Transportation chief: US set to ration highway repair funds as of Aug. 1

Transportation Secretary Anthony Foxx warned Tuesday that America’s fund for highway repairs is fast running out of money, and that his agency plans to ration available funds to the 50 states starting in August if Congress does not act.

The fund, with demands that currently far outstrip revenues allotted to it from federal gasoline taxes, has a projected shortfall of more than $15 billion per year, Secretary Foxx said at a newsmaker breakfast hosted by The Christian Science Monitor.

Transportation Department letters to each state outlined the funding cuts that would start Aug. 1, when the highway fund will be too depleted to cover all approved projects.

“This is a crisis that can be avoided,” said Foxx. But “this cliff is coming, [and] we may find ourselves running over it.”

The cliff reference is a pointed reminder that, although the stakes aren't as great as in battles that affect the whole federal budget, this is still a case with a firm deadline for Congress to act – or the consequences for ordinary Americans could be as visible as a traffic jam near a stalled on-ramp project.

Both major political parties say they want to address the issue, but the two sides haven’t reached agreement on how to get the job done.

One new bipartisan bill in the Senate calls for raising the gasoline tax, which has held steady at 18.4 cents per gallon since 1993, even as gains in fuel efficiency have allowed cars to put more miles on the road for each gallon used – and as the cost of road materials has kept rising.

Republicans are generally focused on resolving the problem with an eye on spending restraint, and are opposed to tax hikes (the Senate bill seeks to offset the boost in the gas tax with measures to extend other tax provisions that reduce federal revenue).

Many Democrats emphasize the opportunity to boost a tepid economy with transportation improvements (roads and bridges, but also airports and mass-transit systems). The idea is that such spending creates construction jobs and also invests in infrastructure that businesses need.

Business and labor leaders alike are pushing for a solution. US Chamber of Commerce President Thomas Donahue in February welcomed the idea of raising the gas tax as part of a reauthorization bill for surface transportation, calling it “a smart, fair, and achievable ways to meet our intermediate infrastructure funding needs.”

The Obama administration has its own idea of how to proceed: a “Grow America Act” that would draw funds for highways from a wider overhaul of the way businesses are taxed on foreign income.

Foxx called the administration plan a “plausible” way forward in a politically divided Congress. It’s not clear if plans such as the bipartisan bill backed by Sen. Bob Corker (R) of Tennessee and Sen. Chris Murphy (D) of Connecticut will pass, he added. 

Foxx said the administration is open to considering bills developed by individual lawmakers, but that “until Congress does something collectively, we’re stuck.”

The Grow America Act is a four-year, $302 billion plan that would, among other things, boost highway funding by about 22 percent above 2014 levels. The administration would pay for the bill by supplementing current revenues with $150 billion in "transition revenue" generated by the tax-code shift for businesses.

Although both Senate Democrats and House Republicans generally support the idea of corporate tax reform, the two sides haven’t agreed on the details.

President Obama envisions the tax changes as reaping a one-time windfall of $150 billion, from corporate profits abroad. Those funds could bridge the gap in highway funding for several years.

At the Monitor breakfast Tuesday, Foxx faced questions from reporters about whether the Obama administration is abandoning the notion, long held by many in Washington, that highways can be funded over the long term by user fees, such as the gas tax.

Foxx deflected the questions, saying that “we have a proposal that we think is politically acceptable” for the current Congress, would give at least four years of certainty on state-federal projects, and thus is “the best solution right now.”

“I think there will always be a user fee component to how transportation gets funded,” he added.

Mr. Donahue of the Chamber of Commerce in his February commentary voiced opposition to “any proposal that eliminates the federal role [in highway funding], undermines the 'user pays' principle, or unfairly singles out a specific industry to foot the bill.”

With spending bills hard to pass as November elections draw nearer, some in Congress are hoping to simply patch up the Highway Trust Fund until a new Congress is elected.

Foxx warned, however, that pushing the highway bill into the new year would complicate efforts to get another needed transportation-funding bill – for the Federal Aviation Administration – through Congress in 2015.