TRANSPORTATION WEEKLY
BREAKING NEWS UPDATE
HIGHWAY TRUST FUND GOES BROKE, DOT ASKS CONGRESS FOR BAILOUT
FRIDAY, SEPTEMBER 5, 2008 - 1:45 P.M.
The Secretary of Transportation announced today that federal motor fuel tax receipts have dropped so precipitously over the summer that the Highway Account of the Highway Trust Fund will run out of cash in the next few weeks.
As a result, starting on Monday, the Federal Highway Administration will cease its longtime practice of twice-daily electronic reimbursements to states for the payments that states have already made to road contractors.
Instead, FHWA will reimburse states once per week, on Thursdays, and will only give states a pro-rated percentage of their outstanding reimbursement claims based on the amount of cash on-hand in the Highway Account on the day the reimbursements are made. The once-weekly schedule is based on the schedule of payments from the Treasury to the Highway Account for ongoing fuel tax receipts - these payments are currently made biweekly (every other Thursday) but DOT has requested that Treasury change that schedule to once per week.
For example, at the end of next week, if bills submitted by states during the week totaled $1 billion, but only $500 million is on-hand in the Highway Account after the weekly transfer from the Treasury, then each state would be paid 50 percent of the amount of outstanding bills submitted during the week. The following week, the state would get the other 50 percent of their prior week's billing, plus a pro-rated amount of the next week's bills based on the remaining cash on-hand.
As a result of the shortfall, Transportation Secretary Mary Peters said she has reversed her position and is recommending to the White House that the President sign legislation introduced by Ways and Means Chairman Charles Rangel (D-NY) and passed by the House on July 23 that would transfer an extra $8 billion from the general fund of the Treasury to the Highway Account of the Highway Trust Fund. The White House issued a Statement of Administration Policy in July threatening a Presidential veto of the bill. Now, Peters said that she hopes the bill can get to the President's desk by next Friday.
Peters has opposed such a general fund bailout of the Trust Fund in the past, but said that states should not be forced to bear the burden of Congressional overspending. Peters said that "this is not what we believe we should be doing...but we have no choice. If we don't do it, states will suffer and the state programs will suffer. We're simply not willing to let that happen."
H.R. 6532 was referred to the Senate Finance Committee after it passed the House. However, the Senate cannot simply pass H.R. 6532 as is, because the effective date of the $8 billion transfer in the House-passed bill is September 30, and DOT wants the bill changed so that it takes effect immediately.
The Senate being the Senate, quick passage of the bill will either require the unanimous consent of all 100 Senators (including such critics of the bailout as Jim DeMint (R-SC) and Tom Coburn (R-OK)) or else will require Senate Majority Leader Harry Reid (D-NV) to spend all of next week trying to invoke cloture and pass the amended bill.
Today's news came as a big surprise, since just five weeks ago, on July 28, the Office of Management and Budget released its 2008 Mid-Session Review that projected a $4.3 billion cash balance in the Highway Account as of September 30, 2008. DOT officials said that actual June and July gas tax receipts and projected August and September gas tax receipts have dropped by $3.1 billion since July 28, and higher-than-expected outlays made up the rest of the shortfall.
Much more coverage in next week's Transportation Weekly.