House Bill Would Double Highway Trust Fund Deficits

House Bill Would Double Highway Trust Fund Deficits

June 11, 2021  | Jeff Davis

The INVEST in America Act as approved by the House Transportation and Infrastructure Committee this week provides significant funding increases for programs supported by the federal Highway Trust Fund. But the Trust Fund is already insolvent (see here for the February 2021 Congressional Budget Office cash flow projections), and any spending increases will only make that insolvency worse.

We estimate that, of the increased contract authority provided by the bill, about $75 billion will “spend out” of the Trust Fund’s coffers by the end of the bill’s duration on September 30, 2026 (in addition to the $296 billion in outlays scheduled to take place over that period under CBO’s current law baseline estimates). Under current law, CBO only projects the Trust Fund to take in $214 billion in excise tax receipts and interest over that same period, so the problem quickly becomes apparent.

If there are no matching excise tax increases or other transfers into the Trust Fund, an end-of-2026 deficit of $70 billion under the baseline would double to a deficit of $143 billion on that same date. Looking further, we increased the House bill’s 2026 highway and mass transit obligation limitations in 2027, 2028, 2029, 2030 and 2031 by the exact same percentages that CBO increased the baseline ob limits by in those years and extended the outlay calculation to the end of the decade. What was a baseline $195 billion revenue hole doubles to become a $389 billion revenue hole under the House bill (extrapolated to 2031).

End-of-2026 Deficit End-of-2031 Deficit
Baseline House Bill Baseline House Bill
Highway Account -48.1 -106.0 -140.5 -282.9
Mass Transit Account -21.7 -36.9 -54.6 -105.9
Total -69.8 -142.9 -195.1 -388.8

Below is the estimated year-by-year cash flow from the CBO February 2021 baseline, augmented by the outlays from the increased highway and mass transit obligation limitations in the INVEST Act. Actual total outlays will be a bit higher because INVEST also increases FMCSA and NHTSA obligation authority above baseline, and we did not calculate those changes. Also, Highway Account spending will decrease a bit and Mass Transit Account spending increase a bit because all earmarks in INVEST start out as highway money, but at some point, the mass transit earmarks will be transferred to the Federal Transit Administration, and corresponding funds will be transferred to the Mass Transit Account (but we don’t have a number for that yet).

CBO February 2021 Highway Trust Fund Cash Flow Forecast, Plus Estimated Extra Outlays From INVEST Act (Billion $$)
FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31
Highway Account
BOY Balance 24.65 12.5 8.4 -3.6 -23.3 -48.0 -75.7 -106.0 -138.4 -172.3 -207.8 -244.6
Baseline Receipts and Interest 37.7 32.5 37.5 37.5 37.5 37.6 37.6 37.6 37.7 37.7 37.8 37.9
Intragovernmental Transfer 0.0 10.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Baseline Outlays -48.3 -45.8 -44.9 -45.8 -47.2 -49.2 -51.2 -52.6 -53.8 -55.2 -56.2 -57.4
Extra Outlays from INVEST 0.0 0.0 -3.5 -10.2 -13.8 -14.9 -15.6 -16.2 -16.6 -16.9 -17.2 -17.6
“Flex” to Transit -1.6 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2
EOY Balance 12.5 8.4 -3.6 -23.3 -48.0 -75.7 -106.0 -138.4 -172.3 -207.8 -244.6 -282.9
Mass Transit Account
BOY Balance 8.3 5.1 3.9 -0.4 -6.2 -14.8 -25.2 -36.9 -49.7 -63.2 -77.0 -91.2
Baseline Receipts and Interest 5.2 4.5 5.2 5.2 5.2 5.1 5.1 5.1 5.1 5.0 5.0 5.0
Intragovernmental Transfer 0.0 3.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Baseline Outlays -9.9 -10.1 -10.4 -10.9 -11.7 -12.1 -12.3 -12.5 -12.6 -12.8 -13.0 -13.2
Extra Outlays from INVEST 0.0 0.0 -0.2 -1.3 -3.3 -4.7 -5.7 -6.6 -7.2 -7.3 -7.4 -7.6
“Flex” from Highways 1.6 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2
EOY Balance 5.1 3.9 -0.4 -6.2 -14.8 -25.2 -36.9 -49.7 -63.2 -77.0 -91.2 -105.9
Unified HTF
BOY Balance 32.9 17.7 12.3 -4.0 -29.5 -62.8 -100.9 -142.9 -188.1 -235.5 -284.8 -335.8
Receipts and Interest 43.0 36.9 42.7 42.7 42.7 42.7 42.7 42.7 42.7 42.8 42.8 42.9
Intragovernmental Transfers 0.0 13.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Outlays -58.2 -55.9 -59.0 -68.2 -76.0 -80.9 -84.7 -88.0 -90.1 -92.1 -93.9 -95.8
EOY Balance 17.7 12.3 -4.0 -29.5 -62.8 -100.9 -142.9 -188.1 -235.5 -284.8 -335.8 -388.8

It will be up to the House Ways and Means Committee to fill the Trust Fund’s revenue gap before the bill goes to the House floor in three weeks. It is very likely that they will just do another general fund bailout of the Trust Fund, in in the neighborhood of $150 billion. It is a better-than-50-50 proposition that they don’t even bother to offset the cost of the transfer with spending or  revenue cuts elsewhere (why else would they have repealed the rule requiring such offsets, and anyway, it’s what they did last year).

If, on the other hand, one were inclined to pay for the House bill by increasing federal motor fuel taxes (and, to be clear, no one in a position of real authority, Republican or Democrat, is advocating this right now), we estimate it would take an immediate 10 cent per gallon increase in 2022, then another nickel in 2023, then 2.5 cents per year in 2024 and 2025, then 2 cents per year thereafter. That would increase federal gasoline taxes going to the Highway Trust Fund to 50.3 cents per gallon by the end of the decade (diesel would be 56.3 cpg).

Gas: FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31
Baseline 18.3¢ 18.3¢ 18.3¢ 18.3¢ 18.3¢ 18.3¢ 18.3¢ 18.3¢ 18.3¢ 18.3¢
Increase +10.0¢ +15.0¢ +17.5¢ +20.0¢ +22.0¢ +24.0¢ +26.0¢ +28.0¢ +30.0¢ +32.0¢
Total Tax 28.3¢ 33.3¢ 35.8¢ 38.3¢ 40.3¢ 42.3¢ 44.3¢ 46.3¢ 48.3¢ 50.3¢

Those higher motor fuel tax rates would bring in an extra $400 billion or so into the Trust Fund’s coffers, enough to keep the Trust Fund solvent for the next ten years at the higher INVEST spending levels.

Unified HTF FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31
BOY Balance 32.9 17.7 12.3 14.2 15.9 14.1 11.9 9.3 6.8 5.4 5.5 7.0
Receipts and Interest 43.0 36.9 42.7 42.7 42.7 42.7 42.7 42.7 42.7 42.8 42.8 42.9
Extra Receipts 0.0 0.0 18.1 27.2 31.6 35.9 39.4 42.7 46.0 49.3 52.6 55.9
Intragovernmental Transfers 0.0 13.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Outlays -58.2 -55.9 -59.0 -68.2 -76.0 -80.9 -84.7 -88.0 -90.1 -92.1 -93.9 -95.8
EOY Balance 17.7 12.3 14.2 15.9 14.1 11.9 9.3 6.8 5.4 5.5 7.0 10.0
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