With the Highway Trust Fund’s fiscal health swiftly nearing a crisis point, pressure is building to get Congress to approve an $8-billion injection to stabilize the fund’s highway account, a critical source of construction aid. The rescue plan’s fate rests in the Senate, where proponents at press time were trying to overcome objections from two Republican lawmakers.

PETERS

The problems have been growing for months as highway travel has slowed, affecting the flow of fuel-tax dollars into the trust fund. But bleak new estimates prompted Transportation Secretary Mary E. Peters on Sept. 5 to direct the Federal Highway Administration for the first time to restrict road-aid reimbursements to state departments of transportation. In a sharp turnabout, Peters also urged Congress to quickly bolster the trust fund by approving an $8-billion shift from the general fund. Without those changes, the highway account will show a zero balance as early as Sept. 30, Peters says.

The legislative remedy on the table is a bill the House passed in July, which authorized the $8-billion transfer. To avert the imminent crisis, Peters wants the bill to be amended so that the funds would be available immediately, not on Oct. 1, as the House bill provides.

In the Senate, Majority Leader Harry Reid (D-Nev.) responded on Sept. 8 by trying to have the chamber unanimously approve the House bill, with the immediate-funding language. But Sen. Judd Gregg (R-Vt.) said he and Sen. Jim DeMint (R-S.C.) wanted to offer amendments, thus blocking the measure’s quick approval.

Reid may seek a vote to cut off debate. He has the votes, says David Bauer, American Road and Transportation Builders Association senior vice president. But he adds, “The problem is time, and the [tight] Senate floor schedule.”

Until the measure is enacted, FHWA will limit reimbursements to states for obligations they incur for road and bridge projects. To conserve money, FHWA will make electronic reimbursements to states only once a week, instead of twice a day as it does now, Peters says.

In addition, the repayments will be prorated to reflect how much money the highway account has on hand. For instance, Peters says if the account has enough to meet only 80% of the aggregate amount state DOTs request, each state will get 80% of the sum it asked for. States would be made whole on their “invoices” when more revenue is deposited in the trust fund. The limitations will go into effect on Sept. 11 unless the legislation is enacted by then, says Peters.

The fund’s deteriorating numbers and the uncertainty about a remedy are “having a real-world effect,” says Brian Deery, senior director of the Associated General Contractors’ highway and transportation division. Each week that goes by without a solution “becomes more and more of a problem for the DOTs and ultimately for the contractors,” he says.

+ click to enlarge

Guy Lawrence / ENR

Goodman / ENR

DOTs are pulling back. “States are suspending new contract awards, halting right-of-way acquisition and looking for ways to stop ongoing construction while maintaining public safety,” says John Horsley, American Association of State Highway and Transportation Officials’ executive director. On Sept. 8, Oklahoma DOT said it postponed $80 million of projects bid last month. Washington Gov. Chris Gregoire (D) says her state has enough federal aid to keep projects going through October, but “long-term funding could be in jeopardy.”

As recently as July 30, the Office of Management and Budget reported the highway account would show a $4.3-billion surplus on Sept. 30. But Phyllis Scheinberg, DOT’s chief financial officer, says new estimates of highway account revenue from May through September totaled $3.1 billion less than earlier projections. On the spending side, outlays for the busy summer construction months were higher than anticipated in some cases. The net effect is that DOT expects the highway account will have $2.7 billion in receipts for September, more than offset by $4.4 billion in reimbursement requests from state DOTs.

At a meeting of DOT’s budget and highway team after Labor Day, it became clear that the highway account would post a shortfall before Sept. 30, says DOT spokesman Brian Turmail. “We saw the immediate red flag,” he says.

Scheinberg and new FHWA chief Thomas J. Madison Jr. brought Peters the proposals to slow reimbursements. The bigger question was whether DOT should keep pushing its earlier proposal to borrow from the fund’s transit account to help the highway account or back the House bill’s general-fund transfer. That would be a big change. OMB on July 23 issued a veto warning for that measure.

Peters spoke with senior White House officials on Sept. 3 and 4, but the decision to support the House bill “was the Secretary’s call,” says Turmail. “This is not an ideal solution, [but] the state of the Highway Trust Fund has now moved from a theoretical to a practical problem, and states should not have to suffer the consequences,” says Peters, a former Arizona DOT director. She also called on Congress to pass a “fiscally responsible” 2009 DOT appropriations bill and overhaul highway financing in the multiyear transportation authorization next year.

“You have to give her credit for stepping up when it really became a major crisis,” says Jack Basso, AASHTO director of management and business development. Basso, a former DOT and FHWA chief financial officer, says passing the House bill will keep the account solvent through fiscal 2009. But after that, with the revenue outlook worrisome and outlays continuing for multiyear projects, he predicts problems will return. “I think $8 billion pretty much guarantees getting though 2009,” Basso says. “But 2010 is a disaster.”