Raising the federal gasoline tax is the most reliable way to meet the nation’s transportation needs in the near term, a major credit rating agency said Thursday.
Other proposals to shore up the federal Highway Trust Fund – using one-time changes in corporate taxes or continuing to bail it out with general funds – are too subject to political whims, Fitch Ratings said.
Though Scott Zuchorski, senior director of Fitch’s Global Infrastructure & Project Finance Group, conceded that an increase in the gasoline tax is unlikely in the near term, he said that Congress’ stopgap approach to the federal transportation program hinders states’ planning efforts.
“The point Fitch is making is that you’ve got to set the politics aside,” he said. “There’s a great deal of uncertainty out there.”
On average, states rely on federal funds for half their road and bridge spending. Many count on a reliable stream of federal dollars to pay down construction bonds. In 2012, citing the diminished reliability of those funds, Fitch downgraded the ratings of bonds in several states, which raises their future borrowing costs.
Congress has not passed a multi-year transportation bill in a decade and hasn’t raised the per-gallon taxes of 18.4 cents for gasoline and 24.4 cents for diesel since 1993. A handful of lawmakers in both parties have embraced an increase, but the idea hasn’t gained much support at either end of Pennsylvania Avenue.
The current transportation bill extension expires at the end of May, and everyone from U.S. Transportation Secretary Anthony Foxx to governors and state transportation officials have warned lawmakers that states are already dropping projects from their plans.
While transportation is one of the least partisan issues facing a fractious Congress, there’s little consensus on how to pay for the federal program. Since 2008, lawmakers have transferred more than $50 billion in general funds to the federal Highway Trust Fund.
Zuchorski said neither that approach, nor efforts by some lawmakers and the White House to close corporate tax loopholes to raise additional funds, would be sustainable in the long run.
Rather, he said, Congress should be looking for more reliable sources of funding, including a tax on miles driven, increased tolling and more private-sector investment.
“You can’t solve it all long term by just raising the gas tax,” he said.
A coalition of business groups, including the U.S. Chamber of Commerce, the American Trucking Associations and the American Road and Transportation Builders Association, supports continuing the federal program and raising the gas tax.
In the absence of a federal program, the road builders group calculated that states, on average, would need to increase their own gasoline taxes by 23.5 cents a gallon to maintain current spending levels. That increase would not account for the states’ future needs.
Last week, the group proposed a 15-cent increase in the federal gasoline tax, which would generate $27 billion a year and support the Highway Trust Fund for the next decade.