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Federal funding may diminish in next few months

The problem
The federal gas tax has stayed the same since 1993, while consumer inflation has increased more than 60 percent over those years. With cars becoming more fuel efficient and people driving less in recent years, the Highway Trust Fund is taking in less revenue than it did a decade ago and is now facing a long-term deficit. To avoid cutting transportation funding, Congress has made up the gap between gas tax revenue and spending since 2008 by transferring $55 billion into the Highway Trust Fund. However, the Trust Fund will exhaust these balances this year. In 2015 and beyond the Trust Fund will run an annual deficit of about $15 billion.
 
Unless Congress takes action to put more money into the Trust Fund, the U.S. Department of Transportation (U.S. DOT) expects it won’t have enough cash to pay its bills in August. U.S. DOT will be unable to reimburse Oregon and other states promptly and in full for federally-funded highway projects currently under construction.
 
What will happen as the Trust Fund runs out of cash?
A recent letter from U.S. Secretary of Transportation Anthony Foxx announced the “cash management” techniques U.S. DOT will use as the Highway Account runs down to empty. US DOT has decided to pay each state a share of available money twice each month. Each state will receive only a portion of the money the federal government owes—in effect, forcing states to float the federal government a loan.
 
ODOT estimates this shortage in federal reimbursements to Oregon could run to $40 million or more in some of the peak months of the summer construction season. Based on last year’s reimbursements to Oregon, if Congress doesn’t take action to address the shortfall by the end of November, ODOT could be forced to float the federal government a loan in the range of $50-110 million total.
 
How will this impact projects in Oregon?
For the current construction season, ODOT has sufficient funds in temporary reserves to weather a lapse in federal funding—at least for a couple of months—without having to shut down active construction projects and send contractors and workers home. And ODOT will continue to pay contractors on behalf of local governments for federally funded projects even if U.S. DOT is unable to reimburse these costs, taking on debt on behalf of local governments.
 
However, projects slated to get underway in 2015 may be impacted. If by the end of 2014 Congress has not taken action to provide funding for all of the 2015 construction season, ODOT will have to slow down project bidding schedules for next construction season to ensure that we are not committing to projects that the federal government will not actually fund. This could affect all federally funded projects.