NCPA - National Center for Policy Analysis

HIGHWAY TRUST FUND INEQUITIES WILL GET WORSE IN FUTURE YEARS

October 31, 2008

Among the many issues in the federal highway program is the inherently unequal distribution of trust fund revenues to the states.  As a consequence of flaws in the formula, many states (donors) consistently receive less than they pay in while others (donees) consistently receive more, says the Heritage Foundation.

Under current law, the federal fuel taxes paid into the trust fund by motorists and truckers are returned to the states by a mathematical formula that matches the scope and usage of each state's surface transportation system with payments received from the federal government.  This exacerbates regional transportation problems because the shortchanged states are typically those with above-average population growth whose transportation needs exceed that of the slower growing states:

  • Over the past several decades, the states shortchanged by the program have been concentrated in the Southeast and the Great Lakes region plus California and Arizona.
  • The states receiving more than their fair share have been concentrated in the Northeast and Middle Atlantic states and the sparsely populated Mountain states.
  • In 2006, there were 30 donor states and 20 donees, although many states were close to being even in their return ratios.
  • In 2006, Texas, for example, received only an 84.7 percent payback, costing it $509 million in lost federal payments that year, while Florida received just 82.5 percent, California 86.9 percent, and South Carolina 88.6 percent.

However, the solution is a simple one: allow each state to keep the 18.3 cents per gallon federal fuel tax revenues collected within its borders to spend on the surface transportation priorities of its own choosing, says Heritage.

Source: Ronald D. Utt, "Highway Trust Fund Inequities Will Get Worse in Future Years," Heritage Foundation, WebMemo No. 2100, October 9, 2008.

 

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