Congress Refills Highway Fund

By Sean McNally, Senior Reporter

This story appears in the Sept. 15 print edition of Transport Topics.

Congress, after an abrupt about-face by the Bush administration, moved quickly last week to transfer more than $8 billion into the Highway Trust Fund to keep the road-building finance program solvent.

In a Sept. 10 voice vote, the Senate approved a slightly modified bill the House had passed in late July that would transfer $8.017 billion from the U.S. Treasury’s general fund to the Highway Trust Fund, and reverse a 1998 transfer of the same amount (8-4, p. 4).

The House on Sept. 11 passed the revised bill by a 376-29 vote, which would become effective immediately after President Bush signs it. The administration had earlier opposed the transfer, saying the president would veto the bill and pushed instead to shift money from the trust fund’s transit account. The administration reversed course earlier this month and said Bush would sign it.

Fears about the trust fund’s health were spurred by the Transportation Department’s Sept. 5 announcement that the fund could be out of cash by the end of September. As a result, states prepared for sharp cutbacks in federal highway funding and trimmed projects from their budgets.

“We were perilously close to having a shortfall in the Highway Trust Fund, which would have resulted in slowing down contracts on repairing bridges, building highways, et cetera,” said Sen. Barbara Boxer (D-Calif.), chairwoman of the Senate Environment and Public Works Committee. She said the Senate has attempted six times to shore up the fund, “but until now, my Republican friends on the other side of the aisle have put up roadblocks and filibustered us.”

“We’re pleased to see that the administration and Congress recognize the significant need to sustain the nation’s infrastructure, which is a vital link to the health of the

U.S. economy,” said Bill Graves, president of American Trucking Associations. “Restoring these critical funds is an important step in solving the complex problem of funding our transportation network.”

The issue was reignited Sept. 5 when Transportation Secretary Mary Peters announced that the highway account within the Highway Trust Fund “will not have cash available to reimburse state highway expenditures — not at some point in the distant future but as soon as this month.”

“At current spending rates, we will start the new fiscal year on Oct. 1 with a zero balance in the trust fund and will continue to spend more than we take in,” Peters said.

The situation, which has been known about since the current highway legislation was signed in 2005, was exacerbated this year by precipitous declines in the miles traveled by American motorists, which has reduced gas-tax revenue, Peters said.

Peters said Congress should pass legislation to shift funds in the trust fund by the end of the week, a sharp departure from the administration’s previous position.

“Make no mistake. This is far from an ideal solution. Taking money from other pressing national priorities to plug a hole caused by poor fiscal discipline sets a dangerous and disturbing precedent,” Peters said. “But the state of the Highway Trust Fund has now moved from a theoretical to a practical problem, and states should not have to suffer the consequences.”

Peters, as well as Senate Republicans, blamed the shortfall on $24.2 billion in earmarked spending in the current highway legislation.

The 2005 highway bill, passed when Republicans had majorities in both the House and Senate, contained nearly 7,000 individual projects, called earmarks, requested by members of Congress.

The Senate passed the measure only after a small group — Sens. Judd Gregg (R-N.H.), Jim DeMint (R-S.C.) and Tom Coburn (R-Okla.) — agreed to drop their objections. The three had blocked the vote, saying wasteful spending was to blame for the trust fund’s predicament and that the money needed to shore up the fund should come from reductions in earmarks.

“Our nation’s highway funds have run out because Congress spent billions on earmarks and blocked energy exploration, which has needlessly raised the cost of gasoline,” DeMint said in a Sept. 8 statement.

In addition to the funds transfer, Peters said the federal government was taking additional steps “designed to stretch out revenues and allow us to continue making highway payments to states on a fair and equitable basis.”

Starting on Sept. 8, the Federal Highway Administration began “making reimbursements to states on a weekly basis, instead of the twice-daily cash reimbursements we make today.”

Those payments, she said, are now being made “on a prorated basis.”

“If, for example, the Highway Administration only has funds available in the highway account to cover 80% of the requests we receive, they will pay only 80% of each.”

The proposed cutbacks led to states’ announcing cuts in their transportation plans. For instance, Arizona officials said work would stop on six projects, including the widening of State Routes 93 and 85, pending a fix in the federal trust fund.

“Our nation’s inability to rethink transportation and implement sustainable funding solutions has created this immediate crisis,” said Victor Mendez, director of the Arizona Department of Transportation and past president of the American Association of State Highway and Transportation Officials. It has been no secret that the trust fund was nearing insolvency, but a deficit of leadership is to blame.”

Maryland officials last week announced changes to their state’s transportation plan, which they said would be exacerbated by the federal funding issues.

“Think of it as their cash-flow problems becomes our cash-flow problem, immediately,” Maryland Transportation Secretary John Porcari said.