The trucking industry, many state transportation directors and
even a few lawmakers say the simple solution to shore up the Highway
Trust Fund and avoid construction layoffs is to raise federal fuel
taxes, unchanged since 1993.
But in a congressional election year in which both Democrats and
Republicans are wary of voter backlash, the message is clear: Not
going to happen.
"We have never proposed or a supported a gas tax," White House
spokesman Jay Carney told reporters on Monday.
Republican House Speaker John Boehner also opposes an increase in
fuel taxes, an aide said. And earlier this year, Boehner all but
ruled out another transfer of general funds to keep the Highway
Trust Fund afloat.
If Congress can't agree on an alternative way to increase
transportation money by late summer - or take the easier path of a
short-term fund transfer - the consequences could be huge, halting
or slowing work on thousands of projects. This could idle hundreds
of thousands of workers at a time when the U.S. economy is finally
gaining some traction.
A funding crisis would affect the nearly 600 major projects under
way in California at a cost of more than $11 billion, said Mark
Dinger, spokesman for the state's Department of Transportation.
"In surprisingly short order, the operations of the nation's largest
transportation agency could grind to a halt," he said.
The situation parallels the numerous "cliffs" that Congress has
faced over the past year on divisive fiscal issues, with a looming
deadline and potentially dire economic consequences.
With time running short, an ambitious reform of a funding mechanism
that has been in place since the 1956 looks less likely.
The central problem is that the existing per-gallon fuel taxes of
18.4 cents for gasoline and 24.4 cents for diesel are no longer
producing enough revenue to fund road, bridge and tunnel projects.
This is due largely to improved vehicle fuel efficiency, less
driving amid a slow economic recovery and construction cost
The U.S. Department of Transportation projects that the fund will be
depleted by late August, which may force the federal government to
curtail disbursements to states weeks earlier, during the height of
the summer road works season. The federal government provides about
45 percent of what states spend on road and bridge projects. A
related fund for mass transit projects is also running low.
AMERICA'S ASSEMBLY LINE
The funding crisis would put at risk projects large and small, from
routine repaving along Interstate 95 in Virginia to a $670 million
section of Interstate 49 under construction in Louisiana, part of a
new expressway corridor that will link New Orleans and Kansas City
and speed the flow of goods between Midwest industries and a major
"The highways are our assembly line, and we have to rely on the
government to take care of it," said Randy Mullett, vice president
of government relations at trucking firm Con-Way Inc.
Washington has kicked around numerous options for filling the
funding gap, but the trucking industry favors a fuel tax increase
because of its simplicity and because it ensures that the money only
pays for transport upgrades. The U.S. Chamber of Commerce has also
called for an increase.
Congestion on highways raised truckers' operational costs by $9.2
billion last year, said Sean McNally, a spokesman for the American
Trucking Associations, citing an industry study.
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Since 2008, Congress has transferred more than $50 billion in
taxpayer money to the trust fund, which was intended to be
self-sustaining. To stay solvent, it will need an infusion of up to
$18 billion in each of the next 10 years, the Congressional Budget
Office estimates. The CBO says it would take a 10-15 cents per
gallon hike in the fuel tax to fill the gap in the near term if that
were the only solution.
Other ideas that have been explored, according to lawmakers, aides
and trade groups, include new technology that charges taxes based on
vehicle miles traveled. But methods requiring electronic satellite
tracking devices would raise privacy concerns and require investment
in new infrastructure.
In a proposed four-year, $302 billion transportation bill sent to
Congress late last month, Obama suggested ending some business tax
breaks to boost funding. Republicans have staunchly
opposed using such revenues for spending or deficit reduction.
The Obama administration also has floated the idea of allowing
states increase their tolls on interstate highways to raise
construction funds. But trucking and business groups are worried the
funds could end up being used for other purposes.
Some Republicans have proposed allowing companies to repatriate
overseas profits at lower tax rates, producing windfall revenues
that would fund infrastructure spending.
Congress must pass a new transportation bill before it goes on
recess in August to ensure that funding is not disrupted.
While lawmakers says they want to find a long-term funding stream
for projects, transportation officials believe they may have to
settle for a short-term extension.
"That's probably the most likely solution," Virginia Transportation
Secretary Aubrey Layne told Reuters.
Republican Thomas Petri, who chairs a highway subcommittee in the
House of Representatives, agreed, but added: "My worry is that it
not deteriorate into a long series of temporary extensions," he
said, adding that the continued uncertainty would delay projects,
(Additional reporting by Eric Beech; Editing by Caren Bohan and Ross
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