January 28, 2019

Earlier today, the nonpartisan Congressional Budget Office released its annual Budget and Economic Outlook, this one covering the ten-year period of fiscal 2020 through 2029.

As part of this process, CBO releases to the public a wealth of detailed information (and gives even more detail to Congress) as part of its preliminary spending and revenue baseline for the upcoming decade. The final baseline against which spending and revenue legislation for this session of Congress will be scored is supposed to come out after the President’s budget request, which by law is supposed to be the first Monday in February, because it relies on a lot of technical information on the performance of government programs that is submitted along with the budget. But the upcoming fiscal year 2020 budget request will be weeks late because of the government shutdown and other delays, so the preliminary baseline will have to do for now.

The baseline projection estimates that both accounts of the Highway Trust Fund will remain solvent at baseline spending levels through the end of the FAST Act authorization period in September 2020. CBO estimates that the Mass Transit Account will run out of money and be unable to meet its obligations sometime in fiscal year 2021 (the account is projected to end FY21 with a slightly negative balance), while the Highway Account will remain solvent a few months longer but will only finish fiscal 2021 with a balance of just under $4 billion, which means they may run out of cash on a day-to-day basis (in September, Highway Account outlays can exceed $200 million per business day, while tax deposits only come from the Treasury twice a month, meaning that a slightly positive end-of-month balance can still allow for running out of money day-to-day earlier in the month.)

Over the ten-year budget scorekeeping window (i.e. through September 30 2029), the cost of keeping the Trust Fund solvent at baseline spending levels is estimated to be about $165 billion ($113 billion to bring the Highway Account up to zero, $46 billion to bring the Mass Transit Account up to zero, and another $5-6 billion to make sure that neither accounts runs out of cash day-to-day in August-September 2029 as mentioned above). At baseline spending levels, that much money in additional excise taxes, or future transfers from the general fund, will be necessary.

Just to pay for a six-year reauthorization bill for FY 2021-2026 to replace the FAST Act, the new tax revenue/additional bailout cost would be about $95 billion ($62 billion to get the Highway Account to zero, $27 billion to get the Mass Transit Account to zero, and $5-6 billion to prevent end-of-year defaults).

The bailout cost change slightly whenever CBO issues the final baseline later this spring. The spending levels in the baseline released today are based on the continuing resolution that was in effect until December 21 and then was reinstated last Friday night when the shutdown ended. That assumes that new obligation limitations on Highway Trust Fund spending for 2019 will be the 2018 enacted levels, and then will get small inflation increases in 2020, 2021, etc. But if the fiscal 2019 omnibus appropriations bill is ever finished, the 2019 numbers will be the FAST Act numbers, not the 2018 numbers, and the FAST Act numbers will be $1.27 billion higher, so every subsequent year will be about that much higher as well. That would eventually translate into outlays being several billion higher over the course of a decade in the final baseline.

C.B.O. JANUARY 2019 HIGHWAY TRUST TRUND CASH FLOW BASELINE (BILLIONS OF DOLLARS)

The official Highway Trust Fund forecast summary from CBO’s January 2019 preliminary baseline is here, but all numbers are rounded to the billion dollars, which is unhelpful when trying to discern trends in the Mass Transit Account revenue line (it is rounded to “5” for every year, which tells you nothing about relative increase or decrease). The following is ETW’s extrapolation of the detailed information on tax revenues and outlays released today in spreadsheet format as part of the baseline, together with the actual detailed year-end 2018 Trust Fund numbers from FHWA, and our own guesstimates of what the annual interest receipts and safety penalties will be, since CBO does not publish those. The following presentation is unofficial in its detail, but it syncs up almost precisely with the rounded-to-the-billion official version from CBO.

For those curious of the guesstimated assumptions:

• Highway Account – interest payments of $450m in FY19, $300m in FY20, $125m in FY21, and $50m in FY22 at which point they hit a zero balance and stop earning interest. Safety penalties are guesstimated at $30 million per year.
• Mass Transit Account – interest payments of $150m in FY19, $75m in FY20 and $25m in FY21, at which point they hit a zero balance and stop earning interest.

While those guesstimates are probably not quite accurate, the total inaccuracies shouldn’t account for more than a few hundred million dollars over the ten-year period.