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DOT Cuts Set as Highway Fund Fades

Thursday, July 3, 2014

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The U.S. transportation chickens are coming home to roost, carrying a plan to start cutting federal aid to every state—and soon.

The months-long warning that the federal Highway Trust Fund would go broke by the end of August is about to become reality unless Congress acts quickly to pass a financing fix, President Obama and Transportation Secretary Anthony Foxx announced this week.

On Tuesday (July 1), Foxx sent letters to state transportation departments and transit agencies, announcing a new DOT plan to address the shortfall by providing less money, less often.

The plan will leave states with decreased reimbursements in two-week increments, versus the same-day payments they are used to receiving.

Highway Trust Fund
© iStock / dan_prat

The DOT expects the Highway Trust Fund to be insolvent by the end of August. States will start feeling the pinch Aug. 1.

"There is still time for Congress to act on a long-term solution," Foxx said. "Our transportation infrastructure is too essential to suffer continued neglect, and I hope Congress will avert this crisis before it is too late."

'Critical Point'

Foxx announced in January that the Highway Trust Fund would be broke by August, and the DOT has provided taxpayers with monthly updates on exactly how much money is left.

The most recent projections show the shortall will "reach a critical point" in just a few weeks.

With the account expected to become insolvent within two months, the DOT said it would implement a plan starting Aug. 1 to manage the flow of federal dollars.

Under the plan, states seeking reimbursements for infrastructure work will be limited to the available cash in the Trust Fund. The DOT said it will distribute what's left in the fund in proportion to each state's previously determined federal formula.

This approach "is intended to allow state departments of transportation to direct available cash to what they determine to be the highest transportation priorities and choose which projects receive reimbursement," the DOT explained.

New revenues from the gas tax will be added into the account every two weeks.

4-Year Funding

U.S. officials have long made the case that the nation lags others in its support for infrastructure and that improvements are essential to U.S. global competitiveness.

Official White House photo by Chuck Kennedy

President Obama and Transportation Secretary Anthony Foxx called on Congress this week to work quickly on approving a transportation reauthorization budget.

"We spend significantly less as a portion of our economy than China does, than Germany does, than just about every other advanced country," Obama said Tuesday in a speech backdropped by the Francis Scott Key Bridge in Washington, D.C.

"They know something that I guess we don't, which is that's the path to growth, that's the path to competitiveness."

Obama proposed a $302 billion, four-year surface transportation reauthorization budget in February. He said the proposal would help rebuild infrastructure in a "more responsible way" by doing it over four years, instead of in short-term increments.

In addition to long-term investments, the bill would also take care of the funding gap that looms as the current transportation bill, MAP-21, gets ready to expire Oct. 1.

"It's not crazy, it's not socialism. It's not the imperial presidency—no laws are broken," Obama said. "We're just building roads and bridges like we've been doing for the last, I don't know, 50, 100 years."

12 Needs

Foxx unveiled his fleshed-out version of Obama's bill in April, calling it the GROW AMERICA Act (an acronym for Generating Renewal, Opportunity, and Work with Accelerated Mobility, Efficiency, and Rebuilding of Infrastructure and Communities throughout America).

According to Foxx, GROW AMERICA addresses what the DOT calls "12 critical transportation needs." The plan is built on precepts and priorities that have previously drawn bipartisan support, he says.

But the proposed bill has moved about as quickly as rush-hour traffic on one of the country's outdated, congested highway systems.

White House infographic

"We spend significantly less as a portion of our economy than China does, than Germany does, than just about every other advanced country," Obama said Tuesday at the Key Bridge in Washington, D.C.

Meanwhile, several other plans are also floating around Congress. House Ways and Means Committee Chairman Dave Camp (R-MI) and Senate Finance Committee Chairman Ron Wyden (D-OR) are both working on their own plans to address the Highway Trust Fund through the end of the year.

Sens. Bob Corker (R-TN) and Chris Murphy (D-CT) have suggested a slow increase of the gas tax, offset by unrelated tax-cut extensions.

Last fall, Rep. Tom Graves (R-GA) and Sen. Mike Lee (R-UT) proposed legislation that would phase out federal funding of transportation projects; drastically slash gasoline taxes; and allow individual states to decide how, when, what and where to build transportation infrastructure.


Tagged categories: Bridges; Department of Transportation (DOT); Federal Highway Administration (FHWA); Funding; Government; President Obama; Program/Project Management; Roads/Highways

Comment from Lee Steinbrecher, (7/3/2014, 8:33 AM)

There are reasons that the Federal Government runs out of money. For example in Minnesota in the past 5 years the Feds have provided funds for 2 lite rail projects that provide limited transportation at the cost of $2 Billion.

Comment from Karen Fischer, (7/3/2014, 9:58 AM)

Yes, Lee, and let's not forget all the similar "Bridges to nowhere" type contracts. Highway Spending is more about getting politicians elected and less about highway maintenance.

Comment from Andrew Piedl, (7/3/2014, 12:48 PM)

I believe it is a good thing to reduce spending on highways. Good for Minnesota. To keep building more roads is a highway to nowhere (just pull off of any interstate exit and look at the sprawl). Spend more on mass transit and bike lanes. The government subsidizes about 80% of your car ride, and about 20% of my train trip. I bet I'm in better shape than most of you, so now I'm paying for your health care too.

Comment from Billy Russell, (7/7/2014, 4:43 AM)

A lot of money is being wasted in this area its sad we have gone from 7 to 18th but at current spending levels and 60-90 Billion in unfunded expenditures coming soon , we should be on 3rd world status before we get to change direction and Leadership, but we have no one else to blame when you elect a community organizer to run major economy's with NO business experience what were you thinking was going to happen. My name is Billy Russell and I approve this message. (Smiling)

Comment from John Fauth, (7/7/2014, 8:38 AM)

Andrew, if there's sprawl at those exits it means people value the product or service. Those empty train cars speak just as loudly. Now, about government subsidizing car rides... just where do you believe that government money comes from... the subsidy fairy?

Comment from Tom Schwerdt, (7/7/2014, 9:06 AM)

Andrew - I don't know where you're getting that "subsidy" idea. Highway expenditures are largely funded by direct taxes on highway users. The most obvious is the gasoline tax. "Transit" (your train) is largely untaxed and highly subsidized - interestingly, this is about as much as would fill the recent gas tax shortfall. Before the shortfall, your train trips were being paid by the highway drivers from their gas taxes.

Comment from Mark Bowen, (7/7/2014, 12:40 PM)

Train tickets are subsidized to the tune of 90-95% of the cost of construction and operation.

Comment from Andrew Piedl, (7/7/2014, 6:47 PM)

Well I just made those numbers up - but as it turns out, my fare is not subsidized at all(I travel on the northeast corridor - check for your self - and yes,this is an exception). Gasoline taxes, fees and tolls aren't enough to cover the cost of roads. About half the cost comes from other tax sources. Pull back your view a bit further and add other costs: storm water treatment,environmental damage, municipal services, fire/police, accidents, health costs, and those subsidies to the auto industries. Mass transit is a favorite target, but the reality is that the costs and subsidies for cars are much greater than popular held beliefs.

Comment from John Fauth, (7/8/2014, 9:44 AM)

You’re right, Andrew. Without cars we’d have no fires that require firefighters, no crime that requires law enforcement services, no disease that requires health services, no environmental impact or municipal services....really? How about the benefits/cost savings associated with the existence of motorized vehicles and roads to bring those services to you? A few more homes may burn, crimes occur, people may die, waterways polluted, jobsites uninspected, etc. if those services are brought to you by horse and buggy on a trail through the forest. You can't look at the indirect costs without considering the indirect benefits as well.

Comment from Tom Schwerdt, (7/8/2014, 3:09 PM)

Andrew, are you talking about Acela, built largely with federal dollars from the Highway Trust Fund? I noticed you said your "fare" isn't subsidized. Bully for you. The billions spent on the tracks and trains was subsidized. The operating costs covered by the fare are pretty measly by comparison - but won't even cover train replacement or track upgrades.

Comment from Andrew Piedl, (7/21/2014, 6:21 PM)

I can’t afford Acela - and the northeast corridor existed long before Amtrak, the Highway Trust Fund and the invention of the internal combustion engine (it was built by private companies, like the PRR). The federal government has been kind to highways and automobiles; the government’s support of lending and building for an infrastructure that promotes the car is well documented. The result of an economy and society based on the automobile (and cheap oil) has resulted in a vast system that is spread out. The governing of this vast system is expensive (oil is not so cheap any more); it is the reason why government is big - you can't have a huge system of roads without a huge government (which is the reason for this article - no?). I am not advocating an elimination of the automobile, just less of a reliance on it. I just read that the American Society of Civil Engineers estimates a $298B need for upgrade of sewer/stromwater systems nation wide over the next 20 years. You may mock the idea of environmental impact, but this is no small change. Where do you think the bulk of this stormwater comes from? It's just one of the real costs that governments have to deal with that doesn't show up on one of your tally sheets. I regret having offended anybody with my comments, and hope to instill a greater understanding and appreciation of the benefits of mass transit. There is hardly a person who does not really appreciate the finest design work of the automobile era than myself, yet when I see patriotic people driving monster pick up trucks with American flags over a cargo of air, I can't help but to think that it's a waste of resources.

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