DOT to Pro-Rate Trust Fund Payments

Highway fund squeezes out last payments as insolvency looms

States will receive pro-rated payment for their highway programs as the Highway Trust Fund’s (HTF) balance dips toward zero, the Department of Transportation announced.

In a recent letter to state officials, DOT Deputy Secretary John Porcari also said that the department would disburse trust fund payments on a weekly or bi-weekly basis to control cash flow. For many states, DOT has transferred funds daily.

Earlier in June, the Obama administration notified Congress that the HTF will be insolvent by August, and asked for an extension until March 2011 to find some $20 billion to replenish the trust fund. Senate leaders have agreed to the extension, but leaders in the House are defiantly pushing toward a new surface transportation bill.

Porcari said that the Federal Highway Administration has not determined the date it will begin the new cash management procedures.

Al Biehler, chairman of the Pennsylvania Transportation Commission, Pennsylvania transportation secretary and president of the American Association of State Highway and Transportation Officials, called the FHWA’s action “devastating.”

“In the case of Pennsylvania, if the problems are short-term, a month or so, we can probably weather the storm,” Biehler said, since the state has declined to fund for transportation projects that will continue to pay for contractors. “If this continues, and it goes into next year, it’s a very different effect. We will have to cut out construction program from $1.8 billion to $700 million.”

Other states are worse off, Biehlers said. “Many states are living the equivalent of paycheck-to-paycheck. They’re depending on [the trust fund] entirely for cash flow.”

Biehler said it was ironic that the DOT letter came from Porcari, since Porcari received the same letter last year when he was the lead of Maryland’s transportation department. Last year DOT announced its first HTF shortfall. In September, Congress moved $8 billion from the general fund to shore up the trust fund.

In fact, Porcari alerted states earlier this year than DOT did last year, probably because he knew how states would be affected, Biehler said.

Source: Journal of Commerce
   

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