States To Face Delayed Federal Reimbursements

September 28, 2010

The Highway Trust Fund will run out of money as soon as next week. To help cope with this situation, the Federal Highway Administration will cease twice-daily reimbursements to state transportation departments effective September 8, U.S. Transportation Secretary Mary Peters said.

In an Administration position reversal, Peters urged Congress to pass a bill that the president can sign to promptly transfer more than $8 billion of general revenue into the Highway Trust Fund to prevent delays in state payments.

"The cash-flow problem we face is serious," Peters told reporters on a conference call. "Our state partners who are working so hard to keep our bridges and roads in good repair deserve better than IOUs from Congress."

While the Highway Trust Fund began this fiscal year with a balance of $8.1 billion, a combination of reduced travel and motor-fuel tax revenue plus high contract reimbursements in the busy summer construction season has reduced the current balance to less than $1.4 billion, according to FHWA. As a result, the highway fund will now be living paycheck to paycheck from the U.S. Treasury, U.S. DOT officials said.

Beginning next week, FHWA will reimburse states on a weekly basis every Thursday for projects the federal government has obligated to fund. Rather than paying all bills submitted in full twice a day as has been the practice, the weekly payouts will be pro-rated based on the money available. For example, if the Highway Trust Fund’s Highway Account only receives enough tax revenue to cover 70 percent of bills submitted in a week, all reimbursement requests received will be paid out at 70 percent. The following week, according to FHWA, it will pay the balance of money owed on prior weeks’ bills and then begin pro-rating new reimbursement requests received that week.

"As a former state DOT administrator, I understand that the measures I have outlined will be tough on state programs and state budgets," Peters said. "That is why it is absolutely imperative that Congress not waste time. We have got to get states out of the box they have been put in."