This document summarizes a presentation about reforming the federal highway transportation funding system. It outlines that the presentation covers: 1) The basics of the current federal Highway Trust Fund and issues with disconnect between revenues and system performance. 2) Areas for improvement like strategies to reduce congestion being inadequate and more efficient allocation of funds. 3) Options for reform like tolls, public-private partnerships, and charging drivers for vehicle miles traveled with considerations for implementing VMT charges.

1. Sustaining Surface
Transportation: Overview of the
Highway Trust Fund and Ideas
for Reform
Dr. Tracy Miller, Associate Professor of
Economics at Grove City College

2. Presentation Outline
1. Basics of Transportation Funding
2. Areas for Improvement
3. Options for Reform
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3. Basics of Transportation Funding
• My focus is on the Federal Highway Trust Fund
(FHTF).
• Created in 1956 to fund Interstate Highway system
and other federal aid highways.
• States manage highway construction & maintenance.
Money allocated to states by formula as matching
grants.
• Beginning in 1982, Congress authorized FHTF money
for transit (approximately 1/9 of revenue).
– Today, almost 20 percent goes to public transit.
• Constant federal tax rate per gallon since early 1990s.
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4. Areas for Improvement
• Problem: disconnect between revenues generated and
overall system performance.
– A different approach is needed to reduce congestion –
millions of hours and millions of gallons of fuel wasted.
– Strategies for dealing with congestion are inadequate
• Add more lanes.
• Encourage drivers to switch to public transportation.
– Improve allocation of funds within and between states.
– More efficient maintenance of pavement by allocating
costs to vehicles according to contribution to pavement
damage.
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5. Causes of Rising Congestion: Demand
Grows Faster than Supply
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6. • Charge prices for highway use that connect revenue to expected
benefits.
Reform options to consider:
• Tolls:
– Can vary over time to limit congestion
• Public Private Partnerships (PPP):
– Private firms lease highways and manage them.
– Implement tolls on selected limited access highways.
– Tolls and PPPs apply to selected highways resulting in:
• Traffic diversion to parallel routes;
• Drivers pay twice for newly tolled highways.
• Charge drivers for Vehicle Miles Traveled (VMT):
– VMT charges can cover all roads and highways.
– Price can be adjusted by time and location.
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Options for Reform of Highway Funding

7. • To limit costs, allow long transition so on-board devices can be
installed in all new vehicles.
• Equity – distribution of costs similar to fuel taxes
• Privacy concerns could be addressed by:
– Using a device inside the vehicle which calculates all charges
and sends a statement containing only the amount due to the
agency responsible;
– Permitting drivers to choose between paying fuel taxes and VMT
charges;
– Making adjustments to the technology during transition.
• During transition, congestion tolls could be used.
Practical Considerations for
Implementing VMT Charges
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8. Bridging the gap between academic ideas and real-world problems