Transfers from the general treasury into the Highway Trust Fund violate a 1974 budget act.
The Highway Trust Fund that pays for America's highways (and some of its mass transit system) is going broke. And it turns out that by incrementally saving the fund from financial failure, Congress might also be breaking the law.
From 2008 through September 2014, the Highway Trust Fund received at least $52 billion in transfers from the general treasury—about 17 percent of its total revenue during that period. That means only 83 percent of the fund's receipts have come from user-related taxes; namely, the federal gas tax. But a Congressional budget act from 1974 requires all federal funds that work on contract authority, such as the Highway Trust Fund, to pull at least 90 percent of receipts from user expenses. Strictly speaking, then, federal transportation funding has been in violation of this mandatory threshold for years.
This disturbing if arcane bit of political insight got the full treatment earlier this year from Jeff Davis, publisher of the Transportation Weekly newsletter (not available online), and it also gets spotlighted in a new report on the rise and fall of the Highway Trust Fund released today by the non-partisan Eno Center for Transportation. Here's the upshot from Eno (our emphasis):
Based on the available evidence, Congress—through its continued use of contract authority to fund the federal surface transportation program—has already violated the 1974 Budget Control and Impoundment Act and is simply choosing to ignore it.
To see what led us here a little better, we need a brief history review. The Highway Trust Fund was created in 1956 to pay for the Interstate Highway System that connects American metro areas today. The fund was supposed to be eased out of existence once the interstates were built, but construction took longer and cost more than everyone had predicted, and by the time the system was completed, lawmakers at all levels enjoyed having a steady flow of dedicated transportation funding. So the fund stuck around, even after outliving its original purpose.
Meanwhile, in 1974, Congress passed a budget control act severely limiting new contract authority (see Section 401). According to Davis's May 12, 2014, newsletter, some programs (like Social Security) were grandfathered in to avoid the rule, while others (like the Highway Trust Fund) were exempt so long as they derived at least 90 percent of their receipts from taxes or fees "related to the purposes for which such outlays are or will be made." In short, as long as gas taxes kept the Highway Trust Fund almost entirely self-sufficient, all was fine.
And, for decades, it was. From 1957 to 2007, roughly $721 billion in trust fund deposits came through the gas tax or other user fees—about 96 percent of the total. But the gas tax has lost its revenue power in recent years for a number of reasons: the rise of fuel-efficient cars, a plateau in driving mileage, and a general refusal by lawmakers to increase the gas tax (or at least index it to inflation) chief among them. Finally, in 2008, it became clear the Highway Trust Fund would go bankrupt if left to its own devices.
Enter the series of multi-billion-dollar transfers from the general treasury that have kept the Highway Trust Fund solvent in the face of a diminishing gas tax (below). Transfers that, in the words of the Eno report, "effectively break the 90 percent rule."
At first, according to Eno's analysis, the transfers could be semi-reasonably justified. Twice before, in 1990 and 1993, Congress had used some of the then-flush transportation fund to balance the general budget. So in 2008 and 2009, when Congress transferred about $8 billion and $7 billion respectively from that general fund to keep the highway trust afloat, the moves were seen as repayment of the earlier funding shift that had gone the other direction, plus interest.
Where the accounting "became substantially more questionable," writes Eno, is when Congress transferred another $19.5 billion from the general fund into the Highway Trust Fund in 2010. Since lawmakers had no real idea how much interest the transportation fund should be owed, no one knew if the previous justification held true, especially in the face of such a large transfer. In 2012, when Congress transferred another $20 billion into the highway trust, officials didn't bother with the initial explanation at all.
Only in 2014, when Congress injected another $10.8 billion into the transportation fund, did lawmakers finally acknowledge "that they were skirting their own rules," according to Eno. Leading up to that transfer, the House of Representatives adopted a resolution that waived "all points of order against consideration of the bill," and thus waived the 90-percent threshold established in 1974. When no Senators objected to the waiver—if they even realized its implications—the latest funding act was allowed to proceed.
So why isn't anyone speaking up? Davis, who consulted on the Eno report, offers a couple reasons in his May newsletter.
For starters, writes Davis, the Highway Trust Fund is exempt from external budget enforcement mechanisms, such as discretionary spending caps. That leaves Congress to police itself through internal means. Such options do exist. When considering a transfer from the general fund to the transportation fund, an official in either chamber can raise a "point of order" referencing the 1974 budget act. But doing so would kill the entire bill in question, something lawmakers are hesitant to do, and the point of order can be overturned by a majority vote, which is preferably built up before a key transportation bill ever reaches the floor.
In other words, writes Davis, the legislation intended to keep the Highway Trust Fund self-sufficient can only be enforced if Congress itself chooses to enforce it. He concludes:
If everyone tacitly decides to keep their mouth shut, or if people are distracted by other things, or lack the proper information, a point of order never gets raised.
The larger point of the new Eno report is that it may be time to eliminate the Highway Trust Fund anyway. Until that time comes, however, Congress should at least have the courage to acknowledge its funding transgressions in the open. If you can simply choose to ignore old rules with impunity, there's little sense to the entire system of establishing new ones.