By KERRY SMITH BUCK

WASHINGTON, D.C. – The funding mechanism and the fund itself to pay for maintenance and construction of federal highways and byways is broken/broke.

Co-panelists at the March 2026 Associated General Contractors of America annual conference’s Federal Highway Administration issues update – including FHWA Administrator Sean McMaster – articulated the critical need for changes in the Highway Trust Fund (HTF) formula in the next five-year federal transportation infrastructure funding package.

Time is of the essence, as the current infrastructure funding bill expires Sept. 30.

The HTF, originally established via the Highway Revenue Act of 1956, is primarily funded by federal excise taxes on gasoline and diesel fuel. Although for decades the funding formula that has been directly tied to gallons of fuel consumption worked, the advent of hybrids and electrical vehicles has driven this funding mechanism into disarray.

Although heavy highway construction costs continue to increase, the funding formula hasn’t been altered since 1993. Diesel-powered vehicles still pay 24.3 cents per gallon into the fund, while gas-powered vehicles pay 18.3 cents per gallon. In addition to the advent of more efficient vehicles that consume fewer gallons of fuel, the American public is driving less than it used to; the reasons include less commuting due to more remote work opportunities and higher costs of vehicle ownership.

“A transportation construction project that’s 15 years in the making is three times more expensive to build,” said McMaster. “That’s not where we want to be. We need to be obligating, not just awarding, transportation projects. Long-term, predictable funding is the answer so we (FHWA and state departments of transportation) can plan ahead five years, 10 years, 20 years out.”

Since 2001, the Highway Trust Fund has been in the red. In FY 2006, Congress began mitigating the Highway Trust Fund’s overdraft status by transferring money from the U.S. Treasury’s General Fund – but that’s only a temporary fix, says McMaster.

“Expenditures have exceeded revenue by amounts ranging from $430 million in FY 2006 to $16 billion in FY 2016,” said co-panelist Deniz Mustafa, senior director of infrastructure finance for the AGC. “In FY 2016, Congress transferred $51.9 billion to the highway account under the Fixing America’s Surface Transportation (FAST) Act and $90 billion to the highway account in 2021 under the Infrastructure Investment and Jobs Act (IIJA).”

The fund faces long-term insolvency, McMaster says, with a projected $37 billion deficit by 2034, as debates over fair funding contributions continue. More than 40 states have addressed the inequity of hybrids and EVs lesser contributions to the fund by imposing or increasing annual registration fees to make up for lost fuel taxes. A bevy of associations are advocating for a replacement system that would tax miles driven rather than fuel consumed.

Compounding the situation is the fact that approximately 80 percent of HTF revenue is used to pay for roads, while 20 percent of it goes toward mass transit needs.