The financial outlook for the Highway Account of the Highway Trust Fund is dire, a representative of the Transportation Construction Coalition has stated, and immediate action is needed to prevent a substantial shortfall in these funds.
John McCaskie, chief engineer of Swank Associated Companies, testified before the U.S. Senate Subcommittee on Transportation, Housing and Urban Development that if highway investment and construction does not get the money it was guaranteed, many projects will have to be put on hold.
“When Congress enacted the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users—or SAFETEA-LU—in August 2005, guaranteed funding for the federal highway program was set at the highest annual levels for fiscal years 2005 through 2009 that could be supported by projected Highway Account resources,” McCaskie said. “Not only did the bill spend all the projected revenues into the Highway Account through 2009, it also spent down the accumulated cash balance in the Highway Account, envisioning virtually no cash reserve when SAFETEA-LU expires on September 30, 2009.”
Overly optimistic revenue projections have led to the Highway Account’s expected revenues being $3.7 billion below budget in fiscal year 2009, McCaskie said. The Bush administration’s solution is to cut the budget from $41.2 billion to $39.4 billion, and let the Highway Account borrow the remaining money from the Mass Transit Account, he added.
“The administration’s proposal is a band-aid,” McCaskie said. “Unfortunately the patient needs surgery. Their plan fails to address the core issue of insignificant Highway Account revenues. The Transportation Construction Coalition opposes it because it perpetuates a zero-sum mentality by transferring resources from one mode of transportation to another.
“The transportation construction industry is concerned we may be facing a ‘perfect storm’ set of conditions that could lead to a substantial downturn in the construction of highways, bridges, transit and other transportation facilities,” he added.
McCaskie said that the best way to deal with the deficit would be to inject additional revenues. He spoke of a three-part plan, introduced by Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Republican Charles Grassley (IA), called the American Infrastructure Investment and Improvement Act, S. 2345. The plan would compensate the trust fund for emergency highway spending since 1998, suspend exemptions from the federal motor fuel taxes for six months and reduce motor fuel tax evasion.“The proposal would generate an estimated $5.1 billion for the Highway Account between now and the end of FY 2009, which would be sufficient to support a $41.2 billion federal highway investment in FY 2009 as called for in SAFETEA-LU and possibly provide a small cash cushion for the SAFETEA-LU reauthorization process,” McCaskie said. “We strongly support this proposal, even though it is temporary, and urge all members of Congress to support enactment of the Senate Finance Committee proposal.”