Last month, Transportation Secretary Ray Lahood confirmed that, by August, the highway trust fund will “run out of money,” due to the fact that Americans are driving less (and more efficiently), while the gas tax hasn’t changed in 16 years. Last summer, Congress had to transfer $8 billion from the general fund to keep transportation programs solvent. Today, many in Washington are calling for another $20 billion in general revenues to cover the next year and a half.
Yet just as important as where the money comes from is how the funds are spent. Today, much of the funds authorized in the current program are given to states based on traditional factors such as road mileage, miles, and number of deficient bridges. But the largest federal highway program—the Equity Bonus program—exists solely to make sure that each state gets its “fair share” of revenue, defined as 92 percent of the state’s annual contributions to the trust fund. In other words, states get roughly as much money as they pay in gas-tax revenue.
But now that the highway account is set to get bailed out with $28 billion in general funds, that formula needs to be revisited. The Equity Bonus should make sure that states receive highway funds based on contributions to the general fund. Based on work from the Tax Policy Center, a joint effort by the Urban Institute and Brookings, states like New York, California, Washington, and Massachusetts all contribute far more in general tax revenue than they receive from the existing Equity Bonus program. Conversely, Florida, Georgia, and Texas all receive disproportionately large Equity Bonus payments.
If the current apportionments go unchanged, many states will be unfairly punished through this transfer of funds at a time they can ill afford it. The federal transportation program needs an overhaul on many fronts—the least Congress can do is make sure the Equity Bonus program doesn’t make a bad situation worse.