Maintaining Federal Investment Purchasing Power

Maintaining Federal Investment Purchasing Power Congress asked the Commission to estimate the level of funding required to "ensure that federal levels of investment in highways and transit do not decline in real terms." The Commission interpreted this to mean the 2008 federal highway and transit program funding (obligation) levels, including the General Fund support for transit. Such an estimate is a projection of future purchasing power and derived from assumptions about long-term inflation. As explained previously, the Commission used 2 percent for that purpose in this report.

Applying a 2.0 percent long-term average annual inflation rate, the combined federal highway and transit program funding level of $53.6 billion would need to grow to $91.6 billion (in nominal terms) by 2035 for current program purchasing power to be maintained. As illustrated in Exhibit 2-21, the HTF revenue forecasts do not come close to achieving this. The Baseline Forecast revenue gap grows from $17.3 billion in 2008 to $45.3 billion Py 2035, with a cumulative shortfall of $827 billion over the 28-year period. The Conservative Forecast produces a revenue gap that grows to $55.5 billion by 2035, with a cumulative shortfall of $975 billion. To the extent average annual inflation exceeds the assumed 2.0 percent, the revenue gaps will grow that much larger.

EXHIBIT 2-19: HTF BASELINE FORECAST VS. CONSERVATIVE FORECAST (HIGHER MPG ASSUMPTION)

 

I EXHIBIT 2-20: HTF FORECAST SUMMARY

 

2008 
Revenues

2035
Revenues

Average
Annual
Revenues
2008-2035

Cumulative
Revenues 
2008-2035

Average
Annual
Revenues
2010-2015

Cumulative
Revenues
2010-2015

Baseline Forecast

 

 

 

 

 

 

Nominal $

$36.4

$46.2

$41.5

$1,161

$39.1

$235

2008$

$36.4

$27.1

$31.8

$891

$35.8

$215

Conservative Forecast

 

 

 

 

 

 

Nominal $

$36.4

$36.1

$36.2

$1,013

$36.6

$220

2008$

$36.4

$21.2

$28.1

$786

$33.5

$201

Data Sources and Growth Assumptions

Baseline Forecast

Conservative Forecast

• Light-duty Vehicle Annual VMT Growth = 1.6%a

• Light-duty Vehicle Annual MPG growth = 3.0%°

• Freight Truck Annual VMT Growth = 1.8%a

• Freight Truck Annual MPG growth = 1.5%

• Light-duty Vehicle Annual MPG growth = 1.59%b

• Other Assumptions Same as Baseline Forecast

• Freight Truck Annual MPG growth = 0.59%

 

• No change in tax rates

 

a.  Average of the guidance provided by the Federal Highway Administration and rates used in December 2008 estimates of the U.S. Energy Information Agency (EIA).

b.  EIA, "Table 7. Transportation Sector Key Indicators and Delivered Energy Consumption," Excel sheet, December 2008, at www.eia.doe.gov/oiaf/aeo/excel/aeotab_7.xls

c.  The Conservative Forecast MPG growth assumption for light-duty vehicles is the compound annual growth rate required to go from 20.4 MPG in 2008 to 35.0 MPG in 2035. The MPG growth assumption for freight trucks is assumed to be 9.0 based on expert opinion.

 

 

EXHIBIT 2-21: ANNUAL FEDERAL REVENUE NEEDED TO MAINTAIN CURRENT HIGHWAY AND TRANSIT PROGRAM PURCHASING POWER, 2008–35