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Publication Number:  FHWA-HRT-08-004    Date:  Nov/Dec 2008
Publication Number: FHWA-HRT-08-004
Issue No: Vol. 72 No. 3
Date: Nov/Dec 2008


Guest Editorial

New Era for Highways Demands New Financing

A photo of Thomas J. Madison, Jr.
Thomas J. Madison, Jr.

For nearly a year, Americans have been driving less and, as a result, buying less gasoline and diesel. Although this shift benefits the environment and U.S. energy security, it raises challenges for meeting the investment requirements of the Nation's transportation system. The Federal Highway Trust Fund, a primary source of funding for the U.S. transportation industry, is supported primarily by motor fuel taxes. The trust fund's financial health, therefore, depends on increasing fuel consumption. As Americans purchase less fuel, the fund's revenues are declining. At the same time, the costs of highway construction materials and labor have spiked, leading to a shortfall in States' abilities to fund highway improvements.

This issue of PUBLIC ROADS features an article about the impacts of reduced fuel consumption on the transportation system in Texas. In "Higher Gas Efficiency Equals Lower Fuel Revenues," the author reports on a recent study by the Texas Department of Transportation that supports the need for new approaches to funding critical infrastructure.

The sustainability of the current funding system has been in question for years; however, little has been done to address the problem. Recently, the U.S. Congress passed a last-minute measure to add general revenues to the Highway Trust Fund so the Federal Highway Administration could continue to reimburse States for Federal-aid construction costs. This solution will work for the short term, but a viable long-term funding solution is needed.

The path away from motor fuel taxes includes numerous options. One option being explored by several States is public-private partnerships (PPPs), an innovative strategy to finance new transportation corridors by allocating responsibilities to the parties-public or private-best positioned to produce the desired results. PPPs tap new sources of private capital and can result in transportation projects being completed faster, with greater savings and improved system performance.

Another option is high occupancy toll (HOT) lanes, which address the need for transportation funding and congestion reduction. HOT lanes are a proven way to generate revenue needed to build and maintain roads, while easing congestion by providing motorists with more travel choices. Studies show that many drivers during rush hour are not going to or from work and could drive at a different time. HOT lanes encourage these drivers to use the road during offpeak times to reduce congestion.

These are only two of the many funding solutions available. Although the transportation community does not know which of them will play the greatest role in the future of highway finance, the current means of financing highways is not sustainable. But one factor is a given: traffic congestion will continue to grow and become increasingly unmanageable unless new approaches are taken.

As the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users expires in 2009, it heralds the beginning of the end of conventional highway financing. The next surface transportation authorization must provide greater flexibility to States to utilize sustainable revenue sources that will increase mobility and enhance economic productivity.

Thomas J. Madison, Jr.


Federal Highway Administration



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