The “Transportation Trust Fund” Idea, 40 Years On…

(Originally published in Transportation Weekly on April 11, 2011)

The centerpiece of the Obama Administration’s ambitious six-year surface transportation reauthorization plan is a proposal to transform the existing Highway Trust Fund into a Transportation Trust Fund from which $551 billion would be spent over six years for highway, bridge, mass transit, railroad, and multi-modal surface transportation projects that can also include marine and air elements.

However, in terms of how these trust fund dollars are spent, the emphasis of the President’s proposal is clearly on huge funding increases for mass transit and railroads at the expense of increased growth for highways and bridges. Comparing gross FY 2011 spending levels for the highway, transit and railroad agencies versus the FY 2017 spending for those agencies under the President’s plan gives the following growth rates:

(Billion $$) FY11 FY17 Increase
FHWA 41.8 59.2 +41%
FTA 10.3 24.3 +136%
FRA 1.7 9.9 +476%

To put it another way, 86 percent of the new spending authority from the Highway Trust Fund in 2011 goes to the Federal Highway Administration (before the flex of funding to transit of up to $1 billion). In 2017, FHWA would get 59 percent of the Transportation Trust Fund’s new spending under the Administration’s plan.

For these reasons, it is easy to see the proposal for one big Transportation Trust Fund as a reaction not just against the existing Highway Trust Fund but against the “user fee” principle in general. After all, the Highway Trust Fund is financed exclusively by excise taxes on the users of the highway system, via gasoline and diesel taxes, taxes on tractor-trailers and truck tires, and heavy truck usage. (It is supposed to be, at any rate). Under the “user fee” principle established in 1956, the proceeds of these taxes are supposed to pay for programs that give direct benefit to those particular taxpayers, so a heavy bias in favor of highways and bridges out of those tax receipts is natural, even proper.

The Obama Administration’s Transportation Trust Fund would be half-financed by the existing tax receipts on highway users and half-financed by a mystery tax — $231 billion in Trust Fund tax deposits over six years to be derived from an as-yet-unnamed source to be negotiated on a bipartisan basis with Congress. But it is a safe bet that the Administration does not intend to raise several hundred billion dollars through additional user charges — they have ruled out a gas tax increase, and it seems unlikely that they would support high tax rates on subway or bus ridership or on Amtrak tickets (or on high-speed rail tickets, if any are ever sold during the lifetime of the Transportation Trust Fund). In this respect — the creation of a “Transportation Trust Fund” as an expression of frustration against the “user fee” system and the way in which that system naturally gives primary benefit to the people who pay those excise taxes — it may be useful to examine just how far back the Transportation Trust Fund concept goes.

The proposal to scrap the existing Highway Trust Fund and replace it with a Transportation Trust Fund (as a way to boost mass transit funding at the expense of highway funding) is not original to the Obama Administration, but dates all the way back to 1970 and a freshman Congressman from Greenwich Village, New York City, New York named Ed Koch. (Koch served in the House from 1969-1977 before serving twelve years as Mayor of New York City from 1978- 1989, earning the lifetime sobriquet of “Hizzoner” before becoming a judge on The People’s Court in the late 1990s.) On July 7, 1970, Koch introduced what we believe to be the first Transportation Trust Fund bill, H.R. 18319 of the 91st Congress (excerpted at the end of this article). At the time, municipalities were struggling to keep pace with the costs of mass transit services that many municipalities had never had to provide before (bus and streetcar companies were largely private until most of them went of business in the late 1950s and 1960s and left cities on the hook). Federal aid for mass transit had begun in 1964 at the Department of Housing and Urban Development (and moved to DOT in 1968) but suffered from the lack of a dedicated revenue source.

At the same time, the construction of Interstate highway extensions into major urban areas was starting or about to start (the Interstate usually had its rural areas built first) and these urban extensions were causing great political controversy in some major cities, particularly San Francisco (the first to rebel) and New York. On August 11, 1966 (p. 19103) and then again on July 3, 1968 (p. 19926), Rep. William Ryan (D-NY) offered amendments to the 1966 and 1968 highway bills that would have allowed states to use any or all of their highway apportionments for mass transit instead. Both amendments were ruled out of order as being non-germane to the underlying bill. But frustration among some urban legislators was building.

Contacted by TW, the still-spry 86-year-old Koch (who we tracked down through his very active Twitter account, of all things) said he did not have a specific recollection of introducing the bill in 1970, but emailed that “I have always been a mass transit advocate resentful of the well-funded (gasoline tax) Highway Trust Fund.”

Before 1979, once a bill was introduced in the House, additional co-sponsors could not be added to the bill, and no more than 25 cosponsors of any particular bill were allowed. As a result, Koch re-introduced his bill several more times over the next few months, each time adding more cosponsors (H.R. 19604, 19433, 19418, 19417, and 19637, 91st Congress).

Eventually, the House began debating the 1970 highway bill (during a lame-duck session). The bill was considered under a special rule typical for that time — unlimited amendments were allowed to most parts of the bill (subject to standard House rules like germaneness), but the tax portion of the bill reported from the Ways and Means Committee was un-amendable. Since the Highway Trust Fund was written into the tax code and was under Ways and Means jurisdiction, this meant that Koch could not offer his Transportation Trust Fund provision as an amendment to the highway bill.

However, feisty freshman Koch did have a spirited discussion with Ways and Means chairman Wilbur Mills (D-AR) on the issue. It is interesting to note how little the argument points or issues involved have changed in the last 40 years. (Koch was from one of the most densely populated (and therefore transit-dependent) districts in the U.S. Mills lived in Kensett, Arkansas, whose population in the 1970 Census was 1,396, and thus had absolutely no use for mass transit.) (Ed. Note: Today, the population of Kensett is still under 2,000, and thanks to Wikipedia, we now know that aside from producing the legendary Mills, the town’s only other real claim to fame is that it currently possesses one of the world’s few zonkeys (half-zebra, half-donkey) as a tourist attraction.) From the Congressional Record of November 25, 1970 (pp. 38956-38957):

      Mr. KOCH. I should like to say to the distinguished chairman that transportation is an integrated matter, that the user of an automobile is at some time during the day a pedestrian. When he comes to the city, or if he is in the city and he has to park his car, and he wants to get elsewhere, he is delighted when public transportation is available.

      Mr. MILLS. Then, assess a tax on them for mass transportation.

      Mr. KOCH. I make this point: If you took the streets of the various cities and put them end to end, they would far exceed the highways that this bill is paying for. There is no special tax levied against the user of a city street. I pay that tax and gladly do so to provide the public with a network of roads in my city. I believe that the user of a motor vehicle would be willing to pay for the integrated system if you would give him a chance to do so.

      Mr. MILLS. That is not what they tell me about it. I am sure that some people have a different viewpoint than others do. What I say is I do not like the idea of telling somebody that he is paying a tax in order to use something and then he finds out that he is paying a tax not for that purpose but for some entirely unrelated purpose. If you friends of mine in New York will come up with some program related to mass transportation as a form of use tax, I will be glad to hear you. I am sure you can almost sell me without any difficulty, but do not continue to ask us to tax for one purpose all of our people and then say “No, no. We are going to use it for some entirely different purpose.” Let us tax them on the basis of that which we want to improve.

      Mr. KOCH. If the gentleman will yield for one brief moment further?

      Mr. MILLS. Yes. I yield to the gentleman.

      Mr. KOCH. What we need is a single transportation trust fund, from which localities can choose that kind of transportation most needed and suitable in their area. It is wrong to impose highways on the city of New York where they need mass transit.

      Mr. MILLS. I am perfectly willing to consider the entire problem, but I am not willing to finance the entire problem out of the users of one segment of the problem. That is all I am saying.

      Mr. KOCH. We say put all of those special taxes into one fund.

      Mr. MILLS. That is what I am telling you. I will be glad to hear you at any time you want to be heard after the 1st of January. You develop a program of user taxes that is related to the use of mass transportation and I will be glad to hear you.

      Mr. KOCH. I will be down to talk to you.

(Ed. Note: Mills retired in 1976 and died in 1992, but he is presumably still waiting for someone from the transit community to make a proposal for a dedicated trust fund for mass transportation that is wholly financed by user taxes levied on mass transit riders or on other entities that could fairly be described as system users.)

The House highway bill that year (H.R. 19504, 91st Congress) did make some concessions to mass transit — section 111 of the bill allowed Highway Trust Fund dollars to be used, for the first time, to build “preferential bus lanes, highway traffic control devices, bus passenger loading areas and facilities, including shelters, and fringe and transportation corridor parking facilities to serve bus and other public mass transportation passengers” (subject to some strict restrictions). Shortly after Koch and Mills had their colloquy, Koch’s New York City colleague Jonathan Bingham (D-Bronx) offered an amendment to the bill to broaden section 111 and allow Highway Trust Fund dollars to be used for any kind of transit project (rail or bus) with very few restrictions.

No one from the Public Works Committee rose to their feet in time to make a point of order against the amendment (if indeed a point of order would have worked), and so Bingham got to debate his amendment (unlike Ryan in 1966 and 1968, who did not). Following is an excerpt of debate between Bingham, Koch, and Rep. William Harsha (R-OH) from the Public Works Committee in opposition — note the highway advocate’s citation of the huge future highway cost needs from the Conditions and Performance Report as a justification for not spending money on other modes, which sounds awfully familiar, and note the also-evergreen reference to congestion statistics (Congressional RecordNovember 25, 1970, pp. 38991-38992):

      Mr. BINGHAM. What the bill does is to say that we will help mass transit but only to the extent that buses are involved. I suggest that is an unreasonable limitation.

      It has been suggested that using highway fund moneys for mass transit is not proper use of the excise taxes involved but if it is proper for bus mass transit, why not for rail mass transit?

      We have other excise taxes that are not strictly limited to certain narrow purposes. We do not say that liquor taxes must be used for bigger and better bars, or that taxes on perfume are to be used only for facilities relating to perfume. It might be interesting to speculate what they might be.

      So let us face the fact that we have here excise taxes which could be and should be used for the purpose of making our highway transportation more efficient, including the needs of our cities as well as the needs of the countryside. The needs of our highways in New York would be vastly better met by improving our mass transit facilities in New York.

      This would not be in any sense a departure from a commitment we have made to any taxpayers, because this is a new bill creating an extension of a tax. It is not dependent on any commitment made in 1956. It is a new bill. It is a new era. It is an era when we should have a balanced transportation system, and this amendment would make it possible for us to have a balanced transportation system…

      Mr. HARSHA…Quite obviously it is an endeavor to open up the highway trust fund to any transportation system that can be envisioned. This is contrary to the 1956 Highway Revenue Act and will delete the trust fund so that we will not be able to complete any of the highway systems that are needed in this country.

      Under the present program of collecting revenues under existing laws there are not enough funds to be collected to provide half enough money to complete the highway needs of this country. The highway needs report filed in January by the Department of Transportation indicated that between now and 1985 there will be a need for some $320 billion to adequately finance needed highways and highway facilities in this country.

      If we open up this highway trust fund to any form of mass transportation then we certainly will never be able to conclude a viable and effective highway program.

      I oppose the amendment.

      Mr. KOCH. Mr. Chairman, I rise in support of the amendment.

      Mr. Chairman, I do not believe that any of the proponents of the amendment or those of who have spoken about mass transit expect to win on any of the proposals which we are making this afternoon. What we are trying to do, and trying to do in a rational way, is to bring to the attention of Members the real need for a comprehensive approach to our transportation requirements, as well as the need for more money for mass transit.

      On September 29 a bill was brought up on this floor by the Banking and Currency Committee providing for a $5 billion authorization over the next 5 years for mass transit; but it was reduced to $3.1 billion by this body.

      Today we are authorizing a Federal expenditure of $17 billion over a 4-year period for highways.

      What we who support the amendment are saying, Is there not something irrational about the way we are proceeding? Is there not something irrational about talking about the need for $320 billion for highways over the next 15 years and at the same time having the House reduce to $3 billion what was already a very modest sum of $5 billion that was going to be authorized for mass transit for 5 years?

      We recognize that there is a need for highways. We are not the enemies of highways, although there are particular highways to which we object.

      What we are saying is: You have an interest in the total transportation picture. The people who drive cars are sometimes also pedestrians and are delighted to find a form of public transportation to carry them to their final destination. Those who live in the cities of this country know what it means to be on the highway for 2 hours to get home when a mass transit facility – if available – could get them home in 35 minutes. The committee in its report provides an estimate of the number of man-hours that have been saved by travelers on the Interstate system; but it fails to mention the millions of man-hours that are lost each day in traffic congestion – hours that could be saved if public transportation were available.

      Members of this House are not acting against the interests of their automobile-driving constituents when they attempt to appropriate sums for mass transit. They are helping these constituents.

      Is there anything wrong with saying that where a highway is appropriate we would build a highway and where a mass transit facility – a subway, a bus, or an elevated structure – is appropriate, that is what we would build? What we say is that the locality is in the best position to know what form of transportation will best meet its needs and that it should be given this choice. If a Governor should determine that a form of mass transit can serve the public more efficiently than a proposed highway, why should the Federal Government refuse to fund anything other than a highway?

      We are not saying take the money and automatically put it into mass transit. We are saying use the money where it makes the best sense and does the most good.

      That is why I have proposed that we establish a single transportation trust fund combining the mass transit, highway, railroad and airport programs. If all transportation funds were dispensed from a single source, we would then be in a position to effect the rational, integrated approach desired and weigh the priorities and efficiency of one form of transportation against another.

      Whether this single transportation trust fund comes under the jurisdiction of the Committee on Public Works, the Committee on Banking and Currency, or some other committee, this unified funding program will have to be established if we are to make effective use of our transportation resources and if we are to maintain – and hopefully improve – the mobility of a growing population.

(Underlining added by TW). However, the Bingham amendment lost on a voice vote, and if Bingham tried to get an actual vote count with tellers, he was unable to get one-fifth of the Members in the chamber to support his request for to do so. The issue was dead for the year.

Meanwhile, in the other chamber, Senator Ted Kennedy (D-MA) had by this point adopted Koch’s bill as his own, introducing it in the Senate on October 8, 1970 as S. 4451, 91st Congress. Kennedy had this to say about his proposal (Congressional Record, October 8, 1970, p. 35744):

      Two or three decades ago, the categorical programs made more sense. The primary need was for interregional transportation, for long-distance highways, and for airport and air travel development.

      But the situation today has changed. Increasingly, our population is bunched into metropolitan areas. And as metropolitan areas expand, they are merging with one another into heavy population corridors — such as the “Northeast Corridor” in my own section of the country.

      So while we have to a great extent succeeded, through categorical programs, in moving people between metropolitan and regional areas, we have failed to develop successful programs to move them within metropolitan and regional areas. Meeting the short– and intermediate-range needs is all the more important when we consider that less than 10 percent of all intercity trips are for more than 500 miles.

      Any lasting solution to the transportation problems in our society today must view them as just that — transportation problems, not simply highway problems, or air problems, or railroad problems. And it must recognize that regions and States and local communities are better able to evaluate their specific needs than the Federal Government. While we can set overall policy on transportation at the Federal level, the best allocation of resources between different modes to meet those needs can best be carried out by appropriate governmental bodies in the areas involved.

      The essential purpose, then, in setting up a national transportation trust fund is to permit greater flexibility to the regions, States and local communities in meeting their transportation needs.

1970 (and the 91st Congress) ended with no action being taken on Transportation Trust Fund legislation in either chamber, but by summer 1972, the Democratic National Convention was drafting its platform in Miami Beach. 1972 was the year when Democratic “base” voters took over the convention process from the old behind-closed-doors party bosses, and this was felt in the Platform Committee as well. Teddy White’s The Making of the President: 1972 quotes Ben Wattenberg (who viewed himself as a token moderate on the 1972 Platform Committee in Miami) as saying “There won’t be any riots in Miami because the people who rioted in Chicago are on the Platform Committee — they outnumber us by three or four to one.”

In between demands on hot-button issues like an end to the war in Vietnam, amnesty for draft avoiders, forced busing for school integration, the abolition of the Electoral College, and declared support of “the right to be different, to maintain a cultural or ethnic heritage or lifestyle, without being forced into a compelled homogeneity,” the 1972 Democratic Party Platform said that:

The Democratic Party pledges:

To create a single Transportation Trust Fund, to replace the Highway Trust Fund, with such additional funds as necessary to meet our transportation crisis substantially from federal resources. This fund will allocate monies for capital projects on a regional basis, permitting each region to determine its own needs under guidelines that will ensure a balanced transportation system and adequate funding of mass transit facilities.

The phrase “Transportation Trust Fund” has not appeared in either party’s platform since 1972. However, the increasing urbanization of the Democratic Party and the growing political strength of close-in suburbs in both parties led to permanent eligibility for some transit funding from the Highway Trust Fund in 1973, and with a permanent Mass Transit Account of the Highway Trust Fund in 1982. But the arguments continue and have not changed substantially since 1970: transit advocates say “transit needs more funding, and highways don’t make sense everywhere.” Highway advocates respond by saying “fine, but why tax one mode of transportation to pay for other modes? Can’t you come up with your own revenue source?” Over 40 years later, legislators have yet to find a financially viable answer to that last question that can muster majority support in both Houses of Congress.




H.R. 18319



July 7, 1970

Mr. KOCH introduced the following bill, which was referred to the Committee

on Ways and Means



To establish a Transportation Trust Fund, to encourage urban mass

transportation, and for other purposes.

[Sec. 201] There is hereby established in the Treasury of the United States a trust fund to be known as the Transportation Trust Fund…

[Sec. 202]…There is hereby appropriated to the Trust Fund, out of any money in the Treasury not otherwise appropriated, amounts equivalent to the taxes received in the Treasury before July 1, 1980, and which are attributable to liability for tax incurred before July 1, 1980, under the following provisions of the Internal Revenue Code of 1954:

   (1) the tax received after June 30, 1971, under section 4061(a)(2) (tax on automobiles, and so forth);

   (2) the taxes received after June 30, 1971, under subsections (c) and (d) of section 4041 (taxes on aviation fuel) and under sections 4261, 4271 and 4491 (taxes on transportation by air and on use of civil aircraft);

   (3) the taxes received after June 30, 1972 under sections 4041 (taxes on diesel fuel and special motor fuels), 4061(a) (taxes on automobiles, trucks, buses, and so forth), 4061(b) (tax on parts and accessories for trucks, buses and so forth), 4071(a) (tax on tires and tubes), 4081 (tax on gasoline), and 4481 (tax on use of certain vehicles)…

[Sec. 204]…amounts in the Trust Fund shall be available, as provided in appropriation Acts, for making expenditures to meet obligations of the United States which are incurred after June 30, 1971, and before July 1, 1980, under the following Acts:

   (1) the Federal-aid Road Act approved July 11, 1916, as amended and supplemented, to the extent such obligations are attributable to Federal-aid highways (including those portions of general administrative expenses of the Bureau of Public Roads payable from such appropriations);

   (2) the Urban Mass Transportation Act of 1964 (49 U.S.C. 601 et seq.), as amended (including general administrative expenses);

   (3) the Airport and Airway Development Act of 1970 (Public Law 91-258), as amended (including general administrative expenses);

   (4) the Federal Aviation Act of 1958, as amended (49 U.S.C. 301 et seq.), to the extent such obligations were attributable to planning, research and development, construction, or operation and maintenance of — (i.) air traffic control; (ii) air navigation; (iii) communications; or (iv) supporting services (including general administrative expenses);

   (5) such other Acts as may from time to time be enacted for related transportation purposes that Congress determines should be implemented by means of the Trust Fund created by this title.

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