Last week, the Congressional Budget Office released a dismal new budget and economic outlook that estimates the effect of coronavirus, and the spending and tax legislation passed in the last six months in response to coronavirus, on the federal budget. (The new budget forecast is based on the July 2020 economic forecast.) While the big picture is dismal (an estimated $3.3 trillion federal deficit in 2020, debt held by the public rising from 71 percent of GDP in 2019 to 96 percent of GDP in 2021), when it comes to the Highway Trust Fund, the new forecast is a mixed bag.

Short term. CBO provided an updated forecast of Highway Trust Fund cash flow to Congressional requesters. That forecast shows that the Trust Fund will still end this year solvent, and that tax increases or another bailout will still be required sometime next year, as was predicted in the March 2020 forecast. But the highway numbers have deteriorated:

Two contrasting factors are at work here. CBO estimates that COVID will decrease the receipts from the excise taxes that support the Trust Fund (though not as badly as many forecasters thought back in April). Those receipts are now projected to drop by $3.8 billion in 2020 and $3.1 billion in 2021, versus the March 2020 forecast (the FY20 drop is projected to be $3.4 billion Highway Account, $0.5 billion Mass Transit Account).

At the same time, CBO has updated its spending assumptions, based on the month-by-month actual spending data for FY20 that is now available through July 31, as well as additional technical and economic assumptions in future years. CBO increased its 2020 spending estimates for the Highway Account by $1 billion and decreased its Mass Transit Account 2020 spending estimate by $500 million to reflect what has already happened this year. For 2021, projected spending for both accounts is down (-$1.2 billion HA and -$714 million MTA).

Both accounts are still on track to run out of money sometime between late spring 2021 and late summer 2021. The new estimate means that, at current funding levels, Congress will have to deposit at least $6.3 billion to get to the end-of-year minimum “safe” balance levels of $4.0 billion HA and $1.0 billion MTA. But because there is more funding uncertainty than usual in this forecast, Congress should add more money than that if they want to be safe.

Long term. Over the full 2020-2030 timeframe covered by the new CBO estimate, these two trends – lower tax receipts because of a less expansive economy, and lower spending levels because of the same – tend to cancel each other out. Compared to the CBO March 2020 forecast, the eleven-year (2020-2030) Highway Account tax receipts are projected to be $10.9 billion lower, but Highway Account outlays are also projected to drop by $10.7 billion, so over the long term, the Account’s net position is only $142 million worse in the new forecast than in the March forecast.

For the Mass Transit Account, the new forecast projects 2020-2030 tax receipts and interest to be $770 million below the earlier forecast, but spending is projected to be $2.4 billion lower (reflecting the hard time that transit agencies are having, and the fact that, as in 2009-2010, the CARES Act emergency funding will crowd out regular Trust Fund spending for a while, particularly for smaller transit providers). So, the long-term net position of the Mass Transit Account is actually $1.65 billion better under the new forecast than under the March forecast.

As a result, the projected end-of-2030 negative balance for the combined Trust Fund is -$188.0 billion, which is actually $1.5 billion better than the projected -$189.5 billion negative balance projected in the March 2020 forecast.

The full Highway Trust Fund forecast from the CBO September 2020 budget update is below.