trust Fund was established in 1956 to ensure steady funding of the nation’s roads and enable long-term planning. The trust fund is supported by user fees, predominately taxes on gasoline and diesel fuel that provide 90 percent of the revenue for the highway account and 80 percent of the revenue for the mass transit account.
However, revenues have not kept pace with spending, and the trust fund is approaching insolvency. Real revenues have declined over the past two decades for two reasons: 1) The gasoline tax of 18.4 cents per gallon has not been increased to match inflation since 1993; and 2) better fuel economy and declining car travel have led to less fuel usage, and therefore less revenue. The Highway Trust Fund needs to maintain approximately $4 billion in reserves to manage cash flows, but DOT expects the balance of the trust fund to fall below that critical level by August 1.
Short-Term Legislation for Long-Term Planning
While the Highway Trust Fund provides a dedicated revenue stream for transportation projects, Congress must still approve the levels of revenue and spending in an authorization bill. In the past, authorization bills covering 4 to 6 years were passed, to give states clear expectations of federal funding for long-term infrastructure investments. But since 2009, Congress has been unable to pass a long-term bill, instead passing nine short-term authorizations.
The current authorization, the Moving Ahead for Progress in the 21st Century Act (MAP-21) passed in July of 2012, only approved two years of spending and will expire on September 30. The new fiscal year for most states began on July 1, without a guarantee that funding will be available in the upcoming months. A new, longer-term bill would provide state DOTs with more certainty, which in turn should help businesses that rely on the road infrastructure.
A new highway bill is an opportunity for lawmakers to reevaluate our existing transportation infrastructure and match the need of businesses and consumers.