Experts See Short-Term Fix as Highway Dollars Dwindle

This story appears in the April 21 print edition of Transport Topics.

With the Highway Trust Fund moving toward insolvency, transportation experts said they expect Congress to approve a short-term bill this summer to avoid delays for major highway projects.

Last week, the Department of Transportation estimated the fund will have a shortfall of $300 million by Aug. 29 and will dip to $700 million by the end of the fiscal year, Sept. 30.

As of March 28, the account had $8.4 billion, but there will be a sharp decline in June with the start of the summer construction season, DOT said.

Experts told Transport Topics that Congress likely will approve the transfer of as much as $10

billion for the fund to keep it operational. This infusion would give leaders time to produce a long-term bill that would reauthorize MAP-21, the current transportation funding law, which expires at the end of September, said Jack Basso, a consultant with Parsons Brinkerhoff.

“I don’t expect we’re going to pass a bill — I might be wrong; I hope I am on this one — before the [midterm] election. I just don’t see how that gets done,” Basso said.

MAP-21 approved the transfer of $9.7 billion from a general revenue fund into the account at the start of the fiscal year.

Since 2008, Congress has added $41 billion from general revenue funds to the highway account to prevent a shortfall.

“In everybody’s ideal world, we pass a long-term bill with long-term revenue this summer. . . . There’s still not any consensus for the best way to do that,” said Janet Kavinoky, executive director of transportation infrastructure at the U.S. Chamber of Commerce.

But Deron Lovaas, director of transportation policy at the Natural Resources Defense Council, cautioned that a problem with passing short-term legislative fixes is that they could hinder states’ ability to plan long term for projects that rely on federal funds.

The trust fund is designed to help states pay for infrastructure projects and, if it runs out of money, state agencies strapped for cash would find it difficult to cover the costs of certain highway projects essential for truckers and other users.

Arkansas already has canceled key projects partly because of funding uncertainties. Other states, such as California, Kentucky, Rhode Island and Utah, said they would halt large-scale construction projects if their federal aid were to shrink or stop, according to an analysis by the American Association of State Highway and Transportation Officials.

At a White House press conference April 17, President Obama called on Congress to pass an infrastructure bill. Doing so would fix “potholes the size of canyons” and create jobs, he said.

During a bus tour last week, Transportation Secretary Anthony Foxx warned that, as the fund dwindles, DOT could begin slowing payments to states. He also called on Congress to stop “kicking the can down the road” and find a long-term way to restore the fund (see story, p. 1).

On April 15, Sen. Patty Murray (D-Wash.), chairwoman of the Transportation, Housing and Urban Development and Related Agencies Appropriations Subcommittee, called on her colleagues to “address this looming crisis.”

Yet, there is little indication policymakers are near an agreement this year on a long-term funding stream for transportation projects or whether they would take up Obama’s $302 billion plan to boost the fund with savings from proposed changes in corporate tax laws.

At press time, Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, had not scheduled a date for her panel to take up a transportation bill that would address the trust fund. The same goes for Boxer’s counterpart in the House, Rep. Bill Shuster (R-Pa.), and the tax-writing committees that would have jurisdiction over ways to fill the fund’s shortfalls.

Darrin Roth, director of highway operations at American Trucking Associations, noted that “a long-term solution to the trust fund’s financial situation is necessary to avoid future crises and to give states the fiscal stability they need to fix our nation’s aging highways.”

Not doing so would “risk throwing thousands of people out of work, shelving hundreds of critical, lifesaving highway projects and sending the economy into a tailspin,” Roth said.

The fund relies on revenue from a fuel tax that has been unchanged for more than two decades. Companies have drastically improved the fuel efficiency of cars and trucks, reducing the amount of money that goes into the fund. Former Transportation Secretary Ray LaHood, the U.S. Chamber of Commerce, the freight-delivery sector and others support a higher tax, but Congress has little political will to raise it.

In December, Rep. Earl Blumenauer (D-Ore.) introduced legislation aimed at raising the tax to 33.3 cents per gallon from 18.4 cents by 2016, then have it indexed to inflation. The legislation lacks broad support.

“In a theoretical world devoid of politics, you probably want to increase the gas tax and then index it to inflation,” Lovaas said. “However, if you look at all the taxes people pay, I think it’s fair to say that the gas tax is one that most people are intimately familiar with and one that people hate the most.”