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Frozen federal tax on gas leads states to raise money for road building, repairs in other ways
May 21, 2007

The federal tax on a gallon of gas has not risen in 14 years, and Congress is reluctant to increase it. States already are looking for other places for road-building money: toll road and consumption-based sales taxes, for example.

Written by Jim Abrams, Associated Press

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WASHINGTON — A cash crunch is fast approaching for the government trust fund that pays to build and repair highways and bridges.

The federal tax on a gallon of gas has not risen in 14 years, and Congress is reluctant to increase it. People are demanding more fuel-efficient vehicles — less gasoline used, fewer dollars for the fund.

States already are looking for other places for road-building money: toll road and consumption-based sales taxes, for example. They worry that the fund's looming shortage could hurt their efforts to address traffic congestion as well as environmental and safety problems caused by inadequate roads.

The situation can only get worse in 2009, when revenue for the Federal Highway Trust Fund begins falling short of planned spending.

The fund provides the overwhelming bulk of federal dollars spent on highways. It gets its money mainly from the 18.4 cents-a-gallon excise tax that drivers pay at the pump.

Self-service regular now tops $3 a gallon in many places. There is concern the price will reach a point at which people will cut back on driving, sending less money into the fund. Fuel tax receipts did dip last summer when there was a spike in pump prices.

At the end of 2000, the highway trust fund had a balance of almost $23 billion. By the end of 2006, it had $9 billion.

The Congressional Budget Office predicts that the fund will be short $1.7 billion at the end of 2009 and $8.1 billion by the end of 2010, when the current highway program expires and Congress will create a new one.

"This crisis will be thrown in their lap right as they are rewriting the program," said Jeff Shoaf, senior executive director of Associated General Contractors of America.

The Senate Finance Committee is looking into temporary ways to refinance the trust fund, including redirecting some transportation-related taxes that now go into the government's general account and clamping down on gas tax fraud. A Transportation Department commission plans to issue recommendations by the end of this year.

By the middle of the next decade, the highway trust fund will be providing $100 billion to $150 billion below real needs for building highways and bridges, predicted Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure subcommittee on highways and transit.

About 45 percent of all highway spending comes from the trust fund. With less money available from the fund, states must turn elsewhere for money to expand their highways and fill their potholes. That prospect is making many people unhappy.

  • Indiana, facing a $1.8 billion gap in money needed for road improvements, negotiated a $3.85 billion deal with an Australian-Spanish consortium to lease and operate the Indiana Turnpike for 75 years. Voters expressed their displeasure, electing Democrats to replace a Republican-run House that signed off on the deal.
  • In Florida, with federal aid declining, more than 90 percent of roads built since the early 1990s have been toll roads, state Transportation Department spokesman Dick Kane said.
  • Voters in Washington state approved a 14.5-cent increase in state gasoline taxes over a five-year period.
  • In California, voters decided to borrow money, approving bond issues totaling $19.9 billion to be used for highway and transit projects over the next 10 years.
  • Georgia increased its construction program from $911 million to $2 billion, largely through a sales tax on gasoline that rises with fuel prices, unlike the frozen federal levy.

The American Association of State Highway and Transportation Officials says that at least six states have adopted variable fuel taxes that are pegged to inflation.

Texas, Virginia and Minnesota are among states that have built or are building high-occupancy toll lanes where drivers can pay to have a congestion-free path.

With the population of Texas increasing by 1,000 people a day, "we as a state don't really feel like we have an option to shelve projects or sit on our hands as the problems with the highway trust fund loom larger and come closer on the horizon," said Christopher Lippincott, a Texas Department of Transportation spokesman.

Revenue from tolls, bonds, gas taxes, federal loans and local contributions allowed most of a turnpike around Austin, Texas 130, to be completed more than 20 years sooner than if the state had relied solely on state and federal taxes.

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