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A Transportation Redline that Obama is Required to Keep

If Congress can't agree how to fund the Highway Trust Fund shortfall, Transportation Secretary Anthony Foxx warned state DOTs that he will be unable to reimburse them for funds already spent. The redline is the $4 billion mark projected to come July.
May 11, 2014, 5am PDT | Irvin Dawid
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"With money running low in the Highway Trust Fund (HTF), the main source of federal cash to build and maintain roads and transit systems, the Transportation Department has indicated it may need to delay reimbursing states for construction costs starting this summer unless Congress moves to replenish the account," writes Kristina Peterson of The Wall Street Journal.

"Replenishing the account" means funding the difference between between what the feds spend annually on transportation and receipts from gas and diesel taxes. That's $18 billion for a one-year extension of MAP-21, the current surface transportation spending bill, or $100 billion if a full, six-year reauthorization was attempted, according to CBO estimates.

In the absence of congressional action, the balance in the trust fund's highway account will fall to $2 billion by Sept. 30, and its mass-transit account to only $1 billion, according to the nonpartisan Congressional Budget Office. That would force the Transportation Department to start delaying payments to states as soon as August to keep the accounts' balances above zero, as required by law.

The effect will be widespread on the economy, "costing up to 700,000 jobs immediately, U.S. Transportation Secretary Anthony Foxx told a Senate panel this week." According to AASHTO Journal, Fox sent a letter Wednesday, May 7, "to all state transportation department formally prepare for a possible Highway Trust Fund insolvency, which could require a delay in reimbursements to states for funds already committed,"

Foxx penned the letter in an effort to keep state DOTs informed on the status of the HTF, though those transportation departments have been keeping an eye on the U.S. Department of Transportation's Highway Trust Fund Ticker.

That ticker shows that the Highway Account of the HTF will most likely drop below the $4 billion funding level as early as July or August, which is well ahead of surface transportation bill MAP-21's expiration at the end of September. USDOT prefers to keep a minimum of $4 billion in the highway account in order to properly manage day-to-day financial transactions.

State DOTs are not the only ones watching the HTF balance tip toward that $4 billion mark, so are the bond markets. "The Federal Highway Trust Fund (HTF) is unsustainable and a long-term funding solution is unlikely anytime soon, according to a Fitch Ratings report," Business Wire reports.

Fitch notes that the bipartisan budget agreement for 2014 and 2015 requires transfers to the HTF to be fully offset, making future transfers more problematic.

I was unaware of that agreement. While there has been lots of talk about revenue options, such as interstate tolling, corporate tax restructuring, or "replacing the gas tax at the pump with a tax at the wholesale level," writes Peterson, Business Wire suggests that talk may soon change to reducing the expenditure side of the HTF, as did ranking Senate Finance Committee ranking member, Senator Orrin Hatch (R-Ut.) who pointed to a favorite target among highway advocates.

"Since its inception in the 1950s, the Highway Trust Fund has been called upon to fund an increasingly broad scope of activities, such as bike paths and other so-called 'enhancements,'" said Hatch, according to AASHTO Journal.

The transportation enhancement program in MAP-21, signed by President Obama in July, 2012, was converted to an "under-funded, watered-down Transportation Alternatives program," (see fact sheet), wrote Streetsblog's Tanya Snyder last summer. See 

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Published on Friday, May 9, 2014 in The Wall Street Journal - Politics and Policy
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