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Congressional Inaction on Road Funding Hits the States

Concerned that Congress won't find enough money for planned projects by summer, Arkansas and Tennessee have scaled back transportation work. Other states are pondering similar moves.

Around the country, state transportation leaders are marking their calendars for July, when federal money for highways and other transportation projects could dry up without congressional intervention.

In a handful of states, though, the day of reckoning is coming even sooner.

Tennessee has already scaled back its plans for the summer. It has an $8.5 billion backlog in projects, so its Transportation Department decided to stop engineering work on all new construction.

Tennessee uses cash on hand to pay for transportation projects and carries no debt for transportation purposes. But that means the state is trying to keep as much money in the bank as possible to get through the upcoming construction season, in case federal reimbursements slow down or get reduced.

“The last thing I want to do is not be prepared for a bad outcome out of Congress,” said Transportation Commissioner John Schroer.

Arkansas officials have also canceled 10 construction projects for this summer, citing the uncertainty of federal funding.

“As cash flow from the (federal) Highway Trust Fund slows down considerably, we decided that instead of beginning projects that we would have to stop, we would just not start them,” said Danny Straessle, a spokesman for the Arkansas State Highway and Transportation Department.

The 10 canceled projects would have cost the state $60 million. But the agency is still going ahead with 70 separate projects that will cost $130 million.

If federal reimbursements slow this summer, the state would have to stop work on projects until the state coffers were replenished.

Arkansas officials picked the projects to delay—including bridge replacements and highway widenings—based on how long they would take and how disruptive they would be if they were left uncompleted for long stretches of time, Straessle said.

Darin Bergquist, South Dakota’s transportation secretary, said his state must decide soon whether to shorten the list of projects it bids out this year. “We’ve waited and hoped about as long as we can,” he said.

Even states that are not adjusting their budgets yet are still taking measures to prepare for interruptions in federal funding, said Tennessee’s Schroer, who also heads a committee on finance and administration for the American Association of State Highway Transportation Officials.

States get reimbursed for the money they already spent, so they are likely to hurry up and turn in their paperwork as soon as they can to make sure they get their money before the Highway Trust Fund runs out of money, Schroer said.

The trust fund has been the federal government’s main source of money for transportation projects since the creation of the interstate highway system in 1956, but it has repeatedly run low on money in recent years. The federal gax tax, which is now 18.4 cents per gallon for gasoline and 24.4 cents per gallon of diesel, funds the Highway Trust Fund.

Because Congress has not raised the taxes since 1993, inflation has reduced the buying power of those revenues. At the same time, cars have become more fuel-efficient and Americans are no longer increasing their driving every year, as they had done for decades.

Efforts to find more money for transportation have been stymied on Capitol Hill, where tax increases are increasingly unpopular. The gas tax remains politically toxic, even though both labor and business groups support raising it.

President Obama has suggested creating a federal infrastructure bank; using savings generated by the winding down of the wars Iraq and Afghanistan wars; or closing corporate loopholes to generate money. None of those efforts have gained traction, either.

Instead, Congress used more than $53 billion in general funds to pay for transportation needs since 2009. 

The U.S. Department of Transportation predicts the trust fund will essentially run out of money as soon as July. If that happens, states could face long delays in their reimbursements.

But if states ask for their reimbursements early, the federal government could run out of surface transportation money even sooner, Schroer said.

The bigger question that looms over state budgets is how Congress will respond to the funding crisis. Tennessee’s road budget, for example, assumes that Congress keeps funding Tennessee at the same amount.

But state transportation officials worry restrictions placed on the Highway Trust Fund—it cannot run a negative balance or use additional borrowed funds—could cut off federal funding next year. 

Schroer prepared two budget plans so Tennessee legislators and Gov. Bill Haslam, a Republican, could see different scenarios. One showed the agency’s plans if federal funds remained level. The other showed the consequences if federal funding were eliminated.

A lot of (legislators) were taken aback as was, to some degree, our governor,” Schroer said.

Oregon Department of Transportation spokesman Dave Thompson said the prospect of zero federal funds next year is “a tremendous game changer.” 

In previous crises, Congress used general funds to backfill the transportation account. But federal lawmakers agreed not to do so again.

Oregon has not put off projects for this year, but its transportation planners are keeping a close eye on developments in Washington.

“We are absolutely worried,” he said. “How can we plan six years ahead if we don’t even know how much money we will be getting six months from now?”

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