Does the road up Stimulus Mountain dead end at a cliff?

By John Latta

The Federal Highway Administration says in January that it had authorized $23 billion in projects under the year-old American Recovery and Reinvestment Act (ARRA). The agency says that almost $5.6 billion in stimulus funds has been sent to states to repay them for materials and labor on highways and bridges. FHWA also says it is working to get $15 billion in projects currently under construction underway.

The American Association of State Highway and Transportation Officials (AASHTO) says more than 12,250 transportation projects are underway as a result of stimulus funding. According to AASHTO, state DOTs have “set an amazing record of speed and efficiency” in putting stimulus dollars to work. In doing so states have stretched the funds far further than either Washington or state capitals expected them to go. “With bids running as low as 30 percent below estimate,” says an AASHTO study called Projects and Paychecks, “states stretched federal dollars even further, creating more jobs and more miles of improvements. California, Georgia and Texas awarded more than 90 percent of their highway contracts below original cost estimates.”

The Projects and Paychecks report says as of January 7 a total of 1,125 bridges had been improved or replaced, 21,400 miles of pavement had been resurfaced or widened and 1,700 safety traffic management projects had been put in place using stimulus funds.

Secretary of Transportation Ray LaHood has blasted criticism that the administration’s economic stimulus package was ineffective. “The stories that have been written that it hasn’t created jobs is baloney,” LaHood said. Recalling visits to ARRA-funded construction sites he bristled, “I see orange cones and orange barrels all over your communities.”

“Projects and Paychecks proves just how big a role stimulus is playing to keep Americans working,” said John Horsley, AASHTO executive director. “In January, state DOTs identified more than 9,800 additional ‘ready-to-go’ projects worth $79 billion. Congress needs to move quickly to pass another Jobs Bill. This study proves transportation projects can deliver hundreds of thousands of jobs for America,” Horsley said.

But money from ARRA will run out or largely be exhausted by the end of this year. States are facing a worrying few months because without help from Washington the end of those funds could trigger more disturbing budget cuts.

Construction industry management consultants and investment bankers FMI says “most ARRA funds were viewed by state governments as fiscal relief, and implemented as a stop gap measure resulting in artificial inflation of highway construction spending set to rapidly deflate in later 2010 and 2011. The coming hangover as funds dry up will be exacerbated by completion in 2010 of the bulk of ARRA-sponsored transportation projects, increased state budget deficits, the delayed passage of a new federal highway bill and the continued slow economic recovery.”

Without congressional intervention, FMI “foresees a dramatic drop-off in highway construction spending and other infrastructure-type projects once the stimulus wave passes.”

“ARRA, overall, had been, the great unsung hero of the past year.”

— Christina Romer, Chair of the Council of Economic Advisers