News Releases

Administration to States: Pave Your Highways With IOUs

Feb 26 2002

Federal Highway Administration says states should employ "advance construction" to fund federal highway projects

(WASHINGTON, D.C.) – Responding to questions from Sen. Patty Murray, Administration officials today suggested states should pave their highways with federal IOUs, which could be redeemed by the states in the future. Testifying before the Senate Budget Committee, Federal Highway Administration chief Mary Peters defended the Administration's $8.5 billion cut to highway funding as one of the "difficult choices" they had to make. She did not address the 350,000 jobs that would be lost nationally by the $8.5 billion cut.

When Murray pressed Peters on what the FHWA would do for states to lessen the impact of the cuts, Peters suggested that states should use a mechanism called "advanced funding," under which the states would pay for the highway construction on the expectation that the feds would compensate them in the future.

Senator Murray's and Ms. Peters' exchange follows

PETERS: "Methods that we stand ready to work with the states on in terms of addressing those [funding] issues include using features such as advance construction… moving forward on these projects and then repaying that funding…"

MURRAY: "What do you mean by advanced construction? Do you mean having the states pick up the cost until we come back around and pay for them?"

PETERS: "Senator Murray, that is accurate."

Murray reminded the panel of the dire financial straights facing many states. Washington state, for example, must cut $1.5 billion from a $20 billion state budget, and does not have the resources to "advance fund" federal highway projects.

"I can't just tell my state to pick up the tab now, and to trust Kent [Conrad] and I to come back here in a couple of years and we'll get the money for you," Murray said. "That doesn't work."

Despite the fact that throughout its budget proposal the Administration has asked congress to ignore or change existing law, with respect to the $8.5 billion highway cut, the Administration has said it would not abandon the TEA-21 formula for highway funding.