Senate Environment and Public Works Committee Holds Hearing on Highway Trust Fund Solvency and Revenue Alternatives

On April 14, 2021, the U.S. Senate’s Environment and Public Works (EPW) Committee held a substantive and engaging hearing to begin a discussion about revenue alternatives for the long-term solvency of the Highway Trust Fund.  Five individuals were invited to provide oral testimony, representing the Congressional Budget Office, The Eastern Transportation Coalition, Mileage-Based User Fee Alliance, Reason Foundation, and National Conference of State Legislators.  A bipartisan slate of nine Senators probed the speakers in more than an hour of questions and answers.  IBTTA staff, in consultation with the Executive Committee, submitted written testimony to the EPW Committee in advance, which was entered into the record of the hearing. 

Despite differences in orientation and emphasis, the oral testimony of the witnesses presented a strong consensus of thinking, including:

• The federal motor fuel taxes are unsustainable as a funding source for the Highway Trust Fund.
• There is a growing gap between surface transportation revenue and investment needs, which is estimated to be $195 billion over the next 10 years.
• The uncertainty of annual General Fund transfers to maintain Highway Trust Fund solvency since 2008, creates impediments to state infrastructure planning and investment.
• The principle of user payments is a compelling foundation for transportation revenue rooted in fairness and its ability to address financial and equity goals.
• The development of distance-based road use charging is a promising option for transitioning from the federal motor fuel taxes and integrating with state revenue programs but needs federal leadership to continue research and impact analyses of policy choices.
• Education, communication, and engagement with highway users and the public must be amplified to gain policy insights and public acceptance.

The witness testimony raised the urgency of the current condition and performance of American highways and the growing investment gap.  Estimates indicate that an investment of $55 billion per year over ten years is required to maintain existing highway services, condition, and performance without improvement.  A projected $71 billion would be needed annually to invest in planned projects with a positive cost-benefit ratio.  A $0.15/gallon increase in the federal gas tax above the current $0.184/gallon would raise $26 billion in the first year.  So, a fuel tax increase would have to be very sizeable to close the transportation investment gap on its own. 

Much of the testimony addressed the adoption of a mileage-based user fee (MBUF) as a road-use charge alternative to the motor fuel taxes.  Some specifics included:

• Recent state and regional MBUF pilots and implementation programs have improved public understanding of the problem of declining transportation revenues and alleviated concerns about privacy. 
• MBUF pilots to date have provided valuable insights into how to balance distributional effects of revenue policies for rural, suburban, and urban users, as well as effects across income levels.
• More research is required on commercial vehicle MBUF alternatives to ensure fair allocations of revenue relative to infrastructure costs, and to avoid disincentives for adopting fuel-efficient and low-emission vehicles. 
• Some argue that shifting funding for transit out of the Highway Trust Fund supports a user-payment principle and allows MBUF solutions, combined with private investment alternatives on mega projects to approach a full pay-for option for the federal highway program. 
• Continued funding of state and regional trials can advance further innovation, partnerships, and evaluations of numerous policy options, including congestion mitigation and emissions reduction goals. 

The inquiry from the Senators participating in the hearing touched upon substantive and critical issues to advancing meaningful revenue alternatives.  Pricing setting was raised as a key interest that will require additional evaluation for financial goals, equity concerns, and policy incentives.  Some Senators asked about cost allocation studies and expressed interest in better understanding the costs of different vehicle types on highway infrastructure and externalities such as congestion and delay.  There was also considerable interest in not slowing the adoption of electric vehicles and alternative fuels if MBUF options are pursued, and ensuring that competitive and market-based innovations are encouraged. 

Overall, there was bipartisan interest and support in taking a serious look at transitioning from the federal motor fuel taxes and understanding the options and implications of adopting distance-based road-use charges as an alternative.  The hearing was recognized as an important first step forward for the Senate in tackling the nation’s transportation revenue shortfalls and investment gaps.