States Address Impending Cut-off of Federal Transportation Funds

With federal highway funds likely to be cut off in August unless Congress can reach an agreement on a stopgap solution, some states, e.g., MO, VT, GA, AR have taken matters into their own hands to ensure that vital construction projects continue.
June 13, 2014, 9am PDT | Irvin Dawid
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States throughout the country are "grappl(ing) with an imminent problem: the federal Highway Trust Fund could soon run out of money [see "ticker"]. The dwindling fund, the main source of federal cash to build and maintain roads and transit systems, could mean a delay in payments to states as soon as August unless Congress agrees on a solution," write Jon Kamp and Kristina Peterson.

In fact, that date could be a month earlier, according to Jonathan Weisman's June 9th piece in The New York Times. "And by the week of July 18, the trust fund’s nest egg would dip below $4 billion, the 'prudent balance' trigger that would force the Department of Transportation to tell states to begin slowing construction projects," he writes.

Consequently, "states are taking steps to address the possibility of a cash crunch: They are preparing to put off projects or trying to boost their own sources of funding," write Kamp and Peterson. Other than Missouri, all will take general funds or issue bonds, illustrating that other state programs suffer when the federal government fails to provide needing funding.

  • In Missouri, "(t)he state's Republican-led Legislature recently passed a resolution to ask voters for a sales-tax increase to raise at least $5.4 billion over 10 years for projects such as widening Interstate 70, which links St. Louis and Kansas City. A rise in the sales tax is considered more politically viable than a gas-tax boost."
  • "Vermont has freed up $15 million to cover a potential federal shortfall, but that would buy it only eight or nine weeks before it would have to consider curbing projects, said Transportation Secretary Brian Searles."
  • "Georgia will use about $130 million in state bonds to support a recent round of transportation projects but will stop contracting out some new ones in July without a federal aid solution, said a spokeswoman for the state Transportation Department."
  • "Arkansas increased its sales tax by a half-cent last year to support highway work. Still, it said in March it would postpone 10 projects until federal funding was secure. It has since found alternate money for two of them. The bridge along Route 70 isn't in any immediate danger, a state official said, and it won't be replaced until federal money is a sure thing." 

A stopgap solution could be in the works, at least in the Senate, according to both the Journal and the Times. A bipartisan proposal emerged by Senate Majority Leader Harry Reid (D-Nev.) and Sen. Rand Paul (R-Ky.) "to grant a tax break designed to encourage U.S. multinationals to bring back corporate profits held overseas as one way of helping plug the funding shortfall," write Kamp and Peterson.

While "there is wide skepticism of the proposal," writes Weisman on the "one-time tax 'holiday'” he adds that "the needs of the Highway Trust Fund may be more pressing than a rewrite of the entire tax code. And what Mr. Reid wants, he often gets."

Note regarding Wall Street Journal article: Subscriber-only content will be available to non-subscribers through June 18.

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Published on Wednesday, June 11, 2014 in The Wall Street Journal
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