While Congress Stalls, States Worry About Highway Funds

By: - June 1, 2012 12:00 am

At 7 a.m. every morning, Mark Foster checks North Carolina’s cash balance for transportation projects. As the state Department of Transportation’s chief financial officer, Foster says keeping an eye on that number is especially important these days, because no one knows exactly how much federal money is coming or for how long.

About a quarter of North Carolina’s transportation money comes from the federal government, and the state receives money from Washington only after it has been spent. “We, like a lot of states, watch our IOUs from the feds very closely, in terms of what we have extended in the state dollar in anticipation of recovering the federal dollar,” Foster says. “You make sure at the end of the day, when you make a commitment, you can pay for it.”

Recently, tracking and planning for federal money has become more difficult.

For three years, Congress has been deadlocked over a new long-term plan to pay for roads, bridges and other surface transportation. Instead, lawmakers have more or less kept the old system running, a little at a time. Meanwhile, the current extension—the ninth since 2009—expires at the end of the month.

But all those temporary extensions make it difficult to plan the types of infrastructure projects that states spend the money on. Nobody wants to run out of cash halfway through building a bridge.

“We are not stopping critical projects,” Foster says, “but we are being cautious about overstepping our headlights … so that we don’t get in fiscal trouble going forward.”

“What we try not to do is to have hard stops and starts just based on what happens in Washington,” he adds. “That’s not fair to our industry and certainly that causes lots of consternation locally as we made priority commitment to certain projects.”

In fact, Berry Jenkins of the North Carolina Association of General Contractors, says several of his members have said they are worried about the continued standoff. He says the uncertainty is taking its toll on the construction industry.

“They’re very hesitant to invest in replacing equipment or obtaining new equipment or adding employees, because there is just no confidence that the funding is sustainable,” Jenkins says. “The federal funding is obviously a big part of the program that they compete for, so this uncertainty is just wreaking havoc with their making business decisions that any business has to make.”

North Carolina contractors may actually be in a better position than contractors elsewhere, says Jenkins, because North Carolina is not as heavily reliant on federal money as other states.

In Nevada, DOT spokesman Scott Magruder says no major projects have been stopped because of the federal impasses. But the agency is keeping its eye on Capitol Hill. “We are monitoring our cash flow,” he says. “There is a potential, yes, where new construction would get delayed down the road.”

The governor of Washington state, Chris Gregoire, said earlier this week she was worried whether Congress would keep funds flowing to states after the current extension expires. If not, she told McClatchy Newspapers, the state’s major projects, including new bridges, “are all at risk.”

Even if Congress finally reaches a long-term agreement, North Carolina’s Foster says, state officials expect no growth in federal funds. That is a big change from the past, when every new federal highway bill seemed to send more money to the states.

In the meantime, cost increases for raw materials are pushing up the cost of building roads, and there is considerable political pressure not to spend any more state funds, Foster says. “We’re kind of getting it from all sides.”

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