July 22nd, 2018

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Federal Highway Funding Steers Toward Another Fiscal Abyss
By Frank X. Mullen

How can Nevada’s Department of Transportation plan for multi-million dollar road projects that take years to complete when the amount of federal funding available is so uncertain and national politics so mercurial?

By being nimble. By balancing on the edge of a fiscal cliff that goes away for a short time only to reappear a few years later. They’re used to it.

The problem is perennial: For years, the Highway Trust Fund, made up of the revenues from federal fuel taxes (18.4 cents per gallon of gas; 24.4 cents per gallon diesel), has paid out more dollars to states than it takes in.

Money from the nation’s general fund has covered the shortfall, but only until 2020. According to the Congressional Budget Office, from 2021 to 2026 trust fund revenue is projected at $243 billion, against payouts of $364 billion, an imbalance of $121 billion. That means shortfalls of $19 billion to $23 billion per year.

“We’re hoping the Congress will still address that,” says Rudy Malfabon, NDOT director. “Being that there’s a presidential election year coming up in 2020, it would look pretty bad if they’re talking about infrastructure and at the same time allowing (states to loose transportation funds).”

Malfabon notes that Pennsylvania Rep. Bill Shuster, a co-author of the proposed infrastructure policy, told Nevada officials in May that Congress needs a more stable solution that frequent bailouts of the highway fund. Shuster said that indexing gas taxes to inflation – something that is currently done with state fuel taxes in Washoe and Clark Counties — are some of the options that need to be on the table.

More likely, though, lawmakers will again “patch” the fund, bailing it out for another short time, kicking the can down the road a bit further.

“So we’re hopeful,” Malfabon says. “But if they do rescind that money, we just have to rethink our program. But for now, we are assuming we’ll get what we always received from the feds. If they do rescind the money, it’s not only going to affect 2020, but every year thereafter.”

The Trump administration is pushing for states to assume more of the burden for transportation costs. If the federal money is severely reduced, state and local governments will have to shoulder the burden through increased taxes, user fees including toll roads, or some other revenue source.

Clark and Washoe counties, with their indexed fuel taxes, have already made a shift to more local funding, but that revenue doesn’t come close to covering the 50 percent of the state transportation budget that now comes from federal coffers. “That’s what Nevada and some other states are concerned about,” Malfabon says. “We raised our gas taxes four years ago, but we don’t get credit for that. Here the federal government is trying to promote raising gas taxes at the state or local levels and we’ve already done it in Washoe and Clark counties… We just want to get the credit we deserve for that effort.”

In addition to the trust fund, the federal government also provides other grants for road projects and public transportation programs. Under a new policy, federal money would be capped at 20 percent of the total cost of the projects. That one-size-fits-all plan doesn’t take the vast tracts of Western states into account. “We’ve always had a high (federal) match because so much of Nevada is federal land and you can’t build on it and expand the tax base,” Malfabon says.

He says changes in federal revenue sharing will cause NDOT to be very selective in choosing which projects get a green light. “We still do some projects in Vegas with almost all state funds,” he says. “We use every program dollar that’s available.”

The Silver State utilizes about $300 million in federal transportation funding and another $300 million from state coffers. NDOT is responsible for 1,154 bridges and 5,393 miles of roads. That’s only about 20 percent of Nevada’s roadways, but it’s the part that accounts for 52 percent of auto traffic and 82 percent of heavy truck travel, according to NDOT statistics.

The issuance of bonds, state funding, the participation of regional transportation districts, federal allocations and grants are all part of the picture, he says. As projects are planned, officials look for the best ways to finance them to get as much value for the money spent as possible, he says. As federal policy mutates, state officials continue to adjust priorities and juggle funding sources.

“We have to be realistic,” Malfabon says. “But we are always developing new projects so we have something on the shelf when an opportunity for grants comes out of the blue. We have to be ready and have some projects where environmental clearances have been given and we’ve done some design work. Then we can pull them off the shelf if additional funding becomes available.”

A main rule: federal funding must be used within the fiscal year it is allocated, so if one project stretches into another year, the money can be shifted into another project and not be left on the table. “Use it or loose it,” he says.

“We’re trying to be thoughtful and do the right thing we the money we do have,” Malfabon says. “What’s happening with the Highway Trust Fund is a concern, but we’re hopeful that will be resolved and not just by kicking the can down the road, but a long-term solution.”

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