The potential insolvency of the Federal Highway Trust Fund (HTF) looms heavy over Michigan’s already troubled transportation system. The HTF is primarily financed by the 18.4-cent-per-gallon federal fuel tax and makes up about one third of Michigan’s total transportation budget. On July 1, President Obama and U.S. Transportation Secretary Anthony Foxx warned of the dwindling fund balance and outlined a plan to start limiting payments to states in August if Congress is unable to identify a solution for the shortfall.
The federal shortfall is largely due to declining revenues at the pump, a result of increased vehicle fuel efficiency – a problem mirrored in our state transportation funding woes. While a few options have been proposed, we have yet to see a serious long-term solution being considered in Washington. The federal fuel tax has not been increased since 1993 and, like Michigan’s fuel tax, it does not adjust for inflation. HTF expenses have exceeded the income from these taxes for the past decade by $52 billion and estimates predict by 2024 spending will exceed revenue by $167 billion. Since 2008 Congress has transferred $50 billion from the general budget to keep the HTF afloat. The amount the HTF can spend in a given year is currently governed by MAP-21, which allowed around $105 billion for transportation funding in fiscal year 2013-2014. MAP-21 is set to expire in September, and in drafting new legislation Congress faces the challenge of properly funding the HTF into the future.
How will this impact Michigan’s complete transportation system? The Federal Transit Administration (FTA) receives 17 percent of HTF dollars to provide grants to state and local transit providers. While the HTF has historically been a major source of funding for road construction, the Federal Aid Highway Act of 1970 allowed for the allocation of funds to further transit-related uses aside from roads, including separate bus lanes and non-rail public transit facilities. In 1973 funding for unwanted segments of highway could be applied to other mass transportation purposes, which “markedly increase[d] the assistance levels for transit projects.”
In 2013, Michigan transit agencies received $142.5 million in federal funding, nearly as much as the $158 million contributed at the state level from our Comprehensive Transportation Fund. At the local level, this accounts for a large amount of funding. For example, in 2012, 83 percent of capital expenditures by the Ann Arbor Area Transportation Authority came from federal grants. Along with traditional public transit capital and maintenance projects, these grants support programs like the New Freedom Program, which provides tools and services for Americans with disabilities. Among several other Michigan transit agencies, the Detroit Department of Transportation received $433,310 through the New Freedom Program to expand the availability of services to disabled persons in August 2013. The insolvency of the HTF would greatly impact transit agencies and deplete both operations and capital budgets markedly.
Michigan’s roads and bridges are also highly dependent on the HTF. Eighty percent of Michigan’s interstates and state highways are funded by these federal dollars. The failure of Congress to come to a funding solution will result in “…a pretty drastic situation next year,” that could include a scale back or delay for many transportation projects in Michigan planned for next year, according to MDOT spokesman Jeff Cranson.
In a recent Detroit Free Press Article, Clark Harder of the Trans4M-member Michigan Public Public Transit Association said:
“We are struggling here in Michigan right now with how best to expand our state funding for road, bridge and transit improvements and yet, at the federal level, we are in danger of having the complete basis for anything we do here in Michigan pulled out from under us…There simply is no defense for inaction.”
A strong, modern and complete transportation system is a key to economic development, accessibility and quality of life in Michigan and our nation. Failing to fund public transit, roads, bridges, rail and non-motorized transportation infrastructure has both long-term and widespread implications for community vitality and access to opportunity. Stay tuned to our blog for updates on the state and federal transportation funding debate.
Written by Elle Getschman, Trans4M Intern and Liz Treutel, Trans4M Policy & Communications Associate
Featured image source: Wikipedia