Auditor: Funding Shortfall Could Halt Transportation Projects

With the Highway Trust Fund depleted, federal payments to states could be delayed.

OAKLAND, CA - JULY 26: A traffic signal is seen near a half-completed 236-foot FAA control tower at Oakland International Airport on July 26, 2011 in Oakland, California. Construction crews working on a new FAA air traffic control tower at Oakland International Airport were told last Friday to stop working after the U.S. House of Representatives refused to reauthorize routine funding of the FAA, resulting in 4,000 FAA employees being furloughed and nearly $2.5 billion in airport construction jobs being halted. Air traffic controllers are not being affected. (Photo by Justin Sullivan/Getty Images)
National Journal
Billy House
May 6, 2014, 8:27 a.m.

The na­tion’s High­way Trust Fund is al­most dried up, fed­er­al pay­ments to states for trans­port­a­tion pro­jects start­ing this sum­mer will have to be delayed, and law­makers have just three op­tions to deal with the pro­jec­ted short­falls, a top con­gres­sion­al aud­it­or test­i­fied on Tues­day.

Law­makers could de­cide to cut prom­ised spend­ing to deal with pro­jec­ted high­way short­falls, mean­ing that no new ob­lig­a­tions from the fund’s high­way ac­count or its ac­count for trans­it pro­jects would be made in fisc­al 2015. They could also raise rev­en­ues for the high­way fund, such as hik­ing taxes on mo­tor fuels or im­pos­ing new tolls on high­way users.

Or law­makers could con­tin­ue to trans­fer “sup­ple­ment­al amounts” from the fed­er­al budget’s gen­er­al fund, which would have to be paid for by re­du­cing spend­ing on oth­er pro­grams or in­creas­ing taxes, to avoid adding to de­fi­cits and in­creas­ing fed­er­al bor­row­ing.

Per­haps some com­bin­a­tion of these three ap­proaches also could be un­der­taken, said Joseph Kile, the as­sist­ant dir­ect­or for mi­croe­co­nom­ics stud­ies at the Con­gres­sion­al Budget Of­fice, in his testi­mony sub­mit­ted to the Sen­ate Fin­ance Com­mit­tee. But he left no doubt that the situ­ation is dire.

Most spend­ing for trans­port­a­tion and in­fra­struc­ture pro­jects comes from state and loc­al gov­ern­ments, with about one-quarter com­ing from the fed­er­al gov­ern­ment, primar­ily through the High­way Trust Fund. Na­tion­wide, gov­ern­ments at vari­ous levels spent a total of about $156 bil­lion to build, op­er­ate, and main­tain high­ways in 2013, and spent an­oth­er $60 bil­lion on mass-trans­it sys­tems.

But with its cur­rent rev­en­ue sources, Kile warned, the fed­er­al High­way Trust Fund can­not sup­port spend­ing at the cur­rent rate. He said the fund will not be able to meet all of its ob­lig­a­tions through the next fisc­al year, which be­gins Oct. 1.

How has this happened? For dec­ades, the trust fund’s bal­ances were stable or grow­ing. But Kile said, more re­cently, an­nu­al spend­ing for high­ways and trans­it has ex­ceeded the rev­en­ues earned from taxes col­lec­ted on gas­ol­ine, dies­el fuel, and oth­er trans­port­a­tion-re­lated products and activ­it­ies. In fact, since 2008, he said, law­makers have trans­ferred $54 bil­lion from the U.S. Treas­ury’s gen­er­al fund to the High­way Trust Fund so it could meet its ob­lig­a­tions in a timely man­ner.

Kile said CBO es­tim­ates that, by the end of fisc­al 2014, the bal­ance in the trust fund’s high­way ac­count will fall to about $2 bil­lion and the bal­ance in its trans­it ac­count will be only $1 bil­lion.

Planned spend­ing for high­ways and trans­it will be $45 bil­lion and $8 bil­lion, re­spect­ively. By com­par­is­on, rev­en­ues col­lec­ted for those pur­poses are pro­jec­ted to be $33 bil­lion and $5 bil­lion, re­spect­ively. As a res­ult, the Trans­port­a­tion De­part­ment has in­dic­ated it likely will need to delay pay­ments to states at some point dur­ing the sum­mer of 2014 in or­der to keep the fund’s bal­ance above zero, as re­quired by law.

Sen­ate Fin­ance Com­mit­tee Chair­man Ron Wyden of Ore­gon said at the same hear­ing that one study shows that as many as 6,000 pro­jects could grind to a halt, put­ting thou­sands of con­struc­tion work­ers out of their jobs and caus­ing traffic “mi­graines” across the coun­try.

He said it’s go­ing to take $100 bil­lion just to keep the trust fund solvent for six more years. He said the ideas offered by law­makers over the last few months, such as new tolls on ex­ist­ing roads or char­ging mo­tor­ists based on the num­ber of miles they drive, “raise ques­tions about pri­vacy and feas­ib­il­ity that will need to be answered.”

Tem­por­ary fixes are not the an­swer, Wyden said.

“Re­ly­ing on short-term policies, emer­gency patches, and tem­por­ary ex­ten­sions makes for­ward-look­ing strategies im­possible,” he said, “and when it comes to in­fra­struc­ture, plan­ning ahead is ab­so­lutely es­sen­tial.” 

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