DOT: Infrastructure fund bankruptcy will mean 28 percent cut for states

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States will be hit with a 28 percent cut in their infrastructure funding later this summer unless Congress act, Transportation Secretary Anthony Foxx warned on Monday.

The Department of Transportation (DOT) has said that its Highway Trust Fund will run out of money next month, barring a move from lawmakers to close the shortfall. Foxx said in a blog post that bankruptcy would cut into the department's repayments to states for shared transportation projects.

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“For all states ... this means we’ll have to stop reimbursing them as they send in their bills for transportation projects,” Foxx wrote. “Instead, we’ll begin a new process of slower and lower payments.

“The approach we’re taking is a fair way to distribute whatever’s left in the Highway Trust Fund. But that doesn’t mean it‘s a good one,” the DOT chief continued. “There isn’t a ‘good’ option in this situation, and on average, states will see a 28 percent cut in their funding.” 

The 18.4-cents-per-gallon gas tax has long been the traditional source of funding for the transportation fund. But the tax has struggled to keep up with infrastructure expenses as cars have become more fuel efficient in recent years, and the fund now runs a shortfall of $16 billion per year. 

Foxx said Monday that he visited three states last week to deliver a warning to governors about the federal government cutting back on road payments if lawmakers allow transportation funding to dry out.

“Last week, I swung through three states in two days, hopping from Kentucky to Rhode Island and then down the I-95 corridor to Connecticut,” Foxx wrote.

“I wish I could say I was visiting those states to offer help, asking their governors, ‘What more can the federal government do? Where can we invest more in your bridges? How about your roads? Your transit systems?’,” he continued. “Unfortunately, I wasn’t able to ask those questions. Due to inaction in Congress, I was forced to deliver an entirely different message: ‘Soon, you won’t be receiving more transportation funding — you’ll be receiving less.’ ” 

Foxx added that “it might take years, even decades, to feel the full damage of insolvency. 

“If states don’t know if federal funding will be available — or how much — they’ll start to pull projects off the books and halt construction,” he wrote.