A virtual meeting of the American Association of State Highway and Transportation Officials Council on Highways and Streets examined the fiscal impact of the COVID-19 pandemic as well as the different approaches applied by state departments of transportation to handle the ongoing needs of the nation’s surface transportation network.
(Photo above courtesy Michigan DOT)
“One of the things we’ve been doing is working with Congress to show them how state DOTs have been impacted by the COVID-19 pandemic,” explained Jim Tymon, AASHTO’s executive director, during the council’s July 1 virtual conference. “Congress has already acted to provide emergency funding for transit agencies and airports but has not come to the table to help state DOTs. So we continue to make the case that Congress must come in and provide financial assistance.”
The focus of that “financial assistance” continues to be a nearly $50 billion “backstop” original requested of Congress back in April, with a more recent appeal sent to President Trump by a coalition of 44 transportation industry stakeholders on June 5.
That “backstop” is needed to address the shortfall in motor vehicle fuel taxes, toll receipts, and other transportation revenues caused by the dramatic drop in vehicular traffic that has occurred during the pandemic, Tymon noted.
A quick poll found that 39 percent of the state DOT members attending council meeting said their organizations are dealing with that funding shortfall by delaying construction or maintenance projects, while 36 percent are cutting funding from other operations and 11 percent are resorting to furloughs.
A recent report issued by the American Society of Civil Engineers – dubbed COVID-19’s Impacts on America’s Infrastructure – also noted that municipal and state budgets are “re-prioritizing spending” due to falling tax and fee revenues: reducing fiscal support for parks, schools, and other publicly owned infrastructure.
Tymon also noted during the council meeting that it is “very interesting” to see how state DOTs are reacting to COVID-19. “Some states initially shut down [transportation] construction while others accelerated it,” he said. “That reinforces one of our overarching principles, which is that each state is very different in how they handle the day-to-day management of the nation’s transportation system – some felt they had to completely shut down work while others felt it important to keep moving forward, despite the revenue decline.”
Brian Bezio, chief financial officer of the Federal Highway Administration, also spoke during the council meeting and highlighted how both an ongoing decline in revenue and the COVID-19 pandemic are speeding up the shortfall being experienced by the Highway Trust Fund.
“Multiple excise taxes flow into Highway Trust Fund; taxes on gasoline and diesel fuel, plus truck, trailer, truck tire sales taxes,” Bezio explained. “We experienced a significant downward adjustment of $1.3 billion by the U.S. Treasury that has no correlation with COVID-19. Treasury conducts a reconciliation of Highway Trust Fund estimates on an ongoing basis. They are now reconciling January thru March and we expect to see that reconciliation in August. Still, we are still outside of the impact of COVID-19.”
However, he noted that HTF receipts “tie very closely” to vehicle miles traveled or VMT data collected by FHWA and the agency’s most recent VMT data indicates that motor vehicle travel on all roads and streets dropped by 39.8 percent or 112 billion vehicle miles this April compared to April 2019.
“There is a lag in the collection of data – essentially a one-month lag between economic activity and when [HTF] taxes are deposited,” Bezio said. “While [HTF] deposits are trending back up a little bit, they are still way below comparative 2019 levels; we’re down $2.7 billion for the year so far.”
And though he stressed that the HTF “won’t go broke or insolvent,” payouts to states will be “resized” in accordance with tax money coming into it.
“When the [HTF] balance falls below $4 billion is when we start looking at reducing disbursements to the state,” Bezio said. “The last time we approached this situation was in 2014. Our original [COVID-19 impact] model projected a 40 percent reduction [in HTF tax revenues] thru May before then slowly increasing back to normal levels by October 1. Now the balance may start to hover at that $4 billion [level] by the fall and winter months this year.”