Highway trust fund bankruptcy imminent without bailout

The Highway Trust Fund — created in 1956 to fund the U.S. Interstate Highway System and funded via a federal fuel tax on gasoline and diesel fuel — will run out of funds in a few weeks if Congress doesn’t intervene, reports The Atlantic’s CityLab blog. The Department of Transportation, which has been warning Congress since earlier this year of the Fund’s impending bankruptcy, is now planning emergency steps to save the Fund.

DOT secretary Anthony Foxx explained in a report, “This cliff is coming… I’ve been saying it for six months and I’m worried that we may find ourselves running over it.” Foxx explained the measures necessary to save the Fund, which is expected to run into the red in late August. Before then, the Department will “implement a ‘cash management plan’ to parcel out federal reimbursements for state outlays, starting Aug. 1,” reports CityLab.

Foxx explained that the management plan will impact finances for two of the three Highway Trust Fund accounts — the Highway Account, and the smaller Mass Transit Account, which won’t run dry until October. “The Department will continue to take every possible measure to fully reimburse your State for as long as we can,” writes Fox in his letter to states regarding the Highway Account. “However, as we approach insolvency, the Department will be forced to limit payments to manage the reduced levels of cash available in the Trust Fund.”

The DOT will re-appropriate the federal gas tax funds to states in disbursements every two weeks, with “the semi-monthly cash management-plan payments… distributed in proportion to each state’s federal apportionment for the fiscal year.” Read more about the state-by-state breakdown of funds here.

While the report seems drastic, the news it bears isn’t necessarily all that new. As we reported here back in May, the DOT asked Congress to allow it to permit states to add new tolls to Interstate highways. And in February of this year, the Obama administration drafted a $302 billion transportation reauthorization program, which was submitted to Congress in April, where it remains stagnant.

So, what’s the holdup? The White House isn’t willing to pull the politically unpopular move of raising the federal gas taxes, which haven’t been touched since 1993. While the U.S. Chamber of Commerce is in favor of increasing the gas tax — as are two senators from Connecticut and Tennessee who last month proposed a 12-cent gas-tax hike that would bring in $164 billion — the executive branch is against the hike.

“The Administration has not proposed and has no plans to propose an increase in the gas tax,” White House spokesman Matt Lehrich said last month, according to the Huffington Post. “It is critical that we pass a bill that not only avoids a short-term funding crisis but provides certainty and lays the groundwork for sustained economic growth. So we appreciate that members on both sides of the aisle continue to recognize the need for a long-term infrastructure bill, and we look forward to continuing to [work] with Congress to get this done.”

The DOT would require $8.1 billion to run through the end of this year. On a positive note, as CityLab reports, a resolution “that moved the deadline to the end of the year would push it past the November midterm elections, after which solutions like gas-tax increases might stand a chance.” In the meantime, what’s at stake? The longer this funding remains tenuous, the longer plans to address decaying highway infrastructure are likely to remain on the back burner.