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Disruption in flow of Alaska's $1 billion in federal highway funds feared

Pat Forgey

Alaskans' notorious self-reliance doesn't extend to our roads, where we rely on the federal government to pay the bulk of the bills for constructing and reconstructing the highways and byways of the 49th state.

That dependence could trigger disruptions in Alaska transportation projects. Due to gridlock in the U.S. Congress, funding for the highway trust fund is in jeopardy, threatening payments to states for an array of transportation projects.

"Congress needs to fix the highway trust fund before it runs dry," U.S. Secretary of Transportation Anthony Foxx wrote on his blog this week. That could happen as soon as August, he said.

Alaska has budgeted for $1.2 billion in transportation capital projects in the next fiscal year, with more than 83 percent ($1 billion) funded by the feds.

Low state gas tax

The Alaska Department of Transportation and Public Facilities bids out federally funded projects and then submits bills to the U.S. Department of Transportation as billable work is done and contractors are paid, said Jeff Ottesen, program development director for the state DOT.

"If a project takes two or three years, we would not see the full amount of funds until the final month," he said.

To minimize the amounts outstanding, Alaska submits bills to the feds every two or three days, he said.

If the highway trust fund runs out of money, which it did briefly in 2011, those reimbursements may vanish, Ottesen said.

The highway trust fund is largely funded by an 18.4 cents per gallon federal gas tax, but that tax isn't enough to cover the fund's obligations.

In Alaska, there is also an 8 cents per gallon state gas tax, the lowest in the nation -- such states as California and New York pay about 50 cents a gallon in state taxes. That state tax brings in about $40 million a year, which goes into the Alaska General Fund.

What makes the fate of the highway trust fund so important in Alaska is that each state gets back varying amounts from the feds. Some states recoup less money than their drivers pay in, while other states receive more.

Those are known in the transportation world as "donor" and "donee" states. And Alaska is the king of the donee states, historically getting back $5 to $6 for every dollar paid in.

"We are receiving significantly more than we're putting into the trust fund, as far as the local fuel taxes Alaskans pay," said Rep. Sam Kito, D-Juneau, who is also a civil engineer and closely watches highway construction issues.

Alaska needs more roads than it has, but doesn't have a transportation fund of its own, Kito said.

"Our biggest concern, as far as my mind goes, in Alaska is the fact that we do not have a robust, or even fledgling state transportation system, so most of our transportation funding is dependent on the (federal) highway trust fund," he said.

tight timeline

Because the majority of Alaska's road construction work is done during the summer, Ottesen hopes much of it will be done and paid for before a crisis hits later in the year -- if indeed the fund is not renewed before then. But many final bills from summer construction could also wind up being submitted right when the feds run out of money.

Holding up negotiations over transportation funding are anti-tax sentiments and political infighting. At the same time, influential donor states are seeking changes to the federal funding system that gives them a larger share, even though the amounts going to small-population donee states such as Alaska, Delaware and Rhode Island wouldn't go as far in complaining states -- like California, Texas, New York and Florida -- that have much larger populations.

Alaska has been left in the lurch before when the trust fund ran into difficulty, but the interruption was only brief.

"I don't think Congress was quite as dysfunctional as it is now, with all due respect to them," said John MacKinnon, executive director of the Associated General Contractors of Alaska. "Although, it's kind of hard to be respectful of a body that's so torn apart by partisanship that it can't seem to compromise on issues."

A number of proposals to raise money for the trust fund without violating anti-tax pledges and budgeting rules have been proposed. They range from a foreign tax holiday to encourage companies to bring profits home from overseas or eliminating Saturday mail delivery and taking the money from the U.S. Postal Service.

MacKinnon said the simplest solution is probably an increase in the federal gas tax, which is more of a user fee than a tax.

"That one passes the red-face test, if you pay a portion of what it costs to fill up a tank to pay for the construction or reconstruction of the road on which you are driving, that's really a user fee," he said.

Ottesen said DOT is bracing for reimbursement shortfalls, where bills would only be paid at 95 percent of what was due on existing projects. The missing amount would be paid on the next billing cycle, but then that cycle's bills might only be paid at 90 percent.

That could present a danger for projects slated for fiscal year 2015, he said.

"This could dramatically reduce funds available for new project work, both design and construction," he said.

MacKinnon said there was a concern that that could result in next year's projects not being ready to bid, threatening next summer's construction season.

Reach Pat Forgey at pat@alaskadispatch.com.


By PAT FORGEY
pat@alaskadispatch.com