July 29, 2014
As discussed in NASBO’s Monday Washington Report, the U.S. Senate is preparing to vote on a short-term fix for the federal Highway Trust Fund (HTF). The full Senate is expected to vote on House-passed legislation that would transfer $10.8 billion into the HTF from the U.S. Treasury’s general fund, which is expected to provide sufficient funding for programs through May 31, 2015; the Senate is also expected to consider several amendments during debate. The fund transfer is needed because the federal Department of Transportation (DOT) has stated that the HTF is expected to dip below the level necessary to fulfill all funding obligations beginning August 1, 2014. If lawmakers fail to take action by this date, DOT has announced that it will implement changes to cash management procedures that may entail slowing some reimbursements to states. This funding uncertainty at the federal level has caused a number of states to postpone some transportation and infrastructure projects. In a recent letter to Congressional leaders, seven state and local associations urged Congress to ensure the continued solvency of the HTF, while also committing to pass a long-term agreement on surface transportation funding.
States are closely monitoring developments at the federal level regarding the HTF because federal funds play a significant role in state transportation funding. While the majority of funds for transportation come from states’ own revenue sources, federal funds account for approximately one-third of total state transportation expenditures, according to NASBO’s latest State Expenditure Report.
In addition to the current issue of transportation funding, the longer term issue of funding capital projects and infrastructure improvements remains important to states. While states’ spending on capital projects involves a number of areas, including higher education, corrections, housing, and environmental projects, the majority of capital spending is directed towards transportation, as noted in NASBO’s Capital Budgeting in the States Report. According to the State Expenditure Report, federal funds comprise over 30 percent of states’ total capital expenditures, with some of the federal funds deriving from the HTF and the rest coming from competitive grants and other funding streams.