This isn’t current news to people in the public works sector, and to nearly every politician, but the Portland Press Hearld’s Jennifer McDermott recently wrote an article about the danger we are facing with respect to the United States Highway Trust Fund. To read the article, click here.
Unless Congress acts, The Highway Trust Fund is in danger of becoming insolvent this summer. This is mainly due to the fact that its main revenue comes for federal gas tax, which hasn’t increased this 1993. The tax, unlike most rates that are based on percentage, is fixed at 18.4 cents per gallon. It doesn’t take an economics professor to know that a fixed rate, which doesn’t change with inflation or with the increase in gas prices, is unsustainable. If only our taxes were fixed on our wages from 1993!
What does this mean for the economy, construction, and the bond business? In our surety world, it means fewer bid, performance, and payment bonds being issued. For contractors, it means less money to spend on highways, bridges, and infrastructure. In fact, the average spending cut is expected to be about 28 percent. The Rhode Island Department of Transportation has already delayed about $67 million worth of projects.
On a more political and macro level, if Congress doesn’t act on this insolvency issue, it could be even worse according to US Senator Jack Reed of Rhode Island. He said partisan gridlock is “threatening to put the brakes on highway spending and transit spending and jobs…We’re on the cusp of a disaster.”
We have seen great momentum in the public works construction arena, and likewise in the surety industry. We are hoping Congress gets this one right to keep these projects moving along.