CBO Updates 10-Year Cost of HTF Solvency to $176 Billion

CBO Updates 10-Year Cost of HTF Solvency to $176 Billion

May 02, 2019  | Jeff Davis

The nonpartisan Congressional Budget Office (CBO) today released updated baseline budget projections for the ongoing fiscal year 2019 and the ten-year period of fiscal 2020-2029. The new baseline estimates that the cost of keeping the Highway Trust Fund solvent at baseline spending levels (FY 2019 enacted levels plus annual inflation increases of around 2 percent per year) has risen to about $176 billion, which is about $12 billion higher than the $164 billion that CBO projected in its January 2019 preliminary baseline.

The new baseline projects that the Highway Account of the HTF will require $124 billion in additional revenues or bailout transfers (or spending cuts) to get up to a zero balance at the end of FY 2029 and the Mass Transit Account will require an additional $47 billion. To those totals must be added a “cash cushion” to reflect the fact that year-end totals actually include a large mid-October retroactive transfer of excise taxes from the Treasury, so ending September with a zero balance really means that you ran out of cash on a day-to-day basis sometime in mid-September. A $4 billion cash cushion for the Highway Account and a $1 billion cushion for the smaller Transit Account are generally called for. 124 + 47 + 4 + 1 = $176 billion.

The table below replicates the CBO table, in billions of dollars.

Actual ——————————CBO May 2019 Baseline Forecast——————————
FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29
Highway Account
Beginning-of-FY Balance 41 33 24 14 2 -10 -23 -38 -53 -70 -87 -105
Revenues and Interest 38 38 38 37 37 37 37 37 36 36 37 37
Cash “Flex” to Transit -2 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1
Outlays -45 -46 -47 -48 -48 -49 -50 -51 -52 -53 -54 -55
End-of-FY Balance 33 24 14 2 -10 -23 -38 -53 -70 -87 -105 -124
Mass Transit Account
Beginning-of-FY Balance 15 12 9 5 0 -5 -10 -15 -21 -27 -33 -40
Revenues and Interest 6 6 5 5 5 5 5 5 5 5 5 5
Cash “Flex” from Highways 2 1 1 1 1 1 1 1 1 1 1 1
Outlays -10 -10 -10 -11 -11 -11 -12 -12 -12 -12 -12 -13
End-of-FY Balance 12 9 5 0 -5 -10 -15 -21 -27 -33 -40 -47
HTF Unified Total
Beginning-of-FY Balance 56 44 32 18 2 -15 -33 -53 -74 -97 -121 -145
Revenues and Interest 43 43 43 43 42 42 42 42 41 41 41 41
Outlays -55 -55 -57 -58 -59 -61 -61 -63 -64 -65 -66 -67
End-of-FY Balance 44 32 18 2 -15 -33 -53 -74 -97 -121 -145 -171

Where did the extra $12 billion in bailout costs come from? Mostly from increased estimates of future highway outlays. Compared to the January baseline, Highway Account outlays over the next decade are about $10.5 billion higher than under the last baseline (while Mass Transit Account outlays are about $1.8 billion lower).

If increased outlays are $8.75 billion of the $12-ish billion difference, then the remainder of the difference must be on the revenue side. Unfortunately, CBO did not update its detailed revenue data this week (a spokesperson said that they are waiting for their next economic update, this summer, to do another detailed revenue re-estimate).  And numbers that are rounded to the billion, particularly on the transit side, are not helpful when you are trying to look for a change of $2 or $3 billion over 10 years.

The new baseline also revealed a big problem for the fiscal 2020 Transportation-HUD appropriations bill – see here for more details.

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