Transportation departments in some states are bracing themselves for staggering cuts to construction projects as the federal highway trust fund dries up and the Federal Highway Administration implements a rationing of reimbursements this week. The announcement exacerbated worries about the fund, which officials now expect to see at least a $3.1 billion shortfall by the end of fiscal 2009.
The U.S. Department of Transportation announced on Friday that the fund is already headed for a zero balance by the end of this month, and that the FHWA would begin paying reimbursements to states on an as-available, pro-rated basis to keep the fund balanced. The outlays will be made weekly instead of twice-daily.
The department on Friday urged Congress to pass legislation that would transfer $8 billion from the general fund into the transportation trust fund to keep it solvent through the end of fiscal 2009, when the current funding bill comes for reauthorization. The House passed such legislation before adjourning for summer recess, but the bill is still pending in the Senate Finance Committee.
Senate Majority Leader Harry Reid, D-Nev., said on the Senate floor yesterday that Senate Democrats "are willing to pass this today," and would move forward the Oct. 1 effective date. "I would hope that we can get my colleagues on the other side of the aisle to move forward by unanimous consent today to pass that," he said.
Gas tax revenues that have traditionally kept the trust fund solvent are in a period of steep decline as Americans respond to high gas prices by driving less. The federal tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel; it has not been increased since the 1990s.
States will see a total cut of more than $24.4 billion in the next fiscal year, unless the trust fund fix is implemented to pad the coffers until Congress can pass a transportation reauthorization, according to calculations by the Transportation Construction Coalition based on FHWA data. The total cut to funding would be 34%, and the resulting job losses were projected at about 380,000.
"We have been warning of the looming revenue shortfall for nearly two years," said Pete Ruane, president of the American Road and Transportation Builders Association, one of the coalition's co-chairs.
States projected to suffer the largest cuts in dollar amount are California, which was authorized for $3.24 billion in reimbursements this fiscal year, and Texas, which was authorized for $2.8 billion. Those and other states said the new weekly, pro-rated reimbursements could force them to delay or cancel transportation projects.
"This latest announcement from the U.S. Department of Transportation aggravates an already tight budget problem for California's transportation program," California Department of Transportation director Will Kempton said in a statement. "We had projected that the state budget impasse could impact ongoing transportation construction projects by October. However, delays in federal reimbursements could exacerbate this situation."
Chris Lippincott, of the Texas Department of Transportation, said the delayed reimbursements meant uncertainty for the state's construction projects, although he declined to specify projects that could potentially face funding cuts.
"If we don't have the money to pay our contractors the full amount, we won't be able to do that," he said in an interview. "The real lesson here is that the old ways of funding transportation in our country are literally crumbling beneath our feet."
Even New Hampshire, the third-lowest-funded state this fiscal year, may cut projects. Gov. John Lynch said in a statement Friday that rationing endangered the state's ability to "continue important highway work without delay or interruption."
The Missouri Department of Transportation warned of delays or cancellations of a minimum of $252 million worth of projects this calendar year.
Georgia transportation officials "haven't made a final determination" on the rationing's immediate or long-term effects, according to spokesman David Spear.
"We have a lot of expensive projects under way now that are incurring costs, and we're certainly going to need those revenues to make payments," he said. The projects include $390 million of resurfacing and bridge replacement on Interstate 85 southwest of Atlanta and on Interstate 95 near Brunswick, "which is a very important hurricane evacuation route," Spear said.
The Illinois DOT is not expecting an immediate impact - at least not this week or next week - said spokesman Mike Claffey, noting that it's near the end of construction season. The widening of Interstate 55 in Will County is one of the state's biggest projects, but it is expected to be completed in October, so officials "hope that it would not be" impacted by the federal funding dilemma, he said.