Since 1956, federal surface transportation programs have been funded largely by taxes on motor fuels that flow into the Highway Trust Fund (HTF). A steady increase in the revenues flowing into the HTF due to increased motor vehicle use and occasional increases in fuel tax rates accommodated growth in surface transportation spending over several decades. The last $70 billion of these transfers were authorized in the Fixing America's Surface Transportation Act (FAST Act; P.L. The FAST Act funds federal surface transportation programs from FY2016 through FY2020. Congressional Budget Office (CBO) projections indicate that the imbalance between motor fuel tax receipts and HTF expenditures will persist beyond FY2020. In consequence, funding and financing surface transportation is expected to continue to be a major issue for Congress. The Highway Trust Fund Revenue Dilemma

The HTF has two separate accounts—highways and mass transit. It was believed at the time of SAFETEA's passage that the tax changes, a $12.5 billion unexpended balance in the trust fund, and higher fuel tax revenue due to expected economic growth would be sufficient to finance the surface transportation program through FY2009. Unless this is changed, $85 billion represents the minimum amount the House Ways and Means Committee and the Senate Committee on Finance would need to find over the FY2021-FY2025 period in some combination of additional revenue and budget offsets for general fund transfers, should Congress choose to continue funding surface transportation at the current, or "baseline," level, adjusted for inflation. 86-342) raised the rate to 4 cents per gallon. During this period, revenues grew automatically from year to year as fuel consumption grew along with increases in vehicle miles traveled. A federal sales tax on motor fuel would likely be at best an interim solution to the long-term problem of financing transportation infrastructure because, as with the current motor fuel tax, it relies on fuel consumption to fund transportation programs. Implementation of a VMT charge would have to overcome a number of potential disadvantages relative to the motor fuel tax, including public concern about personal privacy; higher collection and enforcement costs (estimates range from 5% to 13% of collections); the administrative challenge of collecting the charge from roughly 265 million vehicles; and the setting and adjusting of VMT rates, which would likely be as controversial as increasing motor fuel taxes. Congress could consider imposing a similar federal fee. But the HTF is not essential to a federal role in transportation funding. By enacting the FAST Act, Congress chose to support the current funding model by transferring funds into the HTF, mostly from the Treasury general fund. Making a General Fund Share Permanent

By FY2020, the last year of the FAST Act, federal highway programs will have been funded for 12 years under a de facto policy of providing a Treasury general fund share. Congress could also consider a two-pronged approach to authorization. There are no federal restrictions on tolling of roads that are not part of the federal-aid system. All revenue from tolls flows to the state or local agencies or private entities that operate tolled facilities; the federal government does not collect any revenue from tolls. However, a major expansion of tolling might reduce the need for federal expenditures on roads. For these reasons, while tolls may be an effective way of financing specific facilities—especially major roads, bridges, or tunnels that are likely to be used heavily and are located such that the tolls are difficult to evade—they would likely be less effective in providing broad financial support for surface transportation programs. Asset Recycling

Asset recycling is the sale or lease to the private sector of government-owned infrastructure assets and the investment of the proceeds in new infrastructure. Because they are issued by state and local governments, the federal government has less control over the types of projects supported and the amount of the federal contribution than it does with grant and loan programs. Tax credit bonds typically do not pay interest. The FAST Act ( P.L. These provisions included
providing authority for a TIFIA loan to a state infrastructure bank (SIB) to capitalize a "rural project fund"; adding transit-oriented development (TOD) infrastructure as an eligible project (TOD infrastructure is a "project to improve or construct public infrastructure that is located within walking distance of, and accessible to, a fixed guideway transit facility, passenger rail station, intercity bus station, or intermodal facility"); allowing up to $2 million of TIFIA budget authority each fiscal year to pay the application fees for projects costing $75 million or less instead of requiring payment by the project sponsor; modifying or setting the minimum project cost thresholds for credit assistance at $10 million for TOD projects, the capitalization of a rural project fund, and local government infrastructure projects; and providing for a streamlined application process for loans of $100 million or less.
For many years, federal surface transportation programs were funded almost entirely from taxes on motor fuels deposited in the Highway Trust Fund. The tax rates, which are fixed in terms of cents per gallon, have not been increased at the federal level since 1993. Meanwhile, motor fuel consumption is projected to decline due to improved fuel efficiency, increased use of electric vehicles, and slow growth in vehicle miles traveled. In consequence, revenue flowing into the Highway Trust Fund has been insufficient to support the surface transportation program authorized by Congress since 2008.
Congress has yet to address the surface transportation program's fundamental revenue issues, and has given limited consideration to raising fuel taxes in recent years. Instead, since 2008 Congress has supported the federal surface transportation program by supplementing fuel tax revenues with transfers from the U.S. Treasury general fund. The most recent reauthorization act, the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94), authorized spending on federal highway and public transportation programs through September 30, 2020. The act provided $70 billion in general fund transfers to the Highway Trust Fund from FY2016 through FY2020. This use of general fund transfers to supplement the Highway Trust Fund will have been the de facto funding policy for 12 years when the FAST Act expires. Congressional Budget Office (CBO) projections indicate that the Highway Trust Fund insufficiency relative to spending will reemerge following expiration of the FAST Act. The projections indicate a shortfall of $85 billion over the first five years following the FAST Act, and $109 billion over the first six years.
As the September 2020 expiration of the FAST Act approaches, Congress may again examine adjustments to the funding and financing of the federal role in surface transportation.
Raising motor fuel taxes could provide the Highway Trust Fund with sufficient revenue to fully fund the program in the near term, but may not be a viable long-term solution due to expected declines in fuel consumption. It would also not address the equity issue arising from the increasing number of personal and commercial vehicles that are powered electrically and therefore do not pay motor fuel taxes. Replacing motor fuel taxes with a mileage-based road user charge would need to overcome a variety of financial, administrative, and privacy barriers, but could be a solution in the longer term. Treasury general fund transfers could continue to be used to make up for the Highway Trust Fund's projected shortfalls but could require budget offsets of an equal amount.
The political difficulty of adequately funding the Highway Trust Fund could lead Congress to consider altering the trust fund system or eliminating it altogether. This might involve a reallocation of responsibilities and obligations among federal, state, and local governments.
Some surface transportation needs can be met by private investment, including public-private partnerships, and federal loans from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. If it desires to promote private investment in transportation infrastructure, Congress could consider asset recycling incentive grants to state and local governments for the sale or lease of government-owned infrastructure if the proceeds are committed to new infrastructure.
Tolling may be an effective way to finance specific roads, bridges, or tunnels that are likely to have heavy use and are located such that the tolls are difficult to evade. All revenue from tolls flows to the state or local agencies or private entities that operate tolled facilities; the federal government does not collect any revenue from tolls. However, a major expansion of tolling might reduce the need for federal expenditures on roads. Tolls and private investment are unlikely to provide broad financial support for surface transportation needs, and many projects are not well suited to alternative financing.