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Groups Oppose $4 Billion Shortfall in Highway Trust Fund

July 11, 2007

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Officials from several national organizations called for action to address a looming $4 billion shortfall in the federal Highway Trust Fund in fiscal year 2009, following new estimates released Wednesday by the Office of Management and Budget.

The Bush administration released its mid-session budget review Wednesday, which updates the data included in the President's budget released in February. The budget estimate released in February forecasted a $700 million Highway Trust Fund shortfall in 2009. Wednesday's update increases the forecasted shortfall to more than $4 billion dollars.
New estimates from the Office of Management and Budget indicating a shortfall in fiscal year 2009 for the Highway Account of the Trust Fund totaling $3.8 billion. That figure could rise to as much as $4.3 billion if Congress rejects the Bush Administration's proposal to cancel a slated revenue-aligned budget authority distribution of $630 million.
The American Association of State Highway and Transportation Officials (AASHTO), which represents the state transportation departments in Washington, immediately called for action to address the shortfall, as did the Associated General Contractors of America (AGC).
AASHTO Executive Director John Horsley said unless action is taken, the development could trigger substantial cuts in the federal-aid highway program financed in each state through the Highway Trust Fund. "The impact of these shortfalls will be dramatic," Horsley said. "If this massive deficit were to be offset by obligation limitation reductions, it would require reducing the distribution of federal funding to the states by as much as $16.5 billion in Fiscal Year 2009. It takes four dollars in obligation reductions to save one dollar in spending." Horsley said that would mean a cut in the federal-aid highway program from a planned obligation level of $43.2 billion to $26.7 billion. "Clearly, states cannot meet transportation demands in the face of such dramatic cuts," Horsley said. "We must work with the Congress to identify ways to fill these funding gaps."
Stephen E. Sandherr, chief executive officer of the AGC, said, "America's transportation system is the heart of our country's economy and to neglect it is a disservice to our nation. The cuts in FY 2009 from the promised level of $43.4 billion to about $27 billion, would result in a 37 percent reduction in spending on our nation's infrastructure. Neglecting our transportation infrastructure will only make it more difficult for America to compete in the world market."
Sandherr said that because of the spending rate in the HTF, it will require Congress and the president to find additional revenues to plug the $4 billion hole or cut highway funding for FY 09 by an estimated $16 billion. That dramatic reduction in funding would impact all states, because the highway program is financed by gas tax revenues that are deposited into the HTF. If the deficit is not patched, it is estimated that in 2009, California will lose $1.35 billion, Florida would lose nearly $673 million, New York would lose approximately $634 million and Texas will lose more than $1.1 billion.
The mid-session review also increased the forecast shortfall to $9 billion in 2010 and to $15 billion in 2011. Those amounts will also require significant reductions in spending if Congress and the administration cannot agree on methods to plug the funding gap. Transit funding will also be impacted long term, because it too is funded primarily by the HTF.
Sandherr continued, "This budget news comes at a critical juncture for the highway program, and federal, state and local governments will all feel the pinch. AGC has been working with our allies in the state DOTs on solutions to fix the problem, which we have presented to both the administration and Congress."

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