Congress faces tough choices, tight timeline for highway funding

Dwindling highway trust fund will run dry by the end of August

July 04, 2014|By John Fritze, The Baltimore Sun

WASHINGTON — — Congress returns to work Monday facing a tight deadline to fund highway and road projects across the country, an election-year scramble that has injected uncertainty into state and local construction plans at the start of the summer driving season.

Lawmakers have until Aug. 1 to broker an agreement on the dwindling federal highway trust fund — which paid for $37.4 billion in road projects last year — or risk delaying payments to states. The fund is expected to run out of money at the end of August.

Analysts say Maryland is better positioned than other states to weather the latest round of funding battles, in part because of a recent increase in the state's gas tax. But officials nevertheless have lowered their expectations for federal aid in future years out of concern that lawmakers will be unable to resolve the long-standing debate over how to close the fund's deficit.

"Budget uncertainty is the enemy of planning, investment and growth," said Democratic Sen. Ben Cardin of Maryland, a Senate Finance Committee member who has been negotiating the issue. "Quick fixes may get us past the deadlines and the many short-term crises, but they will not solve the systemic problems."

Maryland expects to receive $866 million in federal highway and transit money this fiscal year, which would fund about 20 percent of the state's transportation budget.

Lawmakers in both parties support federal highway spending — six-year transportation bills historically have been approved without controversy — but they disagree on how to address a deficit that has grown as revenue from the 18.4-cent federal gas tax has lagged behind rising costs. The deficit is pegged at $14 billion annually.

Transportation experts predict that Congress will approve a short-term patch to keep the fund solvent, probably through the end of the year. But that approach has drawbacks, too. Because road projects take years to push through the pipeline, temporary fixes can make it difficult for state officials to plan.

"It's a big impact psychologically," said Beth McGinn, a spokeswoman for the American Road & Transportation Builders Association. "Is the fiscal certainty going to be there?"

Some states, such as Iowa and Arkansas, are implementing contingency plans or have already announced delayed roadwork. But Maryland officials said they are not taking similar steps at the moment.

Erin Henson, a spokeswoman for the state Transportation Department, said officials build a "buffer" into their long-range planning assumptions to account for uncertainty in federal funds.

If Congress fails to act, she said, the state would be able to make up for a loss in federal money with its own funds — at least for a couple of months. Part of that ability, Henson said, stems from the decision by Gov. Martin O'Malley and the General Assembly in 2013 to raise the state's gas tax.

"While Maryland made the tough decision to raise transportation revenues last year, the federal government has yet to resolve the imbalance between revenues and spending in the Federal Highway Trust Fund," Henson said a statement. "That gives us the ability to manage the slowdown in reimbursements … in August and September."

The state estimates it will collect an additional $97 million in gas tax in the current fiscal year, according to the comptroller's office.

But the lack of certainty over whether Congress will address the Highway Trust Fund's structural deficit is having an impact. Owing to "fiscal concerns with the soundness of" the trust fund, the state's six-year transportation plan assumes that Maryland will be able to obligate only about 85 percent of its federal money in the next fiscal year — compared with 95 percent this year.

"If Congress does not act to increase funding in the [trust fund], these amounts will need to be reduced, possibly dramatically," the plan reads.

Henson declined to discuss particular projects that could be affected, but in the Baltimore region several are already on hold due to lack of funding. They include a study of future capacity needs on Interstate 70 west of Route 29 in Howard County — an increasingly congested stretch of highway.

A spokeswoman for the Baltimore Transportation Department said officials do not "foresee any immediate problems with funding." But she declined to address concerns about lawmakers failing to act at all, or the possibility of a short-term agreement.

As President Barack Obama stood on the Key Bridge in Washington this week, criticizing Republicans for a lack of action on the issue, aides on Capitol Hill were working behind the scenes on a compromise that could pass both chambers of Congress.

If a deal is struck, though, history suggests that it will likely come in the days right before lawmakers leave town for their annual August break.

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