Highway Trust Fund Insolvency: Engineering Work at Risk Without Reauthorization
On September 30, 2026, the current authorization for federal surface transportation programs expires. That date matters more than almost any other policy deadline on the calendar for civil engineers, transportation contractors, state DOTs, and anyone building or developing in the United States.
The Highway Trust Fund (HTF) is the federal mechanism that finances roads, bridges, highway safety programs, and public transit across the country. Every dollar of federal-aid highway funding that flows to state DOTs, every Bridge Formula Program grant, every National Highway Performance Program project, runs through or alongside this fund. And the fund has a structural problem that Congress has been patching for nearly 20 years without fixing.
The federal gas tax, the HTF's primary revenue source, has been fixed at 18.4 cents per gallon since 1993. Thirty-three years. No adjustment for inflation. No adjustment for the near-doubling of average vehicle fuel economy over that period. No mechanism for collecting revenue from the electric vehicles that now represent a growing share of the fleet. In those three decades, construction costs have roughly tripled, the highway network has continued to expand, and the gap between what the fund collects and what it spends has grown from manageable to structural.
The Congressional Budget Office projects the highway account balance will approach zero by FY2028. Without action, the HTF will face a cumulative shortfall of $181 billion in the highway account and $60 billion in the transit account over the 2024 to 2033 period. A five-year reauthorization at current IIJA-level spending would require roughly $121 to $156 billion in additional funding just to keep programs running at today's scale.
This post explains what the HTF is, how it got here, what the reauthorization debate looks like, and what the engineering and construction industry stands to lose if Congress stalls.
1. How the Highway Trust Fund Works, and Why It's Broken
The HTF was created by the Federal-Aid Highway Act of 1956 to finance the Interstate Highway System. The concept was straightforward: drivers pay a tax on every gallon of fuel they buy, and those revenues flow into a dedicated fund used exclusively for highway and transit construction and maintenance. It was a user-pays model. People who use the roads pay for the roads.
For decades, that model worked. Growing vehicle miles traveled (VMT) and periodic gas tax increases kept revenues roughly aligned with spending. But that alignment started breaking down in the early 2000s and collapsed entirely in 2008, when the fund nearly ran dry and Congress made the first of what would become nine separate emergency transfers from the general fund to keep the HTF solvent. The total amount transferred since 2008: $275 billion. That's more than the entire cost of the five-year 2005 federal transportation law.
Three things that broke the model
The structural mismatch between HTF revenues and spending comes from three converging forces, all of which are getting worse over time, not better.
• A gas tax frozen in 1993: The federal gas tax was last raised by Congress 33 years ago. It's been 18.4 cents per gallon on gasoline ever since. In 1993 dollars, 18.4 cents had real purchasing power. Adjusted for inflation to today, restoring that purchasing power would require raising the tax to roughly 40.8 cents per gallon. Congress has raised it zero times. Every year that passes without an adjustment, the real value of each gallon's contribution to the fund declines.
• Vehicles that get twice the mileage: Average fuel economy in 1975 was about 13 miles per gallon. By 2023 it was 27.1. Federal CAFE standards push that number higher with each model year. A driver covering the same distance as their 1993 counterpart buys significantly less fuel and pays significantly less in gas taxes to do it. Fuel efficiency improvements have eroded gas tax revenues per mile traveled by more than 10 percent since 1993, and that erosion is accelerating as more efficient vehicles enter the fleet.
• Electric vehicles pay nothing: Under the current gas tax structure, EVs contribute zero to the Highway Trust Fund. EV adoption is growing. New passenger car CAFE standards required an average fleet fuel economy of 49 miles per gallon by model year 2026. As the EV share of new vehicle sales grows, the share of vehicle miles traveled paying into the HTF shrinks. The fund's revenue base is becoming structurally smaller precisely as the network it's meant to maintain grows more expensive to keep up.
The result of these three forces: HTF receipts total roughly $40 to $50 billion per year, while highway spending runs at approximately $53 billion annually and rising. The gap between revenue and outlays was about $14 billion in FY2024. CBO projects it will widen to $38 billion by FY2035 if nothing changes.
By the Numbers: The HTF Shortfall
FY2024 gap between highway account revenue and outlays: approximately $14 billion. Projected FY2035 annual gap: $38 billion. Cumulative highway account shortfall through 2033: $181 billion. Total general fund transfers to HTF since 2008: $275 billion. Gas tax rate unchanged since: October 1993.
2. What the IIJA Did, and What Happens When It Expires
The Infrastructure Investment and Jobs Act, signed in November 2021, included a five-year reauthorization of surface transportation programs covering FY2022 through FY2026. It authorized $567 billion in Highway Trust Fund and General Fund resources for the U.S. Department of Transportation. That authorization expires September 30, 2026.
The IIJA also injected $118 billion in general fund revenue into the HTF, delaying the projected insolvency date from 2022 to 2027 or 2028. It raised authorized spending levels substantially. From the FAST Act to the IIJA, average annual highway authorizations increased by roughly $28 billion. That increase has been a direct driver of the expanded project pipeline that's been flowing to state DOTs, engineering firms, and contractors over the past four years.
Here's the problem: the IIJA's spending increase was funded by a one-time general fund injection, not by a structural fix to the revenue side of the equation. When authorization expires, two things happen simultaneously. First, without a new reauthorization, federal surface transportation programs lose their funding authority and state DOT project pipelines start to dry up. Second, even if Congress passes a new bill, unless it also addresses the revenue structural deficit, the fund continues to bleed red ink from day one. CBO's February 2026 baseline projects the HTF highway account balance approaching zero in FY2028 even at current spending levels.
Why States Are Already Reacting
State DOTs don't wait for a crisis to adjust their pipelines. The American Association of State Highway and Transportation Officials (AASHTO) began developing reauthorization priorities in early 2025, more than 18 months before the IIJA expires. State transportation directors are already scoping projects more conservatively, phasing multi-year programs differently, and deprioritizing planning for projects that depend on post-FY2026 federal authorization. In Connecticut, the state's DOT Commissioner put it directly at ASCE's 2025 Solutions Summit: the highway workforce is like a steam engine. It takes time to get going, and if you stop it for even a 5-year period, it takes a long time to get back up to speed. Welders and technicians who move to other industries don't come back.
3. What's at Stake for Engineering and Construction
The surface transportation program isn't just a policy mechanism. It's a project pipeline. In 2022, the HTF contributed $50 billion to state and local projects covering highway construction, bridge replacement, safety improvements, and transit capital programs. That's $50 billion of work that engineering firms designed, permitted, and managed, and that contractors bid, mobilized for, and built.
A lapse in authorization, or a reauthorization at significantly reduced funding levels, doesn't hit the construction industry like a switch being flipped. It hits it progressively, beginning with the planning and design pipeline and working its way downstream. Here's how the sequence typically plays out.
Planning and design: the first phase to freeze
Federal-aid highway projects go through a multi-year process from programming through planning, environmental review, design, and procurement before a single shovel hits the ground. NEPA environmental reviews alone can take two to five years on complex projects. When funding authorization becomes uncertain, agencies freeze programming. They don't start new NEPA processes for projects that may not have funding by the time they reach construction. They don't obligate design contracts for projects whose construction funding is unconfirmed. Engineering firms are the first to feel a reauthorization delay, because the design work at the front of the pipeline is the first to stop.
State DOT discretionary programs: the biggest exposure
Federal-aid funding flows to states under several programs, each with its own formula, match requirements, and flexibility. The National Highway Performance Program (NHPP) funds projects on the National Highway System. The Surface Transportation Block Grant (STBG) program gives states broad flexibility to address surface transportation needs. The Bridge Formula Program has been directing $27.5 billion toward bridge repair over the IIJA period. Under prolonged reauthorization uncertainty, states deprioritize discretionary programs first. They continue work already under contract. They slow or pause new project initiations. They begin drawing down already-obligated funds while waiting to see what comes next.
Construction contractors: backlog risk and workforce decisions
For contractors, the immediate risk is backlog exposure. A contractor who has built its workload around a multi-year state DOT program funded by IIJA dollars needs to understand how much of that pipeline is at risk post-FY2026. Work already under contract is generally protected. New work that hasn't been procured is not. That creates a hiring and mobilization decision with real consequences: do you staff up for a pipeline that may thin out in 18 months, or do you hedge by slowing hiring and letting your existing workforce absorb more work? Most contractors hedge. That workforce conservatism, replicated across hundreds of firms, compounds into slower project delivery at exactly the moment when infrastructure investment needs to be accelerating.
For Developers: Why This Affects Your Projects Too
If you're developing residential or commercial projects in corridors served by federally funded road infrastructure, a reauthorization lapse affects you in at least three ways. Capacity improvements that were programmed to support growth in your corridor may be delayed or cancelled. Infrastructure impact fees in jurisdictions scrambling to fill federal funding gaps may increase to compensate. And state DOTs under funding pressure shift spending toward preservation of existing assets, away from capacity expansion that enables new development. Knowing where your corridor sits in the state TIP, and what federal funding it depends on, is increasingly important development planning information.
4. The Revenue Options on the Table
Every surface transportation reauthorization debate eventually comes back to the same question: how do you close the structural gap between what the Highway Trust Fund collects and what it spends? There are four substantive options that policy analysts, transportation researchers, and Congressional staff are actively discussing ahead of the September 2026 deadline.
| Revenue Option | Mechanism | Key Tradeoffs |
|---|---|---|
| Gas Tax Increase | Raise from 18.4 to 28 or 40+ cents/gallon; index to inflation | Immediate revenue impact; politically difficult; doesn't solve long-term EV erosion; 15-cent increase delays depletion to 2033 |
| Vehicle Miles Traveled (VMT) Tax | Charge all vehicles per mile traveled, regardless of fuel type | Technologically feasible via OBD data or GPS; privacy concerns; higher admin cost (5-13% vs. <1% for gas tax); more equitable across vehicle types |
| EV Registration Fees | One-time or annual fee on EVs and hybrids | Already enacted in many states; Fair SHARE Act proposed $1,000 EV fee, raising ~$49B over 10 years; doesn't close the full structural gap alone |
| General Fund Transfers | Continue borrowing from the General Fund as needed | Facile short-term fix; has worked nine times since 2008; compounds federal deficit; doesn't solve structural imbalance; CBO projects $340B HTF deficit 2027-2036 |
None of these options is politically clean. Raising the gas tax runs into anti-tax resistance. A VMT tax raises privacy concerns and administrative cost questions that haven't been resolved. EV fees address only part of the problem. General fund transfers work for another cycle but dig the fiscal hole deeper. The Bipartisan Policy Center and others have recommended indexing the gas tax to inflation as the most immediately practical step, combined with beginning a transition to a VMT-based system over the next authorization period. That approach doesn't solve everything, but it stops the bleeding while a longer-term solution is developed.
What's clear from CBO's analysis is that a 15-cent gas tax increase would delay HTF depletion to FY2033, buying Congress another reauthorization cycle to develop a more durable structural fix. Without any revenue action, the fund exhausts itself in FY2028, forcing either mid-cycle payment delays to state DOTs or another emergency general fund transfer at a scale that will be politically harder to pass than a straightforward gas tax adjustment.
5. The Reauthorization Debate: What Engineers Should Watch
AASHTO released its 2025 reauthorization policy priorities, emphasizing continued investment momentum, safety, resilience, and performance-based management. The National Association of Manufacturers has pushed Congress to pass surface transportation reauthorization before the September deadline, noting that highway and bridge construction is among the strongest components of the non-building construction sector right now, largely because IIJA funds are still flowing.
The debate will center on a few specific decision points that directly affect the engineering and construction industry.
Funding level: maintain IIJA levels or scale back
Maintaining IIJA-equivalent spending for a new five-year reauthorization would require approximately $156 billion in additional funding, per the Eno Center for Transportation's analysis. That's the cost of preserving the project pipeline at current scale. Scaling back to pre-IIJA levels would represent a roughly $28 billion annual reduction in highway authorizations, with direct consequences for state DOT program capacity and the engineering and contractor workload built on top of it. ASCE estimates that households save $700 per year if IIJA-level investment continues. The inverse is also true: if it doesn't, those savings evaporate and the deterioration cost re-accumulates.
Freight and freight network prioritization
The National Association of Manufacturers and freight industry groups are pushing hard for reauthorization to include affirmation of freight movement as a national goal under the Federal-Aid Highway Program. The freight network runs on roads and bridges that are heavily stressed by commercial truck traffic. Bridges rated for loads based on older design standards may be inadequate for modern freight volumes. The 22,420 bridges flagged by ASCE as susceptible to extreme weather are disproportionately on routes where freight movement is a primary function. Engineering firms working on bridge assessment, scour protection, and load rating will be directly affected by whether freight infrastructure remains a priority investment category.
Performance management and asset management requirements
The IIJA continued and expanded performance management requirements for state DOTs, including requirements to set and achieve targets for pavement condition, bridge condition, and system performance. The next reauthorization will determine whether those requirements are strengthened, maintained, or rolled back. From an engineering standpoint, strong performance management requirements are good: they create demand for rigorous condition assessments, drive capital programming toward data-informed decisions, and favor engineering firms that can support Transportation Asset Management Plans (TAMPs) and provide the condition data utilities and agencies need to justify investment.
6. What Happens If Congress Misses the Deadline
Surface transportation reauthorization has lapsed before. Between 1991 and 2005, Congress used a series of short-term extensions while negotiating each successive authorization bill. Between the FAST Act's expiration and IIJA passage, extensions kept the programs running. The pattern suggests that an outright lapse in federal surface transportation authority, with no extension at all, is unlikely. But extensions are not reauthorizations, and they carry their own costs.
A short-term extension, often called a continuing resolution for highway programs, typically maintains spending at the most recent authorized levels but doesn't allow for new program initiatives, doesn't restore programs that have been zeroed out, and doesn't provide the multi-year certainty that state DOTs need to plan complex capital programs. Engineering and design contracts get shorter. Multi-year programs get broken into smaller pieces that are more expensive to administer and less efficient to deliver. The workforce investment decisions that contractors and engineering firms make based on a stable long-term pipeline don't get made.
The worse scenario is an extension at significantly reduced funding levels, negotiated as part of a broader fiscal austerity push. CBO's February 2026 baseline shows an immediate $22 billion spending reduction from current levels would be needed to maintain highway account solvency without any revenue increase. An extension that cuts spending to match available HTF revenues, rather than supplementing revenues to match spending, would represent a sharp step down from IIJA-era investment levels.
Conclusion: Reauthorization Is an Engineering Policy Issue
Civil engineers tend to focus on the technical work: the design, the analysis, the construction management. Policy debates happen in Washington. But surface transportation reauthorization is one of the few policy debates that directly determines how much technical work gets done, in which categories, and at what funding levels. The HTF's structural insolvency, and the September 2026 authorization cliff, are engineering policy issues in the most literal sense.
The gas tax hasn't been raised since 1993. Vehicles are twice as efficient as they were then. Electric vehicles pay nothing into the system. Construction costs have tripled. The gap between what the fund collects and what the country needs to spend is structural, not cyclical, and it's been widening for 20 years. Nine emergency transfers totaling $275 billion have kept the patient alive, but they haven't treated the condition.
The reauthorization debate that happens between now and September 30, 2026 will set the terms of federal surface transportation investment for the next five to six years. It will determine the size of state DOT capital programs, the depth of the project pipeline flowing to engineering firms and contractors, and the pace at which America's road and bridge network either improves or slides back. Engineers and the firms that employ them have both a professional stake and a civic responsibility to understand what's at issue and make their voices heard in that debate.
The work we do depends on the funding that makes it possible. That funding is at stake.
