U.S. highway construction fund could run dry by late August -DOT

WASHINGTON, April 15 Tue Apr 15, 2014 3:54pm EDT

WASHINGTON, April 15 (Reuters) - The main source of federal funds for U.S. highway construction and repair will run dry by the end of August unless Congress acts to replenish it or bolster its fuel-tax funding mechanism, the Department of Transportation said on Tuesday.

The Highway Trust Fund, which has seen tax collections from gasoline and diesel purchases dwindle due to a slow economic recovery and improved vehicle fuel efficiency, had $8.4 billion in its road construction account as of March 28, according to the department's latest update.

"The surface transportation program continues to outlay (funds) at a greater pace than receipts are coming in," the DOT said in a statement on its website.

Based on spending projections through the remainder of the fiscal year, these funds will be exhausted in the last week of August or first week of September, the department added.

Depletion of the account without a funding solution could bring major highway and bridge projects to a halt at the height of the summer road-construction season, idling thousands of workers, snarling traffic and dealing a blow to the economy.

Congress is expected to turn its attention to the issue when lawmakers return from a two-week recess on April 28. Current transportation-funding legislation, which had allowed billions of dollars in general fund transfers to the highway account, is due to expire at the end of September.

Senator Patty Murray, a Democrat who chairs the Senate Appropriations subcommittee on transportation, warned that funding could reach a critically low level as early as July.

"Today's update from the Department of Transportation should be a wake-up call to Congress," Murray said in a statement. "Every day that Congress waits to address this looming crisis, states will be forced to make difficult planning decisions, as many already have, to delay projects that improve roads and bridges in their communities."

A group of Republican and Democratic senators have agreed on some aspects of new transportation legislation, such as that it must be in place for a longer period than the two-year extension that expires on September 30.

But they have yet to resolve the most pressing question of how to prevent chronic shortfalls in fuel tax collections. The United States levies 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel to pay for transportation projects, but fuel use has been lower than projected.

The gas tax was last increased in 1993 and some groups have advocated a rate increase to keep the fund solvent. But this is expected to be politically problematic, especially with congressional elections looming in early November.

President Barack Obama has instead proposed raising new money by ending some tax breaks for businesses, an idea unpopular with Republicans, who want any money from closed tax breaks to lower tax rates. (Additional reporting by Elvina Nawaguna; Editing by Alden Bentley)

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