Most Road Programs Safe From Sequester But Fallout Could Pose Risk to Trucking

This story appears in the Feb. 25 print edition of Transport Topics.

While most highway construction and safety programs that depend on federal funding will be protected from automatic budget cuts that will take effect March 1 unless Congress and President Obama reach an agreement, trucking could still face some risks.

If an agreement is not reached, some $85 billion in budget cuts, known as the “sequester,” will occur immediately. But under the 1985 law that allowed for the automatic cuts when budget deadlocks occur, trust funds supported by user fees are exempt from sequestration.

Therefore, the Highway Trust Fund money generated by fuel taxes and truck excise taxes — more than $40 billion a year — is protected from cuts.

However, Highway Trust Fund revenue has been lagging for years because of the proliferation of more fuel-efficient vehicles, forcing Congress to shore up the fund with transfers from the general fund.

It is unclear if that general fund money, about $9 billion a year, will be subject to sequestration.

“I think everyone’s still trying to figure that out,” said Darrin Roth, director of highway operations for American Trucking Associations.

But the Department of Treasury has said the general fund money for highways could be cut.

The larger threat to trucking, if sequestration does happen, could occur with the economic fallout from cuts to the Department of Defense, Roth said. Military funding is not protected from sequestration.

“If they cancel contracts for new ships and things like that, I guess that would affect carriers that supply those parts,” Roth said. “Obviously, the Pentagon budget is so big and it affects so many parts of the economy the impact will be pretty well felt across the spectrum.”

Even though core highway functions within the Department of Transportation — such as the operations of the Federal Motor Carrier Safety Administration — are protected via the Highway Trust Fund, DOT officials are bracing for cuts in discretionary programs and, possibly, to the general fund money contributed to the Highway Trust Fund.

“We will use any and all flexibilities we have to protect our core operations and mission,” DOT Deputy Secretary John Porcari said in a recent memo to employees.

“We are closely examining contracts, grants and other forms of expenditures across the department to determine where we can reduce costs,” he said, adding that worker furloughs are possible, depending on the severity of the cuts and how long they last.

Under the sequestration law, the cuts to government departments would not occur all at once but rather at scheduled intervals.

Programs run by the DOT that are not paid for with Highway Trust Fund money and are subject to sequestration include the grant program Transportation Investments Generating Economic Recovery, or TIGER.

The emergency relief program operated by the Federal Highway Administration would also be subject to the cuts, according to an analysis done by the American Association of State Highway and Transportation Officials.