With highway fund running dry, DOT and Congress look for revenue

McClatchy Washington BureauJuly 1, 2014 

— The U.S. Department of Transportation said Tuesday that it would start limiting payments to states for road and transit projects next month in an attempt to conserve the federal Highway Trust Fund’s rapidly diminishing cash balance.

Usually, the department reimburses states for transportation projects upon request. But beginning Aug. 1, the states will have to live paycheck to paycheck, receiving funds only once every two weeks as money is collected through federal gasoline taxes.

The move may put pressure on Congress to approve at least a short-term fix before its August break begins. The DOT estimates that the highway fund will hit zero in late August, potentially idling several hundred thousand workers as midterm elections loom in the fall.

Transportation Secretary Anthony Foxx wrote his state counterparts Tuesday that they would see, on average, a 28 percent reduction in funds.

“Depending on how they manage the funds, each state will feel the effects differently, but everyone will feel the impact sooner or later,” he wrote.

Congress has only 16 working days to reach an agreement before the August recess. Finding even a short-term solution might prove difficult. Last week, the Senate Finance Committee attempted to move forward with a $9 billion proposal to restore the highway fund through year’s end.

“I hope to see the committee take decisive bipartisan action and send a clear message that stabilizing the Highway Trust Fund is a priority now,” said Sen. Ron Wyden, D-Ore., the committee’s chairman.

But Wyden’s plan went nowhere after Republicans said it wasn’t bipartisan enough.

“I am disappointed that the Senate appears to be heading down a partisan road on highway funding,” Rep. Dave Camp, R-Mich., the chairman of the House Ways and Means Committee, said in a statement last week.

Since the Interstate Highway System was created in 1956, a per-gallon tax on motor fuels has supported federal spending on transportation. The tax has been stuck at 18.4 cents for gasoline and 24.4 cents for diesel since 1993, and it’s lost its buying power to inflation.

Since 2008, federal transportation spending has exceeded the balance of the trust fund, and Congress has avoided the gas tax debate by transferring more than $50 billion from the federal treasury to keep it afloat. While some lawmakers say they don’t want to resort to that approach again, they may have no other options if they can’t reach an agreement.

Republicans want the general-fund transfers to be offset with spending reductions elsewhere, but Congress is running out of offsets. A proposal that Republicans in the House of Representatives circulated last month to pay for a patch in the highway fund by cutting back Saturday mail delivery went nowhere.

Groups that represent business, construction, labor and trucking have been pushing to increase the federal gasoline tax. Last month, Sens. Christopher Murphy, a Connecticut Democrat, and Bob Corker, a Tennessee Republican, offered a bill that would raise the tax by 12 cents a gallon.

But President Barack Obama has never endorsed a gas tax increase, and conservative House Republicans are all but assured to oppose one. Obama favors closing corporate tax loopholes to shore up the highway fund, but his plan hasn’t attracted much support on Capitol Hill.

While spokesman Josh Earnest said Tuesday that the administration had “a sense of urgency” to make sure the fund didn’t go broke, he added that it’s up to Congress, not the president, to prevent that from happening.

“The president is hopeful that Congress will take action on that,” Earnest said.

Congress risks repeating what happened three years ago when it went home without reauthorizing the Federal Aviation Administration. For two weeks in the summer of 2011, the FAA lost its authority to collect taxes, costing $250 million in revenue that supports airport runway construction projects. The agency had to furlough almost 4,000 employees, including air traffic controllers.

Public outrage led Congress to enact a temporary fix. The impact of letting the Highway Trust Fund reach a zero balance could be even greater, according to some industry groups.

“The jobs impact would be worse,” said Darrin Roth, the director of highway operations at the American Trucking Associations. “This funds so many more projects and programs.”

Lesley Clark contributed to this article.

Email: ctate@mcclatchydc.com; Twitter: @tatecurtis

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