Uncertainty over whether Congress will fund transportation infrastructure not only endangers drivers and airline passengers, but creates a credit risk for companies involved, according to a new study by Standard & Poor's.
Last month, the Senate passed a surface transportation bill, Moving Ahead for Progress in the 21st Century (S.1813), which AFL-CIO Transportation Trades Department (TTD) President Ed Wytkind says will “boost the economy, fix our failing transportation system and put America back to work.” But because the House did not act in time, Congress was recently forced to pass yet another extension to fund such programs—the ninth such continuing resolution.
This ongoing uncertainty in funding, according to Standard & Poors, “could force states to delay projects rather than risk funding changes or political gridlock come July.”
Adding to transportation system managers' uncertainty are numerous economists' forecasts for prolonged weak economic growth and high fuel costs. The combination of reduced or unpredictable federal support and lower demand could result in deferred maintenance projects that would keep our nation's transportation infrastructure in good repair. Such deferrals could hurt an entity's credit if capital costs escalate over time, putting the system at risk. Conversely, proceeding with such projects could also hurt the credit rating if the resulting liquidity and debt levels are not already reflected in the rating.
TTD member unions were instrumental in pushing lawmakers to pass the recent funding bill, and are pushing to ensure the House does the same before the current funding expires on June 30.
The report, “Increasingly Unpredictable Federal Funding Could Stall U.S. Transportation Infrastructure Projects,” also cites as last year’s partial shutdown of the aviation industry because of congressional inaction in approving funding as the disastrous result of Congress failing to provide the certainty essential to a healthy business climate.
This can result in a domino effect of severe consequences, to the economy and to public safety. For example, Congress finally passed on Feb. 6th the Federal Aviation Administration funding bill after a record 23 short-term extensions, years of debate, and a two-week partial shutdown. During the shutdown, in August 2011, an estimated 4,000 employees were furloughed, $360 million in federal taxes went uncollected, and 219 projects across the country came to a halt in the middle of the construction season, according to ABC News and Reuters.
As usual, nearly all opponents of funding to make our roads, planes and bridges safe are Republicans—the same ones who make a lot of noise about creating healthy conditions for business to operate.