U.S. to Delay Highway Trust Payments as Soon as Aug. 1

President Barack Obama chided Congress for inaction as his administration began notifying states that federal reimbursements for highway and transit construction projects will slow down as soon as August.

“If this Congress does not act by the end of the summer, the Highway Trust Fund will run out,” Obama said in a speech outdoors near the Francis Scott Key bridge that connects Washington, D.C., to Virginia, which he said is due for repair.

“It’s not like they’ve been busy with other stuff,” he said of Republicans who control the House. “They’re not doing anything,” he said, referring to a highway funding bill, immigration, and other legislation that’s been blocked.

The U.S. Transportation Department will stop paying states in full when the Highway Trust Fund dips below $4 billion about Aug. 1, Transportation Secretary Anthony Foxx said at a breakfast today in Washington hosted by the Christian Science Monitor. Payments will be made every two weeks instead of immediately, he said.

“There’s no good option when we’re talking about a trust fund running short,” Foxx said. “I don’t think the American public understands how severe this crisis is right now.”

Lawmakers are at an impasse both over long-term financing for the Highway Trust Fund and a short-term replenishment to ensure states can keep road construction and repaving projects going for the rest of the year.

Running Dry

The current two-year funding authorization for the trust expires Sept. 30, though the fund is projected to run dry by the end of August, Foxx said.

Congressional negotiators have shown little appetite for raising the 18.4 cent-per-gallon gas tax, which the fund now relies on for most of the $50 billion-a-year in federal monies for highway, bridge and mass transit projects. The tax hasn’t been raised since 1993 even as the cost and pace of construction has risen, contributing to the fund’s current squeeze.

Other alternatives, such as a Senate plan for a short-term, $9 billion infusion through tax policy changes, have drawn scant support from Republicans.

Foxx used the breakfast to make the case for legislation drafted by the Obama administration, the Grow America Act. The four-year, $302 billion measure would raise the level of spending on highways and mass transit, paid for through changes in corporate tax structure.

Alternatives Welcome

The administration plan is fully paid for and reflects policies that are supported by both major political parties, Foxx said. The president is open to alternatives, although it’s not clear there’s another plan that can draw enough votes to pass the two chambers of Congress, he said.

“Our bill provides an answer that is politically feasible with the Congress we have right now,” Foxx said. “It gives us four years of certainty. It gives us time to breathe.”

Besides a funding mechanism, the administration’s plan includes ways to create more capacity by getting traffic to move faster and to increase use of public-private partnerships, Foxx said. It would open parts of the Interstate highway system to tolling, if requested by state governors and approved by the Transportation Department, he said.

The Highway Trust Fund was established in 1956 to finance the U.S. Interstate Highway System, other roads and bridges. It was expanded in 1982 to include mass transit projects.

General Motors

Until Congress resolves the potential shortfall, payments will go out based on the formula established under U.S. law that apportions highway funding to the states, according to a Transportation Department fact sheet. Reimbursements will be limited to the revenue brought in by the gas tax during each two-week period, Foxx said.

Foxx during the breakfast also touched on other topics, including the General Motors Co. (GM) recalls, saying he felt safe riding in his government-issued GM-made Chevrolet Suburban.

GM, which had already recalled about 20 million vehicles this year, yesterday called back 8.45 million more, including older models to fix “unintended key rotation.” The company and its main safety regulator have been criticized by Congress for waiting years to address ignition flaws.

Foxx defended the National Highway Traffic Safety Administration’s handling of the GM recalls, noting the agency imposed the stiffest civil fine in agency history and negotiated unprecedented oversight of the automaker in the coming years.

“We’re going to keep putting the screws on them until they get it right,” Foxx said.

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net; Romaine Bostick at rbostick@bloomberg.net Romaine Bostick

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