CEDAR RAPIDS | It’s not just potholes, but the cliff that may prove hazardous for Iowa drivers.
Transportation funding is facing a fiscal cliff that could cost the state as well as Iowa cities and counties one half billion dollars and halt new highway and bridge projects.
That’s because authorization for the Federal Highway Trust Fund is set to expire Oct. 1.
Already the impact is being felt at the state and local level, according to the Iowa Department of Transportation, which, like all but 15 states, gets at least half of its construction budget from the federal government.
In the five-year transportation plan the Iowa Transportation Commission approved this week, the DOT warned in a “Dear Iowans” letter that without funding being reauthorized, improvement projects could come to a halt.
However, Sen. Chuck Grassley is optimistic Congress will take action before the highway trust fund runs dry.
There is some support for a stop-gap, six-month funding bill before Congress adjourns for its August work session, he said. Then, Congress would take up a six-year highway funding package either in the lame duck session after the November election or early next year.
“It’s not what we’d like, but it’s better than nothing,” Iowa Gov. Terry Branstad said. “Like Congress oftentimes has done, it will find some way to kind of kick the can down the road.”
Unless Congress acts before August, Stuart Anderson, director of the Iowa DOT Planning, Programming and Modal Division, expects the federal government will begin partial reimbursements for state construction projects.
Depending on the level of reimbursement, he said, the DOT “feels we can mitigate the situation and not have an impact on our construction season.”
A more worrisome prospect, according to Anderson, is Congress doing nothing before the end of the federal fiscal year, Sept. 30.
“Then we will be reimbursed only for projects already approved and underway,” Anderson said. In Iowa, that would be a $500 million reduction in federal highway funds.
The DOT would get about $300 million less, Anderson said. Cities and counties would take a $200 million hit.
If that happens, it’s possible the DOT would have to cut about half of its fiscal 2015 construction program, Anderson said.
The Highway Trust Fund was created by Congress 58 years ago to provide a stable funding source for roads and bridges. Later, it was expanded to include transit and highway safety programs.
The revenue comes from the 18.4-cents-a-gallon federal gas tax, which has not been raised in 21 years, and user fees. Since 1993, highway construction costs have increased more than 70 percent, according to the Federal Highway Administration.
Also, revenue has slowed because of fuel-efficiency, the growth in the use of electric and hybrid vehicles and a decline in miles traveled.
To maintain funding to the states, Congress has transferred $55 billion of general fund revenue to the trust fund over the past six years.
The situation is getting attention, Grassley said. During a Senate Republican caucus meeting Tuesday, senators discussed possible fixes. One proposed a tax on repatriated corporate revenues.
That’s similar to President Obama’s proposal earlier this year for a four-year extension using $150 billion of revenue from a repatriation tax.
However, there’s opposition in the GOP caucus from senators who want to use those funds for a larger tax reform package, Grassley said.
“It took up a big part of our GOP caucus Tuesday,” he said, adding no settlement was reached.
Without an increase in the gas tax or some other source of revenue, Grassley warned that the six-month extension might be $10 billion short of what states were expecting.
The GOP-controlled House has called for making up that difference by eliminating Saturday mail delivery.
“That’s about the only idea floating out there with at least some support,” Grassley said.
The DOT’s Anderson suspects that all 535 members of Congress are getting encouragement to take action because the highway fund impacts most communities and industries.
“They’re definitely hearing from people,” he said, noting that Iowa DOT Director Paul Trombino was in Washington within the past month to press members of the congressional delegation for action.
That’s certainly the case for Grassley. During an early January visit to the Iowa Legislature, Grassley said, the topic came up more than once.
This past week, he said, a delegation from Council Bluffs was in his office seeking support for reauthorization because it would like to see interstate highway improvements there completed.