Although Texas voters approved Proposition 1 on Nov. 4—a constitutional amendment which could provide $1.7 billion to state transportation projects in the next year—Texas and the rest of the country have an even more significant long-term transportation funding problem on the horizon: the Highway Trust Fund.
The federal government's funding source for transportation projects across the country, the HTF could run out of money if Congress does not pass new legislation this session. In addition, decreasing revenue from the motor vehicle fuel tax and a growing need for transportation projects means the HTF is facing an average $17 billion annual deficit from 2015–23 unless Congress finds a new funding source.
"For a growing state like ours, [the HTF is] even more critical," said Rep. Kevin Brady, R-The Woodlands. "Just in our communities, we're seeing a strong economy, more growth in people, in businesses and—on the roads—more growth in cargo. It's creating a critical situation that requires that we act soon on this."
Funding problem
The majority of HTF revenue is generated by 18.4 cents for every gallon of gas pumped throughout the country as well as 24.4 cents per gallon of diesel gas. The gasoline tax has not increased since 1993, said Janet Kavinoky, executive director of transportation & infrastructure for the U.S. Chamber of Commerce.
With less gasoline tax revenue being generated, the federal government has had to borrow from the rest of the budget to make up the difference. Since 2008, $64.1 billion has been borrowed to make up the shortfall, she said.
The national recession in 2008 exacerbated the gas tax revenue decline, Kavinoky said.
"When [people] drove less, they also bought less gas, so there were fewer fuel taxes going into the [HTF]," she said. "We didn't anticipate that, so we had to start making up the difference. People didn't jump back into driving the way they did before, so we [have been] making up the difference ever since."
While Congress deals with a long-term problem of fixing federal transportation funding, there is perhaps a more pressing issue of what to do about funding transportation in the next fiscal year.
Kavinoky said Congress passed a bill in July to extend MAP 21—the federal transportation act that has provided states transportation funding since 2013—until May 2015. However, unless Congress acts before then and approves a new bill to fund transportation, the HTF could run out of money.
"I don't think we're hearing any great panic about this," said Alan Clark, director of the Houston-Galveston Area Council's Metropolitan Planning Organization. "Most people feel like it's a matter of when [a bill is passed], not if. But I think there's a bigger issue of transportation funding overall."
Local effect
Roughly one-third of all of the Texas Department of Transportation's budget comes from federal funding, TxDOT Public Information Officer David Glessner said. The department's federal obligation authority, or the authority provided by federal law to make funds available for use, has hovered around $3 billion a year since 2009.
"It's critically important," Brady said of the HTF. "It funds about half a billion dollars of projects in the Houston region each year, and it's more than a third of the Texas highway funding."
Clark said federal funding has been integral to projects throughout the Greater Houston area, including various improvements to Hwy. 290 and Hwy. 59. He said most state transportation projects, aside from toll roads, will likely have some federal funding contributions.
However, federal funding for state and local transportation projects is not necessarily provided prior to a project's construction, Clark said. Rather, states are reimbursed for costs spent on transportation projects.
"It's up to each state to decide how much risk it wants to incur based on the funds that have or have not been appropriated," Clark said. "The states can go ahead and make the investment knowing that at some point they will receive the reimbursement. They just don't know when."
Glessner said transportation projects take years to develop, and planners need some idea of the long-term funding outlook. The short-term extensions provided by Congress have made it difficult for TxDOT to depend on federal funding.
"In recent years, Congress has let the authorization get close to expiring before extending or reauthorizing the program," Glessner said. "Also, [revenue] to the trust fund [does] not keep up with obligations."
State agencies are preparing for a potential slowdown in transportation projects. Glessner said TxDOT can borrow funds on a short-term basis to cover the operations of the department for several months.
Congress has let the program expire for a few days in the past, but it has not been lengthy enough to interrupt construction projects, Glessner said.
Federal funding does not just affect TxDOT projects or highway projects, Clark said. The funding from HTF can be used for transit services for local government agencies, such as the Metropolitan Transit Authority of Harris County and The Woodlands, for capital purchases, maintenance costs and to offset operating expenses.
Funds from the HTF also go toward improvement and transportation plans, park and pathway projects and environmental programs, such as the reduction of vehicle emissions on roadways, Clark said.
H-GAC officials estimate about $1.7 billion of H-GAC's $3.5 billion 2018 Transportation Improvement Program—a four-year plan of transportation projects approved to receive federal funding—will receive federal money between 2015 and 2018.
Short-term, long-term solutions
With MAP 21 set to expire in May, Congress will be faced with passing a new transportation funding bill this next session.
"There's no question that we're going to extend the [HTF]," Brady said. "It has strong bipartisan support. It would be irresponsible to not extend it. So my guess is that Congress will extend the trust fund for a shorter period, maybe a year or two, [but not] the six years that most of us would [prefer]."
Brady said the challenge, however, is finding a long-term solution to federal transportation funding.
Kavinoky said any long-term solution should meet three criteria: the funding solution must be able to be collected today, it must raise enough sustainable funding and it has to be transportation-related.
"We should increase the federal gas and diesel taxes and index them to inflation," she said. "Then we need to [look] at what we're going to do as cars become more fuel efficient."
Brady said there are more cons than pros to increasing the gas tax because of the need to reform the HTF. As a donor state, Texas also sends more gas revenue to Washington than it receives for transportation funds, so there is no incentive for Texas to pay a higher gasoline tax, he said.
State Rep. Patricia Harless, R-Spring, said the state receives about 70 cents in transportation funding per dollar of the gas revenue sent to Washington. Despite an estimated $5 billion transportation funding shortfall at the state level, Harless said she believes the state should address the shortfall itself.
"The money we get from the federal government is important, but we're losing 20–30 cents on the dollar," Harless said. "I don't want to send any more money to the federal government than I have to."
One long-term solution to fixing the federal problem could be the passage of the Transportation Empowerment Act, which would send the bulk of the highway gas tax money back to the states, Brady said.
"It gives more control to the states and requires less paperwork, so you're getting these projects done more quickly," he said. "That still doesn't have the majority support, but I think, long-term, that's a real solution."
The American Association of State Highway and Transportation Officials released a list of 38 possible funding sources in November, including various transportation taxes, registration fees and user fees. AASHTO estimates a 10-cent increase in the gas tax would yield $13.21 billion more revenue in 2014 and $78.12 billion more from 2015–20.
