By Keith Laing
The federal government will start reducing road and transit payments in August, potentially leaving states scrambling to cover the gap.
The trust fund is supposed to reimburse states for their expenses, but DOT Secretary Anthony Foxx said the trust fund will have trouble doing so next month, just as many families hit the roads for summer vacations.
He said his department will stop reimbursing states when the bills come.
“States will be paid not as they sent their bills in, but every two weeks as money from the gas tax comes in,” Foxx said at a breakfast sponsored by The Christian Science Monitor. “This is we believe the most equitable approach, but there is to be very clear, no good option when we’re talking about a trust fund that is running short in supply of dollars.”The announcement comes with Congress at a standstill over approving new funding for the nation’s highways and bridges. The Highway Trust Fund, which is supported by the 18.4 cents-per-gallon gas tax, is set to go bust in August.
Business groups back increasing the gas tax to fund work on aging U.S. roads and infrastructure, and two senators in June offered support for a gas tax to pay for highway projects.
But overall, there has been little interest in Congress for raising the tax, and lawmakers have struggled to come up with other funding.
The gas tax has not been increased since 1993, and cars are becoming more fuel efficient every year, exacerbating the funding gap.
Foxx said Tuesday that the Obama administration has given lawmakers ample warning about the transportation funding problem.
“We began in January with a ticker on our website that basically gave the public an up-to-the-minute view of how the Highway Trust Fund is performing,” he said. “At that time we predicted that the Highway Trust Fund could run dry in August of this year. … As we predicted back in January, the time’s almost up.”
Foxx added that the reductions in transportation payments could become even more severe if Congress allows the gas tax authorization to expire in the fall.
“If we get to Sept. 30 and there hasn’t been a funding solution and there hasn’t been a reauthorization extension at a minimum, we will not be able to spend money even if we have it,” he said. “That’s another part of the crisis.”
Foxx and President Obama have pushed Congress to approve a four-year, $302 billion proposal to address the transportation funding gap. Obama proposal relies on using approximately $150 billion from a corporate tax reform package that is unlikely to be approved by lawmakers this year.
Foxx said Tuesday that the Obama administration was open to other ideas for paying for the infrastructure spending, if Congress could reach an agreement on one.
“If Congress comes up with a different combination, another formulation to get there, we’ve said that we’ll listen to what they have to say, but they have to speak with one voice,” he said.
The House and Senate have each put forward proposals to extend transportation funding in the short-term, with the upper chamber suggesting an $9 billion bill to carry infrastructure spending through the end of the year and the House proposing tying a year’s worth of funding to cut backs at the U.S. Postal Service.
Foxx urged lawmakers on Tuesday to focus on a longer-term fix, however.
“As a country, we’ve got to stop playing small ball with transportation because it is so critical,” he said.
Transportation advocates have pushed lawmakers to increase the gas tax for the first time in two decades to close the shortfall, but Foxx said Tuesday that he did not think lawmakers would be willing to increase the amount paid by drivers in the middle of an election year.
Progress and Challenges in Providing Safe, Efficient and Well-Maintained Roads, Highways and Bridges
Oklahoma’s extensive system of roads, highways and bridges provides the state’s residents, visitors and businesses with a high level of mobility. This transportation system forms the backbone that supports the state’s economy and contributes to the provision of a high quality of life in Oklahoma.
A decade ago, Oklahoma had significant road, highway and bridge deterioration and high rates of traffic fatalities. But beginning with legislative action in 2005 and continuing through state legislative action as recent as 2013, Oklahoma has undertaken a sustained commitment to upgrade the condition and efficiency of its roads, highways and bridges and to reduce traffic fatalities by modernizing its highway system.
By making this effort, Oklahoma has been able to reverse the deterioration of major roads, highways and bridges and has begun to improve traffic safety in the state by modernizing urban and rural roads and highways. These efforts have resulted in a large reduction in the number of state-maintained deficient bridges, the rehabilitation and reconstruction of thousands of miles of roadways, and the completion of safety improvements that are saving numerous lives each year.
But the state still has far to go to meet its initial goals through 2021 for the reconstruction and modernization of the state highway system, additional improvements in road and bridge conditions, and further traffic safety enhancements. Achieving the state’s goals for a modern, well-maintained and safe transportation system will require “staying the course” with Oklahoma’s current transportation program and doubling down on this effort by proceeding with further transportation improvements well through the next decade.
Population and economic growth have placed increased demands on Oklahoma’s major roads and highways, leading to mounting wear and tear on the transportation system.
Oklahoma has been able to rehabilitate approximately a quarter of state-maintained roads and highways since 2006 as the state continues to reconstruct and modernize its highways. While further improvements in roadway structural conditions, safety design and capacity are planned for the state’s major roads, Oklahoma will continue to face a challenge in maintaining surface pavement conditions and the need to further modernize its highway system.
The number of Oklahoma’s state-maintained structurally deficient bridges has been cut in half in recent years as a result of accelerated bridge replacement and rehabilitation efforts that were made possible by additional funding provided by the state legislature. By 2021 the Oklahoma Department of Transportation (ODOT) anticipates reducing the number of state-maintained structurally deficient bridges to near zero.
While Oklahoma has made significant safety improvements to its roadways in recent years, the state’s traffic fatality rate is still significantly higher than the national average. Improved safety features on Oklahoma’s roads and highways are needed to decrease traffic fatalities and serious crashes in the state. It is estimated that roadway features are likely a contributing factor in approximately one-third of all fatal and serious traffic crashes.
Federal funding for Oklahoma’s roads, highways and bridges may be cut as early as this summer because of a lack of adequate federal transportation revenue. The current federal transportation program, which provides funding for the state’s roads and bridges, is set to expire this fall and will require Congressional action to continue beyond September 30th, 2014. Future state highway spending will also be reduced by $75 million annually, which will be required to pay off bonds that were issued to help pay for the state’s recent road and bridge improvements.
The efficiency of Oklahoma’s transportation system, particularly its highways, is critical to the state’s economy. Businesses are increasingly reliant on an efficient and reliable transportation system to move products and services. A key component in business efficiency and success is the level and ease of access to customers, markets, materials and workers.
Sources of information for this report include the Federal Highway Administration (FHWA), the Oklahoma Department of Transportation (ODOT), the Bureau of Transportation Statistics (BTS), the U. S. Census Bureau, the Congressional Budget Office (CBO),the Texas Transportation Institute (TTI) and the National Highway Traffic Safety Administration (NHTSA). All data used in the report are the most recent available.
BY Becky Moylan
1. The Highway Trust Fund is Running Out of Money Because We Waste Money
Thanks to the Intermodal Surface Transportation Efficiency Act (ISTEA), first passed in 1991, transportation projects are planned, developed and executed efficiently while utilizing innovation. Grades in the Report Card prove that when we invest in infrastructure, we see results. The 2013 Report Card saw improvement in six infrastructure sectors that benefited from private investment, targeted efforts from cities and states, or a one-time federal funding boost.
Communities oftentimes know best where money will be best utilized, and the Highway Trust Fund allows many transportation project decisions to be made on the state and local levels. For example, federal funding eligibility for bicycle lanes is a concern in many places. Since there is a growing national share of bicycle and pedestrian fatalities that needs to be addressed through better road design and other proven countermeasures, the Highway Trust Fund allows a community to identify this need on its own roads and decide how to best design bike lanes for that community.
2. The Federal Government Should Get Out of the Infrastructure Business and Let States Make Their Own Decisions
The Highway Trust Fund is designed to assist states in paying (historically about 45 percent) for transportation projects for many reasons, and it is a system that has served the country well. The cost of transportation projects is a huge expense and states do not have the funding to go this alone.
The U.S. Constitution’s Commerce Clause (Article 1, Section 8, Clause 3) grants Congress the power to invest and maintain roads, bridges and transit.
From the Interstate Highway System (keyword: Interstate) to our ever-expanding electrical grid, infrastructure is indeed a national issue that must be addressed through a national vision.
3. The Current Gas Tax Rate is Perfect and Does Not Need to Be Changed
The Highway Trust Fund is how Congress provides federal funding for transportation projects. It was created in 1956 to be funded by the federal gas tax.
The U.S. Department of Transportation projects that the Highway Account of the Highway Trust Fund will run out of money for new projects as early as July. According to the Congressional Budget Office, to prevent insolvency of the Highway Trust Fund in 2015, federal surface transportation investment would have to be cut by 92 percent that year.
The gas tax is not tied to inflation and hasn’t been raised in more than 20 years. We are trying to run a 2014 transportation system on 1993 dollars. Consider that the cost of many items has doubled or tripled since 1993. For example, a new car cost $12,750 in 1993, whereas in 2013 a new car costs on average $31,252.
The purchasing power of the federal gas tax is not what it once was. This is obviously an untenable formula that must be addressed.
4. We Can Just Raise Enough Revenue Through Tolls and Public-Private Partnerships (P3s).
Tolls and P3s can be successful sources of revenue, and are a part of the overall solution, but neither is a silver bullet in finding a sustainable long-term funding source. Historically, federal highway funding has accounted for approximately 45 percent of what state DOTs spend on highway and bridge capital improvements. Quite simply, the federal government must lead on the issue of funding.
For the 10 year window, 2015-2024, the cumulative shortfall in the highway and mass transit accounts of the HTF will be over $170 billion. This is too large a figure for anyone to expect to be filled by tolling and P3s. While as House T&I Chairman Bill Shuster (R-PA) has said “the private sector continues to show significant, growing interest in investing in infrastructure,” they cannot be a substitute for federal investment and federal leadership.
The key is finding a long-term, sustainable funding source. P3s and tolls are pieces of the puzzle, and when partnered with a sustainable revenue stream, can help ensure reliable revenue for the Highway Trust Fund.
5. We Don’t Have Enough Revenue Because People Are Driving Less
Over the past two years, vehicle miles traveled (VMT) actually increased; in 2012 by 0.3 percent and in 2013 by 0.6 percent. While there was a downturn in vehicle miles traveled after 2007, this decrease coincided with the recession. As the economy continues to improve, more employees will return to work, increasing VMT. Furthermore, the U.S. population grows each year by just under three million people, and the number of licensed drivers also grows by two million people. It is estimated that this trend in population growth will lead to an increase of 25 billion VMT annually.
6. Raising the Gas Tax Would Hurt Economic Growth
In our Failure to Act economic studies, ASCE explored the consequences of continued underinvestment in infrastructure. Ultimately, the studies concluded that our deteriorating infrastructure will cost the American economy more than 867,000 jobs in 2020 and suppress the growth of our GDP by $897 billion by 2020. Per household, the cost of deficient surface transportation will cost $1060 per year. To simplify, a homeowner can either fix a leaky roof now or wait for his or her home to eventually cave. Clearly, the former is much more cost effective. Our nation’s infrastructure needs to be tended to and funded now, or we will all continue to pay for it in a multitude of ways at much higher costs.
7. The Gas Tax Isn’t Raising Enough Money Because Cars are More Fuel Efficient
Between 2012 and 2022, gas tax revenues will decrease by less than 1 percent, ($2.5 billion) the CBO estimates. The issue at hand is not really fuel efficiency, but rather that the gas tax has not been increased since 1993. In the 20 years since, it has lost more than a third of its value because of inflation. Fuel efficiency will become more of a problem as fuel efficiency technology continues to advance in the coming decades, but in the near term it is less of a problem than often stated.
8. We Can Afford to Do a Short-Term Bill and Maintain the Status Quo
Not this time. The 2012 surface transportation law, MAP-21, temporarily preserved levels of federal highway and public transportation investment by supplementing existing Highway Trust Fund revenues with other federal resources. Since 2008, over $52 billion has been transferred from the General Fund to the Highway Trust Fund to keep it solvent.
MAP-21’s funding will run out as the Highway Trust Fund becomes insolvent weeks, or more likely months, before the law intended the money to end. Attempting to “Band-Aid” the Trust Fund once again will only result in this becoming a recurring issue. States, planners, and engineers cannot plan needed infrastructure projects without committed funding. As the impending insolvency demonstrates, there is currently not enough revenue to support the system.
Furthermore, the 2013 Report Card for America’s Infrastructure graded our nation’s infrastructure at a D+. Clearly that status quo is not enough in helping the U.S. build a 21st century infrastructure capable of competing on a global scale.
9. Congress Cannot Get Big Things Done Because Everything Turns in to a Partisan Fight
In the words of Senate Minority Leader Mitch McConnell, “Infrastructure spending is popular on both sides.” In the past year transportation legislation and funding ideas have come from both Democrats and Republicans. Notably, Rep. John Delaney’s (D-MD) Infrastructure Bank bill was proposed with an equal number of Democrat and Republican co-sponsors. Sen. Vitter (R-LA) and Sen. Boxer (D-CA) have worked closely to craft a six-year highway bill, which passed out of committee with a unanimous bipartisan vote. And Rep. Dave Camp (R-MI) proposed a tax reform bill which included $126 billion for transportation projects in an effort to close the Highway Trust Fund shortfall. Efforts from both sides of the aisle, and the recent bipartisan support that led to the passage of the Water Resources Reform & Development Act (WRRDA), prove that there is support for infrastructure investment in both parties.
Furthermore, the U.S. Chamber of Commerce continues to support raising the gas tax, stating it is the “simplest and most straightforward” option to fund a long-term highway bill.
Without question, infrastructure is a bipartisan issue that has seen encouraging proposals on both sides. Given that this is an area where Congress can agree, now is the time to work together and get something done.
10. We Don’t Have the Money to Fix The Problem
The Highway Trust Fund will become insolvent in only a couple months, meaning the federal government will slow or stop sending checks to state DOTs this summer. The economic consequences of not being able to pay contractors and employees will send shockwaves throughout our economy. This is going to happen.
The notion that we simply cannot find a long-term, sustainable revenue source is false. The costs of inaction and allowing the Highway Trust Fund to cease funding for needed repairs and maintenance are immense.
Americans are already paying for the cost of our nation’s D+ infrastructure. American families and businesses are losing money and time. Congested roads cost an estimated $101 billion per year in wasted time and fuel, and driving on roads in need of repair costs motorists an average of $324 per year in vehicle repair and operating costs.
We can either invest now or pay a whole lot more in the years ahead. The lesson is clear: We can’t afford not to act.
Construction spending rose 0.2 percent in April, which was lower than the consensus estimate. Private residential and public spending rose, while private nonresidential fell for the fourth straight month.
Residential Outlays Continue to Improve
· Total construction spending rose 0.2 percent in April to a $953.5 billion annual pace with upward revisions to previous months’ data. Private residential construction spending rose just 0.1 percent on the month, with home improvements holding down the headline. However, private nonresidential outlays fell 0.1 percent on the month. The decline was concentrated in communication, power and manufacturing.
Public Spending Expected to Slow in Coming Months
· Public construction spending rose 0.8 percent in April, but could begin to falter in the coming months. The largest component of public outlays, ‘highway & street,’ is up 4.9 percent on a year-ago basis, but the expected slower pace of reimbursements this summer to states from the federal Highway Trust Fund (receives revenue from a federal fuel tax and distributes to states for infrastructure projects) could weigh down total public outlays.