Road Fund to Run Out of Cash by August, LaHood Warns

This story appears in the June 8 print edition of Transport Topics.

WASHINGTON — The Highway Trust Fund, which got an emergency $8 billion cash injection from Congress last summer, is likely to run out of money in the next two months, the Obama administration said last week.

Legislators and the Transportation Department said  the United States probably would need $13 billion to $17 billion to get the trust fund through the next two years, but a congressional staffer said it was more important to address the upcoming highway reauthorization than any trust fund deficit.

Transportation secretary Ray La-Hood  told a House appropriations subcommittee June 4 that the country remains “at risk for another cash shortfall, probably by mid-August,” and that DOT was “working on a plan.”

During a hearing June 2, Sens. Barbara Boxer (D-Calif.) and James Inhofe (R-Okla.) said administration officials told Congress the fund will need billions of dollars before August if states are to continue receiving federal money for road and bridge projects.

Boxer, chairwoman of the Environment and Public Works Committee, said during the confirmation hearing for Victor Mendez to head the Federal Highway Administration that administration officials warned “the Highway Trust Fund is estimated to have insufficient cash by August of this year to make good on prior commitments.”

Specifically, Boxer said she was told that the fund would need between $5 billion and $7 billion to keep it afloat through the end of the current fiscal year.

Inhofe said that besides the “infusion of $5 billion to $7 billion to get through the rest of fiscal year 2009, an additional $8 to $10 billion will be required in 2010.”

DOT spokeswoman Sasha Johnson confirmed the senators’ figures and said addressing the shortfall was “the number one priority for us.”

“We know that it is an issue and we absolutely want to make sure that states have the resources they need to maintain roads and highways,” Johnson said.

The shortfall was announced less than nine months after Congress authorized transferring more than $8 billion from the Treasury’s general fund to the depleted trust fund, which has been battered by a drop in revenue as Americans drive less, coupled with the planned drawdown of cash in the fund called for in existing highway legislation (click here for previous story).

Mendez said one of the key differences between the current situation and the crisis last summer was the way the Obama administration is handling it.

“One of the issues that we faced last year was . . . we were basically notified at pretty much the last minute,” said Mendez, who was head of the Arizona Department of Transportation until February.

Last year, the Bush administration insisted the crisis could be solved by transferring funds from transit projects to highway projects and using unspent money from previous earmarks, but then the White House changed course just weeks before the fund was to be exhausted and said Congress needed to authorize a transfer that the administration and Congress previously had resisted.

“Early notification is indeed very important,” Mendez said, because it “provides states the opportunity to prepare themselves in case there is the shortfall that is expected in the summer months.”

If the fund were exhausted, the federal government would have to stop payments to states covering the cost of long-planned transportation projects.

Pierce Homer, secretary of transportation in Virginia, told Transport Topics at a finance conference in Washington that any cuts would have “enormous consequences for every federal aid project. . . . Your average interchange improvement, widening, major redecking of a bridge . . . are all reliant on timely federal reimbursements to make the process work.”

“It’s our hope that Congress will find a way to plug that gap, but it is a substantial gap,” David Wresinski, administrator of the Project Planning Division of Bureau of Transportation Planning in Michigan, told TT at the same conference.

Jim Berard, spokesman for Rep. James Oberstar (D-Minn.), chairman of the Transportation and Infrastructure Committee, said Congress would move to fix the hole if needed, but the committee’s attention was elsewhere.

“We’re just wrapped up in the highway bill now, but if it appears that there is a need to do something legislatively, we will certainly get into it,” he said.

LaHood said the administration “believe[d] strongly that any trust fund fix must be paid for . . . [and] tied to reform of the federal highway program.”

The trust fund woes, Berard said, ratchet up the pressure on Congress to move forward with a new highway bill before the Sept. 30 expiration of the current legislation, especially since “Oberstar does not want to do any extensions.”

A Senate staffer, who asked not to be identified, said Congress would “have to” do something to protect the trust fund.

“We have to protect contract authority for states to do long-term planning,” the staffer said.

If the fund were to disappear, highway funding would be subject to year-to-year appropriations, a process the staffer said would hurt transportation funding.

“Just like with the stimulus bill,” the staffer said, “transportation would come after things like energy, defense and other programs.”

Staff Reporter Michele Fuetsch contributed to this story.