June 2, 2009 / 6:08 PM / 11 years ago

UPDATE 2-Obama tells Congress US highway fund near empty

(adds Obama adminstration, Boxer, by-line, changes headline)

by Lisa Lambert and John Crawley

WASHINGTON, June 2 (Reuters) - For the second time in a year, the fund supporting U.S. highway repairs and construction will run out of money, members of Congress said on Tuesday, following briefings from President Barack Obama’s administration.

“We recently learned that the Highway Trust Fund will run out of money some time before August of this year, and will require an infusion of $5 to $7 billion to get through the rest of fiscal year 2009,” said Oklahoma Senator James Inhofe at a confirmation hearing for the next federal highway administrator.

Inhofe is the highest ranking Republican on the Senate Environment and Public Works Committee.

Even though the fund has a guaranteed revenue source from an 18.4 cent tax levied on each gallon of gasoline sold in the country, it is in constant danger of depletion. Last summer, the U.S. government had to pump in emergency cash to prevent it from being emptied. Alongside repeating that step this year, the government may have to pour in more money next year.

“Administration officials have estimated that an additional $8 to $10 billion is the amount needed to pay immediate cash needs if the overall program is to be maintained at current funding levels through the end of fiscal year 2010,” said the committee’s chairman, California Democrat Barbara Boxer.

Obama administration officials confirmed the amounts and August timeframe to Reuters, adding they will work with Congress to find a remedy.

In March, Transportation Secretary Ray LaHood pledged that President Barack Obama would not raise the tax, which has stayed at the same level since the early 1990s.

Some say that the tax’s constant level has created the fund’s current shaky state, while others contend rising gasoline prices and more fuel-efficient car designs have pushed down gas purchases and, with them, tax collections.

On Monday the Energy Department said retail gas prices had increased for the fourth week in a row, to $2.52 per gallon. It was the first time gasoline surpassed $2.50 a gallon since last October.

Many have looked to the economic stimulus plan enacted in February for repair funds. But Inhofe said threats of a trust fund shortfall are forcing some states to suspend highway work.

“This will be done by canceling new projects and existing contracts that have already been signed, in addition to slowing down projects that have already broken ground,” he said. “Clearly this would have a detrimental effect on the economy and will negate any gains made by the stimulus.”

Last month, Boxer told Reuters the gas tax will be included in the broad transportation spending bill Congress is currently drafting. Boxer, who will marshal the bill through the Senate, also said it is “very important” to index the tax to inflation.

The Senate is also considering raising the tax on diesel, changing exemptions to the gas tax given to certain groups, taking a percentage of customs duties, relying on private finance and charging drivers fees based on Vehicle Miles Traveled.

additional reporting by Tom Doggett

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