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Congressional Action Needed to Address Highway Trust Fund Shortfall, CalTrans Announces Plans to Use State Funds to Continue Projects Until October

July 11, 2014
While Congress continues to negotiate the Moving Ahead for Progress in the 21st Century Act (MAP-21), which is set to expire on Sept. 30, an even bigger problem looms: the Highway Trust Fund insolvency.
Under MAP-21, the U.S. Highway Trust Fund (HTF) is funded by an 18.4 cents-per-gallon gas tax that provides an estimated $50 billion in annual funding for highways, streets and roads, bridges and mass transit projects.

However, the revenues received from the gas tax are not enough to keep the HTF fully funded through the end of the fiscal year. Without Congressional action, the much talked about HTF could become insolvent by early August — resulting in an estimated 28 percent infrastructure financing cut for states.

U.S. Secretary of Transportation Anthony Foxx sent letters last week to state transportation heads informing them of new cash management procedures the U.S. Department of Transportation (DOT) will be taking. According to Secretary Foxx, beginning Aug. 1 federal “reimbursements to States will be limited to the available cash in the Trust Fund, and new revenues will be added every two weeks as money from the gas tax flows into the Fund. A similar process will be implemented for Federal Transit Administration funds in the fall, when the transit account of the Highway Trust Fund is expected to become insolvent.”
In response, the California Department of Transportation (CalTrans) sent Congress a letter indicating that the state was preparing to fund federal projects, with or without federal assistance, for as long as possible. Unfortunately California is unlikely to be able to continue federal projects past October without further Congressional action. Cities that have federal projects planned or in process should communicate with their CalTrans district office on the status of specific project funding. 
Several factors played a role in the recent decline of HTF revenues, including fewer drivers on the road due to increased gasoline prices, overall sluggish economic recovery and the introduction/increased use of electric and fuel efficient vehicles. The effect of HTF’s decline has been felt by states and local governments nationwide. For example, city of Industry Mayor Tim Spohn posted his reaction on the DOT website. The mayor discussed the absolute vital importance of a stable funding source for state and federal highway systems, and for major infrastructure projects, some currently underway, to realize their full potential. 
A clear plan to address the shortfall has yet to emerge as Congress continues to debate several proposals. It has been reported that U.S. House Speaker John Boehner (R-Ohio) expects a HTF bill to be voted on the House floor sometime next week. The House Republican plan contains a $10 billion cash infusion to the HTF as a result of raising corporate taxable income. The plan has received mixed responses from House and Senate Republicans with some claiming the plan serves only as a temporary fix containing unviable revenue increases. 
Questions remain on how transportation programs will be funded in the future. The League urges Congress to:
  • Adopt a long-term transportation authorization plan that provides a stable and reliable revenue stream for transportation;
  • Ensure funding is available to support current and future federal, state and local transportation priorities and identify new funding streams capable of supporting future transportation needs; and
  • Make reconstruction and preservation of the existing system a high priority for expenditures; and target funds for maintenance to local agencies, which are charged with administering the system.

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