The government shut-down is underway as Congress continues debating a plan for government spending covering the first few months of the 2014 fiscal year, which started today, October 1.
Regardless of what happens, it looks like transportation programs will be cut as a result of sequestration. Sequestration requires at least a 7% cut for discretionary programs to meet the FY14 budget caps. For many programs this will mean a 7% cut from the FY2012 funding levels for 2014, deeper than the 5% required for the expired 2013 fiscal year. As severe as the cuts in FY14 are, they are only the leading edge of devastating cuts to come if Congress does not agree on a long-term way to provide the transportation trust fund with more, dedicated revenues. Relying only on existing revenue from the federal gas tax would lead to massive cuts to highway and transit projects starting next fall in FY15.
In general, programs funded from the highway trust fund are not subject to the sequester. Federal-aid highway programs and core transit formula programs funded by the trust fund were not cut in this last year. In fact, funding for those programs increased slightly over their FY2012 levels to match the authorized levels in MAP-21. In addition, Amtrak will also continue to run during the shutdown. However, the sequester will hamper certain functions of the Federal Transit Administration, including doling out transit grants, which would seriously affect the progress of the Wilshire Subway and the Regional Connector, among other things.
However, in FY 2014, because fuel tax revenues won’t be sufficient for the funding levels authorized by MAP-21 for those programs, MAP-21 also called for a transfer of $12.6 billion from the general fund into the Highway Trust Fund. That $12.6 billion is subject to the sequester, and will face cuts of over $900 million. Unlike other programs, though, this cut does not directly lead to cuts in funding for highway and transit projects. What it will do is speed up the timeline for the Highway Trust Fund going broke, creating the potential for greater cuts or the need for similarly large transfers of general funds — a difficult proposition. In fact, some are concerned that, due to sequestration, the Trust Fund may not remain solvent through even this next fiscal year as originally expected when MAP-21 was enacted.