Highway Trust Fund Is Nearly Out of Gas
Saturday, September 6, 2008
U.S. Transportation Secretary Mary Peters said the nation's highway trust fund will run out of money this month, which means that federal payments to states for construction projects could be cut.
Yesterday, Peters asked Congress to come up with an $8 billion infusion for the trust, a federal account used to help pay for highway and bridge projects. The House has already passed such legislation.
The trust has been hammered because its main source of funding is the gas tax, which has not been increased since the Clinton administration. The high cost of gasoline has resulted in less consumption and, therefore, fewer dollars flowing into the trust fund.
"Time and again, the president has warned Congress of the pending shortfall and submitted fiscally prudent budgets to close the gap," Peters said. "Americans cannot afford to have Congress play 'kick the can' with highway funding for another year, another month or, frankly, another week."
This month, the trust fund will take in $2.7 billion but will field requests for reimbursements totaling $4.4 billion, she said.
While waiting for Congress to act, the Department of Transportation will make payments to states weekly instead of twice daily, Peters said. In addition, the agency will make payments on a pro-rated basis, meaning that if the trust fund is only 80 percent full, payments will be reduced to 80 percent. The remainder of the reimbursements would be paid the next week. Any new projects would be funded on a prorated basis.
Maryland and Virginia transportation officials said the decision could have an impact on major road projects planned or underway.
"We build out highway projects by using state dollars and are reimbursed by federal dollars. If those are slowed or stopped, it means some of our projects could be slowed or stopped," Maryland Transportation Secretary John D. Porcari said.
Porcari said that Congress and the administration were playing "a giant game of chicken, and that is not good government."
Transportation officials said the move will not result in the wholesale cancellation of road projects, but could have a profound effect on future contracting and the reliability of the federal government as a partner. By delaying reimbursement payments, the federal government is essentially passing on the cost of interest to states.
Concern over the dwindling trust fund has been building. The Bush administration had opposed the $8 billion infusion because it would have come out of the general fund without corresponding cuts. Peters said the administration has reversed its opposition to the House plan because the situation has become so grim.
"What's especially shocking to the states is that they can't count on the federal government," said John Horsley, executive director of the American Association of State Highway and Transportation Officials. "It will worsen the financial crises many states are already facing, and it will delay or halt needed transportation projects and leave contractors and suppliers with IOUs instead of cash to pay their workers."
Unlike the sales tax, the federal gas tax is not based on a percentage. At 18.4 cents a gallon, the trust fund has not increased with the run-up in gasoline prices. And because Americans have been driving less -- the number of miles traveled has dropped more than 50 billion over the past eight months -- funding for the trust has fallen.
Peters warned Congress not to lard up highway legislation with earmarks for specific projects. She said the last transportation bill passed by Congress contained 6,000 earmarks totaling $24 billion.