State Transportation Projects and the Federal Highway Trust Fund

By Justin Fisk, Washington, D.C., Office
Congress voted last week to approve a three-month extension of spending authority for federal surface transportation programs that also replenishes the Highway Trust Fund through mid-December with an $8 billion cash infusion.
Despite averting a July 31 deadline after which the U.S. Department of Transportation had said it would stop authorizing payments to states for work on transportation projects, lawmakers failed to come up with a longer-term solution before the start of their August recess. Further negotiations will have to be postponed until the fall, leaving states in the same uncertain position they’ve been in for much of the past six years.
The lack of long-term transportation legislation has been preventing states and contractors from planning infrastructure projects that can take months and even years to complete. Already, states have canceled or postponed projects worth millions of dollars.
The Highway Trust Fund is a major source of funds for infrastructure in America. Though state departments of transportation administer most infrastructure projects within their state, the federal government helps fund these projects through the Highway Trust Fund.
The highway fund receives money primarily from the federal fuel tax, which has remained at 18.34 cents on gasoline and 24.4 cents on diesel since 1993. Due to increased fuel efficiency in vehicles and inflation, the fund has been facing a financial shortfall for years.
Since 2009, Congress has passed more than 30 short-term funding measures. Approval of the latest three-month extension followed House passage of a five-month measure and Senate passage of a six-year measure known as the DRIVE Act. Senate Majority Leader Mitch McConnell of Kentucky—who had been pushing for the long-term legislation, which he negotiated with Democratic U.S. Sen. Barbara Boxer of California—declined to consider the five-month patch. A two-month bill also was nixed. Senate leaders hope the three-month extension will allow the House enough time to consider, and possibly pass, the long-term legislation.
Without a long-term fix, the Congressional Budget Office estimates that the Highway Trust Fund will face a deficit exceeding $120 billion over the course of 10 years.
There are many ideas about how to fix the trust fund floating through the halls of Congress. One proposal, advocated by President Obama, would impose a one-time tax of 14 percent on companies’ overseas profits, estimated to bring in about $2 trillion. Republican leadership has been open to this as long as it is part of a comprehensive tax reform plan.
Another proposal is to raise the gas tax, while indexing the new rate to inflation. Republican Sen. Bob Corker of Tennessee and Democratic Sen. Chris Murphy of Connecticut have proposed raising the gas tax by 12 cents, phased in over a two-year period. But there appears to be little support on either side of the aisle for raising taxes and the Senate’s DRIVE Act would rely mostly on transfers from the general fund made possible by a variety of budget offsets, including controversial tax tweaks unrelated to transportation.
Without a long-term solution, states will continue canceling or postponing infrastructure projects. According to the Arkansas State Highway and Transportation Department, federal uncertainty forced state officials to withdraw 75 construction projects scheduled for bid openings this year worth more than $335 million.
 
“If you stop and think about the economic impact this has—not only on construction jobs, but the lost commerce that results in each local area because construction isn’t taking place—then you begin to understand the trickle-down effect and the urgency of solving this national problem,” said Scott Bennett, director of the Arkansas State Highway and Transportation Department. “The reality is that over $160 million has not found its way into our state’s economy this year.”
Tennessee was the first state to announce last fall that they would delay projects in 2015 to the tune of $400 million.
In Kentucky, the state has designated 79 bridges needing replacements and about 25 projects that would rebuild, relocate or widen roadways. Juva Barber, president of Kentuckians for Better Transportation is urging Congress to pass long-term funding for the Highway Trust Fund as “preparation for construction begins months in advance of construction itself.”
 Congress will be on August recess for the next several weeks. When they return , they’ll have a short time either to develop and pass a long-term solution or at least to further extend the life of what many states continue to see as an essential contributor to transportation funding—the Highway Trust Fund.
 
 

 

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