Federal Highway Fund Running Out of Money
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By DAVID STOUT
Published: September 5, 2008
WASHINGTON — An important account in the federal Highway Trust Fund will run out of money this month, which could hamper completion of road and bridge construction projects across the country, Transportation Secretary Mary E. Peters said on Friday.
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Secretary's Remarks | Trust Fund Fact Sheet (Department of Transportation)
Because the fund is draining away so fast, the Transportation Department will have to delay payments for the local projects, or reduce their amount, Ms. Peters said at a mid-day news conference.
Ms. Peters said her department will begin to dole out money from the fund on a pro-rated basis. For instance, if there are only enough funds to cover 80 percent of the payment requests the department receives for federally financed local projects, the agency will pay only 80 percent of each request.
“Time and again, the president has warned Congress of the pending shortfall and submitted fiscally prudent budgets to close the gap,” Ms. Peters said, in remarks that reflected the political nature of the long-running debate over how to pay for road-building.
State transportation officials reacted to the announcement with alarm. The development will have “grave repercussions for the states, for hundreds of thousands of workers in the construction industry and the driving public,” said John Horsley, executive director of the American Association of State Highway and Transportation Officials.
“It will worsen the financial crises many states are already facing, and it will delay or halt needed transportation projects and leave contractors and suppliers with I.O.U.’s instead of cash to pay their workers,” Mr. Horsley said in a statement.
Whether Mr. Horsley’s dire prediction will come true, or whether the money shortage will be corrected when Congress reconvenes and the lawmakers hear from their constituents, is anybody’s guess. But at least for the moment, the trust fund’s problems have cast a shadow over highway work from coast to coast.
The trust fund’s highway account is being rapidly depleted because Americans have reacted to the high price of gasoline by driving less, Ms. Peters said. The fund gets its money from federal excise taxes on motor fuel: 18.4 cents a gallon on gasoline and 24.4 cents a gallon on diesel. But for months, Americans have been driving fewer miles than before since it has been costing them more.
One possible solution would be to transfer money to the highway account from the separate account that the trust fund maintains to finance mass transit projects. That account is much smaller, though, and in any case, Ms. Peters said such a transfer would merely rob Peter to pay Paul. Lawmakers from large cities that rely on trust-fund aid for their transit systems could be expected to resist a transfer.
In July, the House passed a bill that would use $8 billion of general federal revenue — from income and other taxes, not the dedicated motor fuel tax — to finance highway projects. The measure has not gained much traction in the Senate, and until Friday the White House had been hostile to it. But Ms. Peters said on Friday that the administration now endorses the measure, because “immediate action” is required to ensure that the states do not suffer.
http://www.nytimes.com/2008/09/06/us/06highway.html?hp
