U.S. Transportation Secretary Anthony Foxx sent a letter to state transportation departments to let them know the steps the Federal Highway Administration will take should the Highway Trust Fund (HTF) drop below a $4 billion balance, which is expected to happen by the end of this month (July, 2014) month without a solution from Congress.
"The Federal Highway Administration will no longer make 'same-day' payments to reimburse states," Foxx said in his letter. "We will distribute incoming funds in proportion to each state's federal formula apportionment in this fiscal year."
Those cash management strategies are set to begin on Aug. 1 for programs funded through the HTF Highway Account. While USDOT is preparing for a HTF shortfall at the end of the month, Foxx said that there is still time for a solution to keep the HTF afloat and eliminating the need for these cash-management strategies.
Tennessee Department of Transportation Commissioner John Schroer said if the federal government does not put additional money into the Highway Trust Fund, revenues received by the state would be decreased by about 30%.
He explained that, under the federal apportionment scheme, “Twice a month they are going to figure out how much money they get and we (TDOT) are going to receive 2.14%,” Schroer said. “Starting Aug. 1, when we submit a bill we will only get 70 percent back.”
Mississippi Department of Transportation Executive Director Melinda McGrath said, "In the event Congress does not add revenue to the Highway Trust Fund, it will be necessary to pull all state-funded maintenance projects open for bid in July. This is something our state can't afford."
Alabama Department of Transportation wouldn't begin any new road construction projects for up to a year because of disruption in federal funds.
The state would get less than 2% of incoming gas-tax revenues under federal apportionment, said Ronnie Baldwin, ALDOT's chief engineer.
At this time, it doesn't appear ALDOT will have to stop any ongoing projects as other states are planning to do, Baldwin said. But the only new work would be those covered under the Alabama Transportation Rehabilitation and Improvement Program, or ATRIP, a program started in 2012 and paid for by state bonds.
As the funding crisis began to appear more likely earlier this year, ALDOT began reducing certain budgets to help free up cash flow during the shortage.
"The ultimate question is how each state is during this time frame from a cash flow standpoint," Baldwin said. "I am confident with the steps we have taken at this point in anticipation of the trust fund problem, we will not have any problems for at least six months -- maybe longer."