Georgia and the Highway Trust Fund

As many of you know, my day job with PolicyBEST involves a lot of information about transportation related problems, issues, and facts. Of those many things that we’ve been watching the last few months is the Federal Highway Trust Fund. This is the funding mechanism for maintaining the interstate system in the US. It’s also about to run out. Previous projections were October, but August is now looking much more likely.

Today on Vox, the new project of Ezra Klein formerly of the Washington Post, there was a great piece that explains the looming problems with shortfall. And while I’ve never been a big fan of Ezra Klein, Vox does seem to be putting out a good bit of content based on sound numbers and data.

Why does any of this matter? Well Georgia is one of the states that will be disproportionately affected by any shortfall of the HTF. The reason being that of the $2ish billion budget that GDOT has, $1.1 billion comes directly from the Federal government via the HTF.

If the HTF were to default then Georgia, as well as many other states, would no longer be able to start new transportation projects because the funding is not there. Already, many state Transportation Departments are looking at which projects to delay and if new projects should be bid.

Why is the HTF no longer solvent? Three main reasons. First is the introduction of higher CAFE standards. These are the Corporate Average Fuel Economy standards that direct how many miles per gallon each automobile manufacture must achieve. These have been going up and vehicles are traveling further on less gas. Consequently less motor fuels tax is being collected.

Second is that people are driving less. (Figure 2) If we aren’t driving as much, then less fuel is being consumed, and consequently less fuels tax being collected.

Third, is that the motor fuels tax is set per gallon and not pegged to inflation or price. At the federal level it has been 18.4 cents per gallon of gasoline since the early 90’s. Obviously there have been some changes since then and the revenue has not remained constant.

All three of these factors together have resulted in the looming transportation funding crisis that will happen if things stay the status quo. Something will need to change, or there will be stop gap measures taken every couple of years to continue funding the HTF. If not there will be an additional $12 billion shortfall added each year.

The first step in fixing this problem begins with changing the perception of the gas tax itself.  We need to see the gas tax for the user fee that it is.  As such, it is as a tax paid per mile driven, not a tax paid (as it currently collected) per gallon of fuel. That doesn’t mean that we need to shift to a VMT based tax, only that we need to reframe our perspective. This perspective allows us to more easily see the diminishing return of the user fee.  Once we understand this, a discussion about long term funding solutions becomes a bit easier.


  1. Will Durant says:

    I know the problem is more complicated than simplistic solutions bandied about on blogs. But isn’t it obvious that the federal motor fuel tax should be a straight sales tax? If that had been the case in 1993 when it was pegged at 18.5 cents per gallon then today it would be roughly 67 cents per gallon and we wouldn’t be having this conversation.

    • Eric The Younger says:

      That’s one of the reasons why the state motor fuels tax is both an excise and sales tax. The sales tax portion is re-evaluated every six months to help keep this kinda thing from happening.

      • Will Durant says:

        Unless your Governor steps in with a little pandering prior to a SPLOST-on-everything-else-vote to kill the automatic increase.

        Again, I know there are many more issues that factor in including the cost of transporting goods, ethanol requirements to prop up corn prices, and posturing politicians that want that 100% rating for not adding or creating new taxes. But the cost of the infrastructure certainly doesn’t go down and without adjusting for inflation and higher production costs on the method for “user fee” collection it shouldn’t be a surprise when you run short.

        What you don’t do is try to reinvent the wheel with Oregon’s Big Brother Bureaucratic Boondoggle. This part just isn’t that complicated. If cars get better fuel economy that is great for our national economy on the whole and the environment. If you choose to drive a bus-sized SUV to commute then you should pay more per mile than someone driving a Prius. A higher fuel tax accomplishes this quite fine and no one has to add any technology or bureaucrats.

        Granted there are still a few complications and I’m sure more than the petroleum companies will be lobbying. When a higher percentage of cars become totally electric we may have to revisit this but that is still decades away on everyday highway vehicles. I’ve already stated in this forum a couple of times and been criticized for it, but one fallacy in the motor fuel tax as an equitable user fee is that big trucks are still subsided by us all. The rates they pay in motor fuel taxes is not proportional to the exponentially higher damage they cause to the roadway and bridges.

        We have to have politicians willing to bite the bullet rather than posture on this issue and frankly I am not optimistic.

        • Rambler14 says:

          “The rates (big trucks) pay in motor fuel taxes is not proportional to the exponentially higher damage they cause to the roadway and bridges.”

          But because their lobby is strong, they continue to get away with it.
          Vehicles should be taxed based on their true impact on our infrastructure.

          • Dave Bearse says:

            I’d include public costs beyond infrastructure, such as safety, air, water, etc.

    • Charlie says:

      That works presuming you look at the price of gas/oil is constant or always going to go up. But if you look at the price of oil since the eighties, it’s changed by a magnitude of 6-8 times if I’m not mistaken (not going to stop and look up, but I think we’ve ranged from a low about $20 to a high of $140ish).

      The fixed cents/gallon measure is about having some level of consistency during these swings, specifically on the down side. That said, just because the tax was “right sized” in the eighties doesn’t mean it is today.

      And yes, it pains me every time I see an emergency suspension on the gas tax seasonal increase, as Georgia still spends only 60% of an “average” state on transportation (last of 50 states), and relies the most on the federal government for our transportation needs. We sell logistics as an advantage, and we’re not investing to keep up. We at least need to capture the taxes that are currently prescribed, rather than pretend an extra 9/10th of a cent is going to break Georgians budgets when the tax resets by law.

      • Will Durant says:

        OK, keep it as an excise tax but with automatic adjustments annually/semi-annually averaging the commodities markets’ PPB over that period. No political interference allowed after setting the initial rate. I would say limit spending to 90% of the take in the up years to have reserves for the down ones but there just haven’t been that many as of late and the reserve could get too attractive for other purposes. Chance of enough Congressmen to grow a set and do the right thing? Next to nothing.

        At the state level I’m fully supportive of your group’s efforts to get the full 4% sales tax back to transportation. It is important for the taxpayers to know that the motor fuel tax is the toll for Georgia Highways and that it should be exclusively for the purpose of their construction and maintenance. To that end no County SPLOSTS should be attached to motor fuel sales unless they are exclusively for transportation as well.

      • Dave Bearse says:

        Not necessarily disagreement, but a little clarification: Georgia state and federal highway transportation spending combined (not state highway spending alone) is 61% of the US average (not average of states), and that is on a per capita basis per the following (Georgia is not the least funded on a per mile basis and likely other measures):

        Note the “state highway spending” column and columns derived from the link above include federal spending. For example, Georgia’s $2B highway spending in the table consists of $0.8B in state funds, and $1.2B in federal funds.

        I suppose it could be coincidental that state funding, not state plus federal funding, is also 60%. What is your source of your 60% state alone?

        Also, what is your source for “relies most on the federal government for our transportation needs”? I inquire because Georgia in the past received back only 90.5% (minimum return) of the federal fuel taxes paid, and because there is more local highway funding in Georgia than in most other states (which is to be expected in a local control state). The 90.5% return and local funding would seem to blunt the “relies most”, i.e. relies most may not include local transportation spending.

  2. xdog says:

    “we need to reframe our perspective”

    Yeah, it will take some serious reframing to get pols signed on to telling voters they should pay much more to drive.

    I also don’t think it’s right to single out big trucks as offenders. Raise their taxes and expect to pay more whenever you go shopping. There’s nothing inherently wrong with that idea as long as income keeps up with the increases but be prepared for many people not to understand how they’re benefiting.

    • Will Durant says:

      To quote the late, great dean of Science Fiction, Robert A. Heinlein: “TANSTAAFL”.

  3. The Last Democrat in Georgia says:

    One option is for a perennially cash-strapped state like Georgia to privatize its controlled-access highway network, increase and peg the state’s motor fuel tax to inflation (so that the state’s motor fuel tax always pays for as close to 100% of road maintenance costs as possible) and provide Georgia motorists with frequent cash rebates off of the revenues collected from privatization and state motor fuel tax increases.

    Georgia’s controlled-access highway network (Interstate and non-Interstate expressways) could potentially fetch as much as between $15-20 billion on the private market for long-term outleases of between 75-100 years.

    • saltycracker says:

      Georgia is cash strapped thanks to poor priorities and mismanagement. So much money is bring spent to influence our elected to manipulate the tax process to get our piece of the pie.

      Paying one of the lowest gas taxes in the US to drive across a crumbling road/bridge to advantage a tax free day ? Bought to you by those that give us subsidies du jour while minimizing oversight.

  4. peachstealth says:

    Georgia used to have one of the lowest fuel taxes, but I don’t think we do any longer. Comparing it to surrounding states the highest is North Carolina with combined state and federal tax per gallon of 56.15 cents for gasoline and 62.15 for Diesel. Followed by Florida with 54.42 for gas and 56.77 for Diesel.
    In Georgia we pay 45.89 on gas and 55.32 on Diesel. Alabama,39.27 gas and 46.25 Diesel, Tennessee 39.8 gas and 42.8 Diesel the cheapest is South Carolina 35.15 Gas and 41.15 Diesel

    These figures include all taxes Federal ( 18.4 for gas ans 24.4 Diesel) state excise and sales and any other government mandated fees and are as of 4/25/2014

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