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WSJ Examines Highway Funding
April 25, 2007

Posted by (12:55pm ET)

Although SAFETEA-LU does not expire until September 30, 2009, Senator Inhofe believes Congress needs to begin looking now at how future bills will be funded. Certainly one issue that needs to factor into deliberations is the effect increasingly fuel-efficient vehicles have on the balances in the highway trust fund. While increasing fuel-efficiency is a good thing, Congress can’t ignore the fact that our current system of fuel taxes to pay for transportation infrastructure depends in large part on optimizing the number of gallons of fuel sold.  Senator Inhofe believes there are many interesting ideas on how to ensure transportation is adequately paid for and looks forward to working with his colleagues in giving this issue serious thought.

Today’s Wall Street Journal article, Fuel-Efficient Cars Dent States' Road Budgets (subscription required) takes a look at the issue.

The Wall Street Journal

Fuel-Efficient Cars Dent States' Road Budgets


April 25, 2007; Page B1

Cars and trucks are getting more fuel-efficient, and that's good news for drivers. But it's a headache for state highway officials, who depend on gasoline taxes to build and maintain roads.

The Federal Highway Administration estimates that by 2009 the tax receipts that make up most of the federal highway trust fund will be $21 billion shy of what's needed just to maintain existing roads, much less build new roads or add capacity. Trying to compensate for highway-budget shortfalls, a handful of states are exploring other, potentially more lucrative ways to raise highway money.

"In 10 years, we are going to be in an intolerable financial position, and we need to start fixing it now before the problem starts," says James Whitty, manager of an alternative funding project in the Oregon transportation department…

Federal excise taxes dedicated to highways grew 10% between 2000 and 2005, according to the Treasury Department, and are forecast to grow an additional 11.6% through 2011. State receipts increased 12% from 2000 to 2005, according to the U.S. Transportation Department. But most of the revenue growth reflects an increase in the number of miles that each car travels.

In 1990, the average car on the road traveled about 11,107 miles a year. In 2005, each car traveled about 12,084 miles annually. More miles traveled leads to faster deterioration of highways and a greater need for repairs. More traffic also leads to increased congestion -- and to calls for more roads.

U.S. Transportation Secretary Mary Peters says that the federal highway trust fund will lack sufficient funding from taxes beginning in 2009. She has been pressing states to look for alternatives to gasoline taxes.

"The bottom line is that we are spending more than we take in, and we have nearly run through the balances that had built up in the fund," Ms. Peters told Congress in February. "The highway funding problem is not going to go away, nor can we put it off until the last minute."

The highway-fund shortage could be exacerbated if Congress raises fuel-economy standards to curb pollution and reduce reliance on foreign oil. Cars with higher fuel economy can travel longer without refueling.

Cars already are more fuel-efficient than they used to be. Two decades ago, passenger cars got an average of about 14 miles per gallon, according to the Department of Transportation. Now that number is 17 mpg -- in part because people are trading in older cars for new ones with greater fuel-efficiency. The number would be higher had the fuel economy of vans, pickup trucks and SUVs improved, but it has stayed about the same at just over 16 mpg…

The bulk of highway and road funding, about 55%, comes from a combination of state and federal gasoline taxes. The rest generally comes from vehicle registrations, drivers' license fees, bonds and other public borrowing.

To read the entire article, click here.






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