Construction Firms, States Fret as Highway Patch Nears Lapse

Some states are struggling to plan future road and bridge projects without assurance that long-term federal funds will be available in the coming months.

With less than two weeks before a short-term extension of federal transportation programs expires, and perhaps only months before the Highway Trust Fund runs out of money, state officials and industry representatives worry more costly and disruptive delays are on the way.

“We just don’t have any assurance of what federal funds will be available and when they’ll be available,” said Susan Howard, program director for transportation finance at the American Association of State Highway and Transportation Officials. “Is that federal investment going to be there after October 31?”

Contractors are facing declines in construction jobs and other consequences from project delays. Some lettings, or contract openings, are supposed to start Nov. 1, Michele Stanley, vice president of government and regulatory affairs at the National Stone, Sand & Gravel Association, said. Her members are hearing that some states are deciding now whether to delay them or use more state funds upfront.

The Senate passed a bipartisan infrastructure bill (H.R. 3684) in August, which would reauthorize surface transportation programs for five years. A House vote, expected before the existing program’s Sept. 30 expiration, was delayed due to opposition from progressive Democrats seeking to also pass a larger social spending package.

On Oct. 1, about 3,700 Transportation Department employees were furloughed when the House didn’t take up the broader infrastructure bill. In the following days, lawmakers did what they said they didn’t want to have to do: pass a 30-day extension to keep employees working and money flowing in the short term.

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Industry and lawmakers are warning now that the patch (Public Law 117-44) and any further short-term extensions will hinder highway project and safety planning.

Photographer: Elijah Nouvelage/Bloomberg

Highway construction on Interstate 285 in Sandy Springs, Ga., on July 14, 2021.

In North Dakota, where a short construction season means bidding typically occurs from November to February, projects are already starting to see delays. That often results in higher costs, especially amid supply chain turmoil, said Bill Panos, the director of the North Dakota Department of Transportation.

“We might get to a point where materials become unavailable to us, and that would delay projects. So the sooner that we get these federal dollars into the states, the sooner the states can bid the projects and get them to the field, the better,” Panos said.

‘Stopgap to Stopgap’

The current stopgap measure is the 16th short-term highway extension since 2009. Transportation stakeholders are warning against further stopgap funding bills, which in the past have occurred consecutively.

“While I supported the extension, these programs cannot operate effectively while jumping from stopgap to stopgap,” Sen. Shelley Moore Capito (R-W.Va.), ranking member of the Senate panel that oversees highway programs, said after the most recent extension passed.

House Majority Leader Steny Hoyer (D-Md.) said in a “dear colleague” letter on Oct. 16 that the House is aiming to consider the infrastructure and reconciliation bills during “this work period” since the extension of surface transportation programs ends after Oct. 31. “Discussions continue to move forward,” he wrote, but didn’t set a date for a vote.

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The Virginia Department of Transportation is “concerned by the uncertainty and risks that short-term extensions and authorizations present,” said Emily Wade, assistant director of communications at the agency. The administrative effort needed to manage federal revenues under an extension is “significant,” she said.

Some states haven’t yet felt any impact from the 30-day patch, but are worried about a longer series of stopgaps. In Michigan, transportation officials think they can handle the budget and projects in progress, or soon to be let, in the near term without delays, state Department of Transportation spokesman Jeff Cranson said.

But if there are numerous short-term extensions, “then there could be a growing list of concerns, questions, and delayed decisions and projects,” he said.

Any delay of the broader infrastructure bill is a “missed opportunity” to start to implement it, said Russ Martin, senior director of policy and government relations at the Governors Highway Safety Association. He pointed to a need for the bill’s increased highway safety funding and a directive requiring drunk-driving prevention technology in cars, at a time when traffic fatalities are rising.

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Iowa officials want to plan for the higher funding available in the stalled infrastructure bill, but are stuck planning multi-year construction work based on current funding levels, said Stuart Anderson, a director of the state’s Department of Transportation.

‘Looming Fear’

There are also growing concerns about when the Highway Trust Fund, the main source of federal money for highways and transit, will run dry. Receipts from the motor fuel tax — the fund’s main source of revenue — have been high enough to stave off insolvency in recent months, but are inadequate to support the fund’s outlays over the longer term.

AASHTO’s Howard said there’s still a “looming fear” that FHWA may have to limit federal reimbursement from the trust fund if there isn’t a long-term solution. The short-term extension didn’t include additional general fund money, but Howard said that there soon may be a “point where that’s not possible anymore.”

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The uncertainty comes at a time when state and city budgets are already stretched. A new report from the National League of Cities found that about half of city finance officers said infrastructure is the factor “most hindering” them from balancing their fiscal 2021 budgets. Many cities halted some infrastructure projects during the pandemic because of budget limits, and are continuing to struggle to fund them, the survey released this month found.

“Continued and heightened uncertainty involving long-term federal authorization is occurring at a key time of the year when planning for the 2022 construction season and our 2023 program updates are underway,” Alexis Campbell, press secretary at the Pennsylvania Department of Transportation, said in an email. “Our already-strained budget is being further strained to continue on-going work and cover gaps and shortages due to delays in federal actions.”

To contact the reporter on this story: Lillianna Byington in Washington at lbyington@bloombergindustry.com

To contact the editors responsible for this story: Sarah Babbage at sbabbage@bgov.com; Fawn Johnson at fjohnson@bloombergindustry.com