Transportation sector leaders and the credit ratings agencies are tracking progress on the surface transportation reauthorization bill that will replace the Infrastructure Investment and Jobs Act and determine the flow of billions of dollars.
"Outlooks for most of our infrastructure sectors in 2026 are all stable," said Baye Larsen, vice president and senior credit officer for Moody's Ratings.
"That's looking at toll roads, transit, airports, water, and sewer. Two exceptions, we have the port sector, our outlook is negative, and that's largely due to some of the uncertainty and influences around tariffs and public power is actually positive because of increased demand."
The comments came during a panel discussion hosted by the Volcker Alliance on Thursday.
Moody's is hedging its stable outlooks with concerns about the expanding trend of states
"We have some states that are already exploring gas tax holidays, which would reduce a key funding source for a lot of highway and transit projects," said Larsen. "Over the long run, that can increase costs for some systems, particularly transit systems that are still running diesel trains or buses."
Getting the surface transportation reauthorization passed before funding expires Sept. 30 will require a team effort between the House Transportation and Infrastructure Committee and input from four Senate Committees.
Rep. Sam Graves R-Mo., chair of the House Transportation and Infrastructure Committee, has talked about rolling that committee's version of the bill out in April in an effort to get it passed by the end of the fiscal year.
Temporary extensions may be in the cards already.
"History suggests that there will be multiple short-term extensions," said Larsen. We expect to see that again this year, we've got midterms coming up, growing political polarization, sensitivities around the federal deficit, so this probably won't be quick."
If the deadline is blown, the construction industry expects to remain busy, whatever the outcome.
"Those IIJA dollars do not stop on September 30," said Lauren Schapker, vice president of the American Road & Transportation Builders Association.
"They are going to be working through that construction pipeline over the next several years. We commissioned a study through IHS Markit that estimates about 40% of the spend out is going to be occurring after September 30 of this year."
The troubled financial condition of the Highway Trust Fund continues to inspire solutions that include charging nationwide user fees on electric vehicles, adding tolls to interstate highways and leveraging investment from the private sector.
"It's hard to compete with the tax-exempt muni market," said Larsen. That ends up being really the most affordable option for a lot of states and local governments."
"We have seen some increase in the P3 availability payment model, but that doesn't really alleviate the funding pressures for states and local governments."
The Trump administration is leaning into the notion of assigning more federal dollars to the states via formula funding which puts smaller municipalities last in line.
"Federal funding really didn't get to the county level," said Eryn Hurley, chief government affairs officer for the National Association of Counties.
According to NACo's numbers, counties own 44% of the nation's roads and 38% of the bridges but only receives 14% of federal formula transportation dollars.
The current administration has also stopped, delayed, and challenged already approved infrastructure spending, especially related to public transit, which has also caught the attention of the ratings agencies.
KBRA has published a
"The federal pause on previously committed mass transit funding introduces a multitude of challenges for issuers. Some issuers may need to consider legal action to compel the release of funds under these binding agreements," said KBRA.
