The Obama administration is outlining the steps it will take if the Highway Trust Fund runs out of funds, a doomsday scenario that looms just weeks away.
Since April, the U.S. Department of Transportation has warned that the trust used to fund state transportation projects is running out of money. Unless Congress takes action to replenish the Highway Trust Fund, the administration expects that it will be exhausted by the end of August.
Today, according to the Huffington Post's Sam Stein, Department of Transportation Secretary Anthony Foxx outlined the drastic measures that the administration will be forced to take if Congress does nothing.
“This cliff is coming," Foxx said, according to the report. "I’ve been saying it for six months and I’m worried that we may find ourselves running over it."
DOT authorities predict a shortfall for the Highway Trust Fund—which was established in 1956 to finance the U.S. Interstate Highway System—to manifest in the last days of August. Before that happens, DOT will implement a "cash management plan" to parcel out federal reimbursements for state outlays, starting Aug. 1.
In letters to state transit department chiefs, Sec. Foxx outlined out that this procedure will affect funding for two of the three Highway Trust Fund accounts: the Highway Account and the smaller Mass Transit Account. (The third account is called the Leaking Underground Storage Tank Trust Fund.)
"As I stated in my June 19 letter, the Department will continue to take every possible measure to fully reimburse your State for as long as we can," reads Sec. Foxx's letter to the states regarding the Highway Account. "However, as we approach insolvency, the Department will be forced to limit payments to manage the reduced levels of cash available in the Trust Fund."
Under the new dispensation, DOT will reallocate revenue it receives from the federal gas tax to the states in payments every two weeks. The semi-monthly cash management-plan payments will be distributed in proportion to each state's federal apportionment for the fiscal year. The state shares are outlined in a table on the DOT site.
The news is slightly less grim for the Mass Transit Account—or more ambiguous, anyway. DOT hasn't yet implemented a cash-management plan for mass-transit reimbursements. But Sec. Foxx's letter to the states on the Mass Transit Account notes that disaster on that front is merely delayed: This account is predicted to reach a crisis point in October.
Congress can take action at any time to avoid the transit cliff and keep payments to the states moving on time. In February, the Obama administration outlined a four-year, $302 billion transportation reauthorization proposal. In April, the administration sent the plan to Congress. But neither lawmakers nor administration officials have shown great enthusiasm for raising federal gas taxes—now, or at any point since 1993.
In fact, the Obama administration's proposal adds $150 billion to transportation spending by closing corporate loopholes and other measures aimed at business taxes. The proposal would also relax restrictions on the tolls that states can apply to federal interstates and raise the cap on fines for automaker safety violations. (The feds fined GM the maximum $35 million over its horrifying recall scandal; under the current proposal, that cap figure would rise to $300 million.)
Senators Chris Murphy (D-Conn.) and Bob Corker (R-Tenn.) proposed a 12-cent gas-tax hike last month, which would raise $164 billion; the bill would be coupled with corporate tax breaks to offset the tax increase. Even the U.S. Chamber of Commerce supports a hike in the gas tax. But the Huffington Post's Sam Stein and Ryan Grim reported in June that the administration wouldn't back a gas-tax increase.
Any solution will need to pass the House of Representatives, whose own plan for funding DOT involves shuttering Saturday deliveries by the U.S. Postal Service—a plan that critics described as "unworkable" and "bad transportation policy."
The Congressional Budget Office estimates that DOT would require $8.1 billion to meet its obligations through Dec. 31. A spending solution that moved the deadline to the end of the year would push it past the November midterm elections, after which solutions like gas-tax increases might stand a chance. Senate Finance Committee Chairman Ron Wyden (D-Ore.) supports a $9 billion bill that would do exactly that: kick the ball down the road.
But the damage may be done already: Even if construction projects aren't suspended in the middle of the summer construction season, states may be reluctant to launch big transportation infrastructure projects—especially since states depend overwhelmingly on federal funds for transportation spending. If the funding stream is shaky, the infrastructure planning will be, too.