As the summer construction season enters its peak, state departments of transportation may be forced to cut millions in on-going projects because of a bookkeeping provision enacted by Congress in 2004.

On September 30, the Federal Highway Administration will reduce the federal "contract authority" states use to build multi-year projects by $8.7 billion, as a result of a provision included in the last highway and transit authorizing act. "It's ironic that as states work to create jobs through economic recovery projects, they must also prepare to cut millions of projects from their regular federal-aid programs, unless Congress acts to repeal this provision," said John Horsley, Executive Director of the American Association of State Highway and Transportation Officials. "We strongly urge the Congress to repeal this potentially devastating cut, which will have no impact on the federal deficit."

During the July 15 mark-up by the Senate Environment and Public Works Committee of a bill to extend the federal-aid highway program for 18 months, an amendment to repeal the pending rescission was offered by Senator Kit Bond (R-MO), but was defeated. However, the amendment is expected to be offered again during debate on the Senate floor if agreement is reached to consider amendments, which may occur possibly next week. AASHTO has written to the Senate urging the rescissions be repealed.

Some states will be particularly hard hit if the rescission takes place.

Colorado Director of Transportation Russell George has stated that the upcoming $8.7 billion rescission will cost the state $98.7 million "that could have otherwise been obligated and out the door helping to employ hard working Coloradoans and providing important infrastructure projects to the State. This real dollar cut is about 20% of the total federal funds Colorado receives each year."

In Nevada, Department of Transportation Director Susan Martinovich said that the upcoming rescission of $61 million represents 25 percent of the state's annual $236 million federal aid allocation. Martinovich said she would be forced to cancel $48 million of projects that are already under construction, having a "devastating effect" on workers.

A table prepared by the Federal Highway Administration on the rescission cuts for each state is available at tinyurl.com/rescissionstable.

Since the enactment of the SAFETEA-LU highway and transit bill, Congress has quietly taken back over $16.5 billion in "contract authority" promised to the states. Now the biggest cut of all, some $8.7 billion will come due on September 30.

States built up balances of unused contract authority, because Congress always restricts the amount of federal-aid funds they can actually spend by setting "obligation limitations." Taking back the leftover funds provided a way for Congress to balance their books and provide funding for other programs. The practice, which began as a relatively modest $300 million in 2002, escalated to rescissions of $3.5 billion in 2007. Congress also stepped in to demand that the cuts be taken across most federal-aid programs, but exempting funds for safety and distributed to metropolitan areas.

Now, with balances of unobligated funds drawn down to zero, some states will be forced to cut "real dollars" from project spending, not just the unspent balances.