States Hit the Brakes on Road Projects As Federal Fund Goes Broke

WASHINGTON (Stateline.org/MCT) -

Instead of shifting into high gear during what is normally the peak of construction season, state transportation departments around the country are easing off the gas pedal as the federal Highway Trust Fund barrels toward insolvency sometime next month.

The U.S. Department of Transportation estimates that the highway account of the Highway Trust Fund, which allocated $37 billion to the states for highway projects in the fiscal year that ends September 30, will run out of money in August unless Congress can come up with a solution before then. (The mass transit account of the fund is in slightly better shape, but not by much.)

In the absence of intervention by Congress, federal officials plan to implement cash management procedures beginning Aug. 1 that would mean reduced payments to states along with delays in reimbursements.

For the states, which rely heavily on the federal funds to maintain, improve and build roads, bridges and rail projects and bicycle and pedestrian facilities, the situation could spell serious trouble in an area that directly impacts both public safety and economic development. Given the uncertainty over the federal funding, a number of states have delayed projects to avoid getting stuck with bills they can’t pay or starting projects they can’t finish.

States received anywhere from 14.9 percent (New York) to 58.9 percent (Montana) of their total highway and transit funding from the federal government in fiscal year 2011, according to an analysis by the Pew Charitable Trusts (Pew funds Stateline). Nearly half the states (24) received a third or more of their highway and transit funding from federal sources.

Nearly all of that federal money comes from the Highway Trust Fund. Created in 1956 to finance the new interstate highway system, the fund relies on a federal gasoline tax of 18.4 cents per gallon and a diesel tax of 24.4 cents per gallon. The taxes have not been raised since 1993, and inflation has eroded their value. Increased fuel efficiency, decreased driving and the recession have also helped to deplete the trust fund. Since 2008, Congress has funneled $55 billion from the general fund into the Highway Trust Fund to make up the difference between spending and revenues.