Government estimates $20 billion highway funding shortfall

By John Crawley and Lisa Lambert

WASHINGTON (Reuters) - The United States will need up to $20 billion through early 2011 to cover an emergency shortfall in funding for road construction projects, the Obama administration told Congress on Thursday.

The federal trust that reimburses states for road work is nearly broke for the second time in a year as gasoline tax revenues -- its primary funding source -- have declined sharply as higher fuel prices have prompted less driving and more fuel-efficient cars.

"The (Obama) administration has a difficult problem -- a system that can no longer pay for itself," Transportation Secretary Ray LaHood said at a Senate Environment and Public Works hearing. "There is simply not enough money to do what we need to do."

As of now, the Highway Trust Fund will run dry in early September. But officials said the Transportation Department may slow payments to states to keep the account afloat longer.

Congress rescued the fund in 2008 with an $8 billion cash injection.

LaHood has proposed an 18-month extension, through March 2011, of the current law authorizing transportation construction priorities to sort out the funding shortfall and give lawmakers more time to draft a longer-term blueprint with more stable funding sources.

The current law expires September 30.

The House of Representatives is moving forward with a six-year, $450 billion proposal despite the call for a substantial extension while senators with influence on transportation matters, including Environment and Public Works Chairman Barbara Boxer, support LaHood's more deliberate approach.

LaHood said he has met with President Barack Obama's top economic adviser, Lawrence Summers, and budget officials on the question of an emergency capital infusion for the so-called Highway Trust Fund.

"There are a lot of people trying to figure out where to find $20 billion," he said.

Senator David Vitter, a Louisiana Republican, is proposing legislation to tap money from the $787 billion economic stimulus package enacted in February.

But Roy Kienitz, transportation undersecretary of policy, told a House Ways and Means Committee hearing on Thursday that stimulus money was off-limits because of rules on how it can be spent.

The administration opposes raising the gas tax of 18.4 cents per gallon for the first time since the early 1990s -- a politically sensitive issue with 2010 congressional election campaigns in full swing.

The National Surface Transportation Infrastructure Financing Commission and other leading experts have recommended a gas tax hike, But LaHood dismissed it as an option amid deep national recession.

LaHood said it was time for the administration and Congress to consider stepped up private investment and user fees as funding sources.