Feds warn states about highway funding cliff

The Obama administration is warning state transportation departments that it will have to stop sending them payments for construction projects on July 31 unless Congress reaches a deal to extend federal infrastructure funding in the next two weeks. 

The current transportation funding measure is scheduled to expire at the end of the month, and lawmakers are struggling to come up with a way to pay for an extension. 

Transportation Secretary Anthony Foxx said in letter to the states that he will be unable to make new payments if Congress allows the law that authorizes the federal government’s infrastructure spending to expire. 

{mosads}”As you know, the most recent Congressional extension of the current surface transportation authorization, the Moving Ahead for Progress in the 21st Century Act, is set to expire on July 31, 2015 — less than a month from now,” Foxx wrote.  “Unless Congress acts prior to this date, the Federal Highway Administration (FHWA) will be unable to incur new obligations or make reimbursements to States beginning August 1, 2015.” 

The transportation funding debate has loomed large in Washington this year as lawmakers punted in May deadline, pushing the deadline to July 31. 

Foxx has warned that the federal Department of Transportation’s Highway Trust Fund will dip below a critical level of $4 billion if the new deadline is missed, requiring the agency to become more selective with its payments to state and local governments.

“If Congress does not take appropriate action in addressing the expiration, the Highway Trust Fund will approach critical cash balance levels in August, requiring the implementation of cash management protocols,” he wrote.  

“If this scenario occurs, the U.S. Department of Transportation will take every measure possible to fully reimburse your State for as long as we can,” the transportation chief continued. “However, if we approach insolvency, the Department will be forced to limit payments in order to manage the dwindling cash flows in the Highway Trust Fund.”  

Lawmakers in both parties have expressed a desire to pass a new transportation funding bill, but consensus on how to pay for it has been elusive. 

The House unveiled on Monday evening an approximately $8 billion measure that would extend the nation’s infrastructure spending until December. The Senate, meanwhile, has worked on a longer, six-year, $275 billion transportation funding measure, but lawmakers in the upper chamber have yet not revealed how their legislation would be paid for. 

The traditional source of transportation funding has been revenue from the 18.4 cents per gallon federal gas tax. The tax has not been increased since 1993, however, and has struggled to keep pace with construction costs as vehicles have become more fuel efficient. 

The federal government typically spends about $50 billion per year on transportation projects, but the gas tax only brings in about $34 billion annually at its current rate. 

Lawmakers have turned to other areas of the federal budget in recent years to close the gap, but Foxx argues the resulting temporary patches are preventing states from undertaking badly needed large construction projects. 

“Congress’s failure to pass a long-term bill of great concern to all of us who are engaged in the work of building and maintaining our nation’s transportation infrastructure,” he wrote. “Careening from self-inflicted crisis to self-inflicted crisis undermines our system. We need Congress to break the cycle of short term extensions; we need a long-term bill with significant growth.” 

Transportation advocates have pushed Congress to increase the gas tax for the first time in two decades to pay for a long-term infrastructure funding extension, but lawmakers have been reluctant to ask drivers to pay more at the pump. 

The Obama administration, meanwhile, has suggested that lawmakers approve a six-year, $478 billion transportation funding bill that it says can be paid for largely with taxes that could be collected on corporate profits that are stored overseas. 

Republicans have said they are open to the idea, known as repatriation, but the parties have squabbled about the rate of the corporate taxes and whether companies should be required to participate. 

Foxx said in his letter that the Obama administration’s plan would end the streak of short-term infrastructure funding bills in Washington that has lasted for the better part of a decade. 

“In an effort to provide long-term stability, and to move away from the uncertainty caused by short-term extensions that undermine State transportation programs, the administration’s GROW AMERICA proposal and its Fiscal Year 2016 budget request call on Congress to enact a six-year, $478 billion surface transportation reauthorization proposal,” he wrote. 

“Not only does this proposal provide states with extended funding certainty, it also increases Federal surface transportation investment by 45 percent, providing funding growth and smart policy reforms to strengthen the American economy,” Foxx continued.