DOT 128-08
Contact:  Brian Turmail, Tel.:  (202) 366-4570
Friday, September 5, 2008 

U.S. Transportation Mary Peters Announces Steps to Delay Highway Trust Fund Shortfall, Calls on Congress to Pass Legislation to Address Problem

Trust Fund Fix Needed Because Congress Ignored Three Years’ Worth of Warnings 

            U.S. Secretary of Transportation Mary E. Peters today directed the Federal Highway Administration to take immediate steps to protect the solvency of the highway account of the Highway Trust Fund and called on Congress to act quickly to finally address this long-predicted problem. 

            “Time and again, the President has warned Congress of the pending shortfall and submitted fiscally prudent budgets to close the gap,” said Secretary Peters.  “Americans cannot afford to have Congress play ‘kick the can’ with highway funding for another year, another month, or frankly, another week.” 

She called on Congress to provide immediate short-term relief by passing pending legislation, already approved by the House of Representatives, that would make an additional $8 billion available for the highway trust fund.  She urged Congress, however, to avoid adding pet projects, new earmarks or unrelated provisions on the “must pass” legislation and to get the bill done by the end of next week.           

The Secretary said the legislation was needed now because Congress had failed to heed over three years of warnings from the President and the Department about the long-predicted highway trust fund shortfall.  She added that the recent and sudden decline in American driving and the resulting decline in gas tax revenue during the summer had accelerated the predicted shortfall.   

The Secretary said that, in order to allow for continued highway payments to states while Congress acts, the federal government would begin making reimbursements to states on a weekly basis starting next week.  In addition, she said the agency would make funds available on a pro-rated basis.  For example, if there are only enough funds to cover 80 percent of requests, the highway agency will pay only 80 percent of each. 

            Secretary Peters added that states would receive the balance of the funds in the following week, and then any new requests would also be dealt with on a pro-rated basis.  She added that the Department will also review its personnel and purchasing policies and consult with other federal agencies receiving highway funds to find ways to free up additional funding for reimbursing state partners.

As recently as July, the Administration opposed the House Trust Fund legislation, in part because the $8 billion would come from the government’s general fund.  However, the recent decline in federal gas tax revenue requires immediate action on legislation that has already passed the House to ensure states are not adversely affected.   

Secretary Peters noted that today’s problem would have been avoided had Congress acted on the President’s fiscally responsible proposal from last February to transfer funds from the highway trust fund’s mass transit account, which has a surplus.  That measure would not have affected current transit investments at all, the Secretary added.   

“Taking money from other pressing national priorities to plug a hole caused by poor fiscal discipline sets a dangerous and disturbing precedent,” the Secretary said.  She added, though, that “states are working hard to keep the nation’s bridges and roads in good repair and deserve better than IOUs from Congress.” 

The Secretary said it was time to fundamentally reform the nation’s scattered approach to transportation.  She said Congress should do away with billions in annual earmarks and consolidate the over 100 special niche programs that require states to slice and dice federal transportation funds to do things like build museums and restore lighthouses.  She noted that the Administration issued a comprehensive transportation reform proposal along those lines several weeks ago.  

To avoid future shortfalls, the Secretary said it was time to embrace new funding mechanisms that respond to today’s transportation challenges and are in keeping with national energy policies.  “The current approach may have made sense 50 years ago, but it is ineffective and unsustainable when we are trying to reduce congestion and encouraging Americans to embrace more fuel-efficient cars,” she noted.

Immediate Steps to Address the Projected Shortfall of the Highway Account of the Highway Trust Fund

We have been spending more money each year than what we collect from federal gas taxes and other Trust Fund revenue sources.

Ø      Fuel tax receipts, the main source of revenue for the highway program, have been significantly lower than expected for several months.  Coupled with high spending during the peak of the highway construction season, the reduced receipts caused the balance of the Highway Trust Fund to decline more rapidly.  In September alone, the Highway Account will take in $2.7 billion but have reimbursement requests totaling $4.4 billion.

Ø      The shortfall will prevent timely full payment of bills from Federal Highway Administration to state grantees, but will not in any way shut down the programs or the agencies funded from the Highway Account.

A shortfall has been forecasted by the Administration for several years.

Ø      In February 2006, President Bush warned Congress of the looming shortfall and asked members to take swift action to address it.  Congress did nothing.

Ø      In February 2007, the President again warned about the upcoming shortfall and asked Congress to take fiscally responsible measures to close the gap.  Congress did nothing. 

Ø      For the past 3 years, Department officials repeated this message through countless speeches, Congressional hearings, and media interviews. 

Ø      Earlier this year, the President and the Department again warned Congress that the looming shortfall must be addressed.  Again, Congress did nothing.

Ø      The Department proposed a fiscally responsible solution that would make it possible to cover the projected shortfall by making repayable advances from the Trust Fund’s Mass Transit Account without affecting the transit funding commitment under SAFETEA-LU.

On September 5, 2008, Secretary Peters announced immediate steps designed to stretch out Highway Trust Fund revenues.

Ø      Effective September 8, the Federal Highway Administration will begin making weekly reimbursements, rather than the current twice daily reimbursements.

Ø      These weekly reimbursements will be made on a pro-rated basis.  For example, if the funds available in the highway account to covers 80 percent of the requests received, 80 percent of each reimbursement will be paid.

Ø      The following week, the balance of unpaid requests from the previous week will be paid providing similar, pro-rated reimbursements for the new requests received that week. 

Ø      The Department is taking action to streamline personnel and purchasing policies to further slow the rate of depletion and will consult with other federal agencies funded by the Trust Fund to make the most of every available dollar.

Secretary Peters called on Congress to finally address the challenge with…

Ø      A short term fix:  Congress must approve a clean bill that provides $8 billion in funding to cover the shortfall by the end of next week. 

Ø      A midterm fix:  Congress needs to pass a fiscally responsible and effective transportation spending bill for next year that is free of waste and earmarks. 

Ø      A long term fix:  Congress needs to work with the Department to reform our nation’s current scattered approach to transportation which includes new funding mechanisms to respond to today’s transportation challenges.

Timeline of Congressional Inaction

2006

President Bush’s 2007 budget projects a $2.3 billion cash shortfall in the Highway Account of the HTF in FY 2009, and urges Congress to address it.

·          “[B]alances are on a downward slope,” U.S. DOT Secretary Norm Mineta says. “I know that this committee is aware that the balances in the Highway Trust Fund are on a downward slope. And there is a growing consensus that we will need to look beyond traditional gasoline taxes to finance 21st Century transportation needs.” (U.S. DOT Secretary Norm Y. Mineta, House Transportation and Infrastructure Subcommittee on Highways, Transit and Pipelines, Testimony, 3/16/06)

CONGRESS FAILS TO ACT

2007 

President Bush’s 2008 budget to Congress again projects a $2.3 billion cash shortfall in the Highway Account of the fund and proposes measures to narrow the shortfall to $238 million. 

·          Secretary Peters testifies at three Congressional budget hearings, noting:  “We continue to be concerned in particular about the solvency of the Highway Account in the Highway Trust Fund.  Our projections suggest that spending may outpace receipts before the end of fiscal year 2009.” 

In July, the Administration revises shortfall projection for to $4.3 billion for the Highway Account.    

·          Secretary Peters sends a letter to Appropriations Committees emphasizing the need spending restraint.  Secretary Peters says the OMB figures are “a stark reminder that we need to reevaluate our policies for funding and operating the nation’s surface transportation network.” 

Secretary Peters testifies before the House Budget Committee and warns of the impending shortfall.  “There is intense focus right now on the sustainability of the Federal trust funds that support this increasingly flawed model.  On the highways and transit side, we are currently spending billions of dollars more than we collect in tax revenues.  As a result, the Highway Account of the Highway Trust Fund is projected to experience a substantial cash shortfall. 

·          “Resolving the short- and long-term challenges related to the Highway Trust Fund” is a top priority of the Department, (USDOT Inspector General Calvin Scovel III, Senate Committee on Commerce, Science and Transportation, Testimony, 10/18/07) 

·          Congressional Budget Office warns, “The balance in the Highway Trust Fund will be exhausted at some point….” (Congressional Budget Office Deputy Director Robert A. Sunshine, House Committee on Budget, Testimony, 10/25/07)
 

INSTEAD OF ACTING TO REDUCE THE SHORTFALL, CONGRESS INCREASES SPENDING BY BILLIONS.

2008 

President Bush’s budget projects a shortfall of $3.1 billion and requests legislative authority for repayable advances from the Mass Transit Account to cover the shortfall.   

·          Secretary Peters testifies three times before Congress on the FY 2009 budget, emphasizing the instability of the highway trust fund.  “To honor that commitment [made by SAFETEA-LU], even with an anticipated shortfall in the Highway Account balance of the Highway Trust Fund, the President is requesting temporary authority to allow ‘repayable advances’ between the Highway Account and the Mass Transit Account in the Highway Trust Fund. This flexibility will get us through the current authorization without any impact on transit funding.”  

·          Secretary Peters tells the Senate EPW Committee, “It is clear that we are crawling across the finish line, with the Highway Trust Fund’s short term future unclear and its long term future in serious jeopardy.” 

·          Vehicle Miles Traveled declines for eight straight months.  Secretary Peters stresses the implications of the decline on the Trust Fund and the need for reform.  

·          In July, Secretary Peters unveils a plan to “Refocus, Reform, and Renew” the nation’s approach to transportation warning that the country can no longer count on the gas tax to fund the Highway Trust Fund. (Atlanta, GA, 7/29/08)  

·          In August, Secretary Peters holds media events in Miami, Fl, Houston, Tx, St. Louis, Mo., Charlotte, N.C., and Somerville, Mass., warning of problems with the Highway Trust Fund if we continue to rely on gas taxes.  

CONGRESS FAILS TO ACT