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During the current session, the Congress is considering legislation that could change the scope and financing of the federal highway program. The nations highways are in disrepair and the existing federal highway taxes are not sufficient to finance their restoration in addition to the current federal construction program. The Congress is faced with major strategic choices about how best to deal with these problems. The purpose of this paper is to review these choices and analyze their consequences.

The paper examines three options: (1) a continuation of the current pattern of spending and financing; (2) an increased highway program financed by the equivalent of an additional four-cents-per-gallon tax on motor fuel; and (3) a redefined federal role that would concentrate federal resources on roads of greatest national importance. The increased program option is very similar to that proposed by the Administration on November 30, 1982.

The Congressional Budget Office (CBO) prepared this report at the request of the House Committee on Public Works and Transportation and the House Committee on Ways and Means. In keeping with CBO's mandate to provide objective and impartial analysis, the study offers no recommendations.

Richard R. Mudge of CBO's Natural Resources and Commerce Division prepared the paper under the supervision of Damian J. Kulash (now with the Transportation Research Board of the National Academy of Science) and David L. Bodde. Valuable comments were received from David L. Lewis, Patrick J. McCann, Rosemary D. Marcuss, and James Nason of the Congressional Budget Office. Francis Pierce edited the manuscript, and Kathryn Quattrone prepared the paper for publication.
 

Alice M. Rivlin
Director
December 1982
 
 

SUMMARY

CHAPTER I. INTRODUCTION

CHAPTER II. THE FEDERAL-AID HIGHWAY SYSTEM

• Historical Overview
• Current Highway Problems

CHAPTER III. THE HIGHWAY TRUST FUND

• Fund Revenues
• Revenue Projections

CHAPTER IV. THREE APPROACHES TO HIGHWAY POLICY

• Continuation of Current Spending
• Increased Program Levels
• Redirected Federal Role
• Summary of the Three Program Options

CHAPTER V. EVALUATION OF THE OPTIONS

• Contribution to Economic Efficiency
• Effect on the Physical Condition of the Highways
• State and Local Impacts
• Implications for Highway Taxes
• Impact on the Budget Deficit
• Conclusions

APPENDIX A. HIGHWAY COST ALLOCATION

APPENDIX B. RELATIONSHIP BETWEEN HIGHWAY AUTHORIZATIONS AND OUTLAYS

APPENDIX C. GASOLINE TAXES BY STATE
 

TABLES
1.	MAJOR PARTS OF THE NATION'S HIGHWAY SYSTEM
2.	HIGHWAY PROGRAM AUTHORIZATIONS IN FISCAL YEAR 1982, BY SOURCE OF FUNDS AND PROGRAM
3.	INCREASE IN OPERATING COSTS FOR SELECTED VEHICLES AS ROAD CONDITIONS DETERIORATE
4.	PAVEMENT CONDITIONS ON THE FEDERAL-AID HIGHWAY SYSTEM FOR 1978
5.	ESTIMATE OF MAJOR NATIONAL HIGHWAY NEEDS AND THE FEDERAL SHARE, 1983-1986
6.	CURRENT HIGHWAY EXCISE TAX RATES
7.	RECENT TRENDS IN FEDERAL HIGHWAY EXCISE TAX RECEIPTS, 1978-1982
8.	FORECAST OF HIGHWAY TRUST FUND TAX RECEIPTS, 1980-1987
9.	BASIC TYPES OF FEDERAL HIGHWAY PROGRAMS FINANCED BY THE HIGHWAY TRUST FUND
10.	FEDERAL HIGHWAY PROGRAM UNDER A REDIRECTED FEDERAL ROLE
11.	COMPARISON OF MAJOR HIGHWAY OPTIONS
12.	THE HIGHWAY TRUST FUND UNDER A CONTINUATION OF CURRENT SPENDING PATTERNS
13.	THE HIGHWAY TRUST FUND UNDER THE INCREASED PROGRAM OPTION
14.	THE HIGHWAY TRUST FUND UNDER A REDIRECTED FEDERAL ROLE
15.	SUMMARY OF MAJOR HIGHWAY OPTIONS
A-1.	SUMMARY OF RESULTS FROM DOT'S HIGHWAY COST ALLOCATION STUDY
A-2.	AN ALTERNATIVE SET OF HIGHWAY TAXES FOR THE INCREASED PROGRAM OPTION
A-3.	COST OF MAJOR EXEMPTIONS FROM FEDERAL HIGHWAY TAXES
C-1.	GASOLINE TAXES BY STATE

 

Federal financing of highways has not kept pace with highway problems. Revenues from the motor fuels tax--the key source of highway funds--have stopped growing in recent years because a slowing of the increase in automobile travel and improved fuel economy have halted the historical upward trend in gasoline consumption. Compounding this, inflation has eroded the purchasing power of the revenue that is available. This decline in spending power has made it more difficult to deal with the condition of the nation's highways.

In recent years, the principal need of the highway system has shifted from new construction to repair. Many parts of the Interstate highway system are nearing the end of their designed lives and thus require greater maintenance than before; other Federal-Aid highways and bridges have also deteriorated in serviceability. But these repair needs also compete for resources with completion of the Interstate system, which, as now defined, would require more funds than are currently authorized for that purpose. Solving these problems will require increases in federal highway user taxes, increases in state responsibilities together with state user fees, or both.

Sooner or later, the central problem--the deterioration of the nations major roads--will be taken care of: the economic costs of doing otherwise are simply too high to permit deterioration to continue unabated. The gain in economic efficiency from facing this problem sooner, rather than later, appears clear.

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