Nearly $9 billion in highway contract authority previously allocated to state highway programs was cut as per a funding take-back provision of the 2005 SAFETEA-LU law Sept. 30. With the rescission,state DOTs lost millions in funding restricting their ability to delegate highway projects under contract. This could also affect Federal Highway Administration (FHWA) programs that usually allocate funding into transportation programs.
In the past, rescissions have been more flexible, allowing states to decide which spending categories to reduce. Wording in the Energy Independence and Security Act of 2007 made the SAFETEA-LU rescission much less flexible. States must now reduce each spending category by a specific amount, which is meant to bring each state's share of highway funding more in-line with the amount of gas tax dollars paid into the system by each state.
The rescission does not affect projects that are already under way, says Kristi Jamison, community relations coordinator for the Missouri DOT, which lost $202 million due to the federal take-back. The department has already received authority to spend federal funds on current projects, but future projects are delayed until additional funding becomes available.
Individual states lost between $34 million (Washington, D.C.) and $785 million (California), according to the FHWA's official rescission notice. Because the SAFETEA-LU provision was passed four years ago, states knew in advance that if the rescissions weren't repealed before Sept. 30, they would need to figure out what money to obligate where before the fiscal year ended. If a DOT did not obligate money toward a project before the rescission went into effect, they lost it.
"FHWA did extensive outreach with states to help ensure they were well prepared to manage the rescissions required by SAFETEA-LU," says Cathy St. Denis, FHWA associate administrator for public affairs.
The nearly $8.7 billion in take-back funds has accumulated over the past several years as states were required to set aside a small portion of their annual funding. Congress does this as a way to create budgetary flexibility. States had been counting on those funds because other revenue sources have become less stable.
Programs that were affected the most include congestion mitigation and air quality improvement, interstate maintenance, and surface transportation enhancements for areas with populations of 200,000 or more.
A proposed bill in Congress, though, could alleviate problems for highway spending. The six-year, $450 billion Surface Transportation Authorization Act of 2009 proposed by Rep. James Oberstar (D-Minn.) has the potential to create thousands of jobs and defer the decision on how to properly renew the program until after 2010 congressional elections. The plan would basically borrow from the funds before it would be put in place. But with Congress consumed by healthcare reform talk, the bill could be delayed until after the elections.
The only way to resolve the impacts is to directly restore the funding lost by the rescission, says Pete Rahn, director of the Missouri DOT. "The needs we have today are neither small nor short-term. We desperately need a sufficient and stable transportation program."
Congress passed a three-month funding cover in September.