U.S. Secretary of Transportation Mary E. Peters announced today that the Highway Trust Fund is paying out far more money than it is getting in, and needs an immediate $8 billion infusion from the government’s general fund or it could be down to zero as soon as the end of this month.
According to Peters, the Dept. of Transportation and the President have warned of a shortfall in funding for the past three years, and the unexpected decline in gas tax revenue during the summer accelerated the shortfall. Peters said she was highly critical of Congress’s inaction to find a long-term solution, commenting that “members continued to earmark, continued to divert transportation dollars to lighthouses and museums, and continued to spend like there was no tomorrow.
“Outlays are now expected to exceed receipts by more than $8 billion for fiscal year 2008,” Peters said. “In September alone, we expect the Highway Account will take in $2.7 billion but have reimbursement requests totaling $4.4 billion. At current spending rates, we will start the new fiscal year on October 1 with a zero balance in the Trust Fund, and will continue to spend more than we take in.
“The urgency of the situation was heightened earlier this summer when we began to see significant and sustained declines in vehicle miles traveled (VMT),” Peters added. “For the first time in history, VMT dropped more than 50 billion miles over eight months. The less Americans drive, the less gas tax revenue is collected. And with Americans seeking greater fuel economy and taking steps towards conservation, this trend is likely to continue even if highway travel begins growing again.”
In response, Peters asked the Senate to pass its version of H.R. 6532, introduced on July 17, 2008 by Rep. Charles Rangel (D-NY). The bill, which has already been passed by the House of Representatives, would transfer $8.017 billion in Treasury funds not otherwise appropriated to the Highway Trust Fund effective September 30th. She said the President could immediately sign this bill.
The support for H.R. 6532 is a significant departure from the Administration’s previous position on the bill. In July, the Office of Management and Budget stated that it is “both a gimmick and a dangerous precedent that shifts costs from users to taxpayers at large” while saying it “unnecessarily increase[d] the deficit and would place any hope of future, responsible constraints on highway spending in jeopardy.”
“Make no mistake,” Peters said. “This is far from an ideal solution. Taking money from other pressing national priorities to plug a hole caused by poor fiscal discipline sets a dangerous and disturbing precedent. But the state of the Highway Trust Fund has now moved from a theoretical to a practical problem, and States should not have to suffer the consequences.
“If the $8 billion is not approved, we would be in a position some weeks of not being able to pay for new requests,” Peters added. Federal Highway Administrator Tom Madison said that the agencies will work with each state to best prioritize projects to find the most equitable way to distribute the available resources.
Phyllis F. Scheinberg, DOT Assistant Secretary for Budget and Programs & CFO, added that DOT has only been receiving about $185 million a day in revenues while paying out as much as $250 million, as increased outgoing funds is normal near the end of the summer when states are looking to do construction.
“We’ve always had a balance in the trust fund,” Scheinberg added. “But we’re about to be living from treasury payment to treasury payment.”
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