The federal government will start reducing road and transit payments in August, potentially leaving states scrambling to cover the gap.
The cuts are expected to begin in the first week of August, when there will only be about $4 billion left in the Highway Trust Fund, according to the Department of Transportation.
The trust fund is supposed to reimburse states for their expenses, but DOT Secretary Anthony FoxxAnthony Renard FoxxBusiness, labor groups teaming in high-speed rail push Hillicon Valley: Uber, Lyft agree to take California labor win nationwide | Zoom to implement new security program along with FTC | Virgin Hyperloop completes first test ride with passengers Uber, Lyft eager to take California labor win nationwide MORE said the trust fund will have trouble doing so next month, just as many families hit the roads for summer vacations.
He said his department will stop reimbursing states when the bills come.
"States will be paid not as they sent their bills in, but every two weeks as money from the gas tax comes in," Foxx said at a breakfast sponsored by The Christian Science Monitor. "This is we believe the most equitable approach, but there is to be very clear, no good option when we're talking about a trust fund that is running short in supply of dollars."
The announcement comes with Congress at a standstill over approving new funding for the nation's highways and bridges. The Highway Trust Fund, which is supported by the 18.4 cents-per-gallon gas tax, is set to go bust in August.
Business groups back increasing the gas tax to fund work on aging U.S. roads and infrastructure, and two senators in June offered support for a gas tax to pay for highway projects.
But overall, there has been little interest in Congress for raising the tax, and lawmakers have struggled to come up with other funding.
The gas tax has not been increased since 1993, and cars are becoming more fuel efficient every year, exacerbating the funding gap.
Foxx said Tuesday that the Obama administration has given lawmakers ample warning about the transportation funding problem.
"We began in January with a ticker on our website that basically gave the public an up-to-the-minute view of how the Highway Trust Fund is performing," he said. "At that time we predicted that the Highway Trust Fund could run dry in August of this year. ... As we predicted back in January, the time's almost up."
Foxx added that the reductions in transportation payments could become even more severe if Congress allows the gas tax authorization to expire in the fall.
"If we get to Sept. 30 and there hasn't been a funding solution and there hasn't been a reauthorization extension at a minimum, we will not be able to spend money even if we have it," he said. "That's another part of the crisis."
Foxx and President ObamaBarack Hussein ObamaEbay founder funding Facebook whistleblower: report Emanuel defends handling of Chicago police shooting amid opposition to nomination McAuliffe rolls out ad featuring Obama ahead of campaign stop MORE have pushed Congress to approve a four-year, $302 billion proposal to address the transportation funding gap. Obama proposal relies on using approximately $150 billion from a corporate tax reform package that is unlikely to be approved by lawmakers this year.
Foxx said Tuesday that the Obama administration was open to other ideas for paying for the infrastructure spending, if Congress could reach an agreement on one.
"If Congress comes up with a different combination, another formulation to get there, we've said that we'll listen to what they have to say, but they have to speak with one voice," he said.
The House and Senate have each put forward proposals to extend transportation funding in the short-term, with the upper chamber suggesting an $9 billion bill to carry infrastructure spending through the end of the year and the House proposing tying a year's worth of funding to cut backs at the U.S. Postal Service.
Foxx urged lawmakers on Tuesday to focus on a longer-term fix, however.
"As a country, we've got to stop playing small ball with transportation because it is so critical," he said.
Transportation advocates have pushed lawmakers to increase the gas tax for the first time in two decades to close the shortfall, but Foxx said Tuesday that he did not think lawmakers would be willing to increase the amount paid by drivers in the middle of an election year.