The funding hiccup

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"If you do the math, we're talking about more than $153 million a day in lost reimbursement payments for highway projects to the states.” –Larry "Butch" Brown, executive director of the Mississippi Department of Transportation and president of the Association of State Highway and Transportation Officials, on the impact of the current shutdown of federal highway and transit programs

The failure by Congress to pass an extension of the current highway bill – which goes by the unwieldy name, Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, or “SAFETEA-LU” for short – is creating some headaches out there in the transportation community.

Though blame for this situation is being placed on the shoulders of U.S. Sen. Jim Bunning (R-KY) for putting a “hold” on Congress’ $15 billion Hiring Incentives to Restore Employment (HIRE) Act – more commonly called the “Jobs Bill” – a bigger question is why legislation critical to keeping Department of Transportation (DOT) offices open and highway money flowing should be shoved into a contentious “stimulus” bill in the first place.

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A major component of the HIRE Act extended highway and transit programs through the end of 2010, as well as transferring $20 billion from the U.S. General Trust Fund to the Highway Trust Fund in interest foregone since 1998. That’s huge because the Highway Trust Fund is going broke from plummeting fuel tax revenues.

The bill's text also would halt annual payments that the Highway Trust Fund makes to the General Trust Fund as reimbursement for tax-exempt users of the highway program, including state and local fleets and transit providers – as well as repealing an $8.7 billion rescission of states' highway contract authority slipped into SAFETEA-LU that only just took effect at the end of September last year

Now, of course, all of that is up in the air as the “Jobs Bill” got stuck in a debate over deficit spending and probably not a few cantankerous egos as well.

“It’s a bad situation and it's only going to get worse,” said Larry "Butch" Brown, executive director of the Mississippi Department of Transportation and president of the Association of State Highway and Transportation Officials at what was dubbed an “emergency meeting” held in conjunction with the group’s annual Washington Briefing going on in Arlington, VA, this week.

The failure to pass an extension of the highway bill effectively shut down reimbursements to the states for highway projects and transit programs administered by the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA).

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According to FHWA, the shutdown means that $768 million in highway outlays and $157 million in transit outlays for the week ending March 5th could be affected. By today, an estimated 4,000 federal highway, transit, and safety personnel must be furloughed, putting a halt to federal project approvals, safety enforcement and transit starts.

"The timing could not be worse for a lot of reasons," said Susan Martinovich, director of the Nevada Department of Transportation and AASHTO’s vice president. "States need every dollar they can get to improve our aging roads and bridges and put people to work. We should be awarding contracts for spring construction right now, but instead many states are forced to delay and in some cases cancel projects. Congress must act quickly to solve this problem."

But there’s a much larger issue here as well. As reported in my post yesterday, there’s a growing feeling that our nation’s highway policies are in disarray as massive revenue shortfalls from declining fuel tax receipts are coupled to a growing lack of vision when it comes to the needs of freight carriers.

[AASHTO, for one, has called for years to establish a national freight system and strategy. You can see a brief overview of why they consider this so important.]

“We clearly are at a historic point in the development of our transportation infrastructure programs,” noted Jack Basso, AASHTO’s director of program finance and management, in a speech back in January this year.

“There is good news in that we clearly have the Administration putting a priority on infrastructure investment. But the bad news is that the lifeblood of these programs, Federal and State funding, is clearly in crisis,” he stressed. “At the federal level the Highway Trust Fund is just about flat broke and many states are experiencing similar problems. As evidence the Congress has had to shore up the fund by providing $15 billion from the General Fund to remain solvent – the first time in the history of the fund.”

Add to this competing goals, such as climate change regulatory efforts, big declines in vehicle miles travelled (VMT), and a financial crisis the likes of which we have not seen in our lifetime, and you’ve got the recipe for a grade-A transportation meltdown on our hands, Basso noted.

“The financial backbone is all but broken,” he said. “Given the magnitude and diversity of needs, states and local governments should be provided with maximum flexibility to use federal revenues from existing core sources to meet systemic transportation needs.”

Just consider this one factoid: based on inflation, the purchasing power of motor fuel taxes has declined by 80% since 1993. That’s pretty incredible if you ask me.

[Transportation policy as a whole in need of a good top-to-bottom review, something many groups have called for. AASHTO put together what they see as the big needs in the video below back in 2007.]

Of course, the big problem is money: it’ll cost a LOT to improve our bridges and roads, yet fuel tax revenues are declining and the federal government is burdened with truly astronomical deficits.

According to data compiled by The Road Information Program, one-quarter of major urban roadways are in poor condition, 25% of the nation's bridges are structurally deficient or functionally obsolete, and roughly half of the nation's transit buses and rail cars have exceeded their service life or will do so within the next six years.

Yet fixing all that it ain’t cheap; according to data from the FHWA, the cost to repair or modernize the country's bridges ALONE is $140 billion, assuming all the bridges were fixed immediately. The costs of materials used for road, highway, and bridge construction have increased by 55% over the last five years, meaning the current level of national transportation investment would need to DOUBLE in order to significantly improve the country's highway, transit, passenger rail, and freight systems.

Then toss in the impact of congested on roads, highways, and transit systems. They are all increasingly overburdened and congested, leading to quality of life and economic headaches in the form of longer rush hours, costly disruptions in freight movement, and overcrowded transit buses and rail cars. Average motorists alone are losing $249 billion each year as a result of travel on roads that are congested or deficient, with just the top 10 highway interchange bottlenecks causing an average of 1.5 million truck hours of delay each year.

And demand will only increase, further stressing the transportation system. TRIP said increasing demands on transportation, largely due to rising levels of population, travel, and economic activity, result in additional wear and tear on the our nation's roads, bridges, and public transit systems. Since 1990, U.S. population increased by 23% and vehicle travel increased by 41%, with transit travel increasing by 41% since 1995.

Transportation sure faces some big challenges in the years ahead, of which the current funding shut-off fracas is only a mere hiccup by comparison.

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Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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