The federal government is poised to shut off funding for one of the biggest road construction and maintenance seasons in Vermont’s history. At stake is $100 million in federal funds and 38 projects — about a third of the work slated for this year.
Congress this week will take up a bill to address the $9.7 billion shortfall in the Highway Trust Fund, but the proposal is a temporary fix, according to Rep. Peter Welch, D-Vt. If Congress doesn’t find a way to shore up the fund before the August recess, the money will run out and state transportation projects around the country will come to a grinding halt.
Welch says the Republicans’ plan is a “very temporary quote fix” that would only keep the fund solvent through April or May of next year, and would come from a dubious source, namely a “pension smoothing” proposal that would allow corporations to reduce the amount of money they pay into employee pension funds. As the theory goes, corporations would make more profits as a result, which would in turn create a bump in corporate tax revenues, which would be earmarked for the Highway Trust Fund.
The plan is not sustainable, Welch says, and it would hurt workers.
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“Two things would happen down the road,” Welch said. “There would be less corporate income tax revenue and No. 2, the pothole in the highway trust fund would become a pothole in someone’s pension fund.”
Vermont’s sole congressman says the federal government needs a long-term revenue source for highway repairs and construction. He supports a gas tax hike, but did not say by how much the per gallon tax should increase. The national gas tax is 18.4 cents per gallon and has not been increased since 1993. A 10-cent bump has been proposed by House Democrats; the tax would raise $105 billion for the nation’s roads and would cost the average driver about $75 per year, according to a fact sheet from the Associated General Contractors of Vermont.
The American Society of Civil Engineers released a report that estimates the nation’s roads need $2 trillion worth of investment to support a healthy economy. Congress needs to set aside $83 billion a year for roads in addition to current funding, according to the Department of Transportation.
In the past, Congress has been able to come to a bipartisan agreement over how to finance highway repairs and construction, Welch said, because “Vermont has potholes and so does Texas.”
Not this time, he says.
“This is a serious situation right now we’re facing, and it really is exhibit A, regrettably, of congressional dysfunction,” Welch said. “Everybody in Congress knows we need a highway bill. We have to pay for our highways. Potholes do not fix themselves.”
Instead, congressional Republicans have suggested that states should bear more of the burden for highway maintenance and repair, he said.
Welch has signed onto a bill that would close tax loopholes for domestic corporations that are doing business overseas. The tax “expatriation” legislation would divert $19 billion of the proceeds to the Highway Trust Fund and mass transit projects.
If House Speaker John Boehner proposes a sustainable funding source for the fund, Welch said he would vote for it.
Brian Searles, the secretary of the Agency of Transportation, said if Congress doesn’t act before the August recess, the state will have to use temporary funding to cover the cost of current projects. State Treasurer Beth Pearce has authorized up to $15 million in state funds to cover delayed reimbursement costs associated with the federal slowdown in funding from the Highway Trust Fund.
The Agency of Transportation has spent about half of the $195 million the federal government approved.
The federal reimbursement rate is typically 80 percent, Searles said. After Aug. 11, the reimbursement rate will vary between 30 percent and 50 percent, depending on how much each state generates in gas tax revenue every two weeks.
The federal shortfall could lead to layoffs for 970 construction workers and 460 construction suppliers and service providers in Vermont, according to Cathleen Lamberton, the executive vice president of the Associated General Contractors of Vermont.