Despite a flurry of eleventh-hour activity, Congress failed to pass a 3-month extension of the SAFETEA-LU highway bill before its expiration on Sept. 30, putting in jeopardy billions of dollars in funding for highway projects. Last week the House of Representatives passed a 3-month highway bill extension. Republican Senators objected to the House bill when it came up for consideration yesterday, preventing the Senate from acting in time to extend SAFETEA-LU. The GOP’s objection stemmed from a provision added by Senators to the House bill that provides offsetting funds from unused money in the Troubled Asset Relief Program (TARP).

An offset is necessary because House rules prevent passage of legislation that adds to the federal deficit. The Senate bill attempts to use TARP money to offset funding designed to prevent the loss of state funds due to a previously planned rescission of money authorized under SAFETEA-LU that is scheduled to take effect today. The rescission would cause an immediate loss of $490 million in project funding, thus necessitating a $490 million offset to avoid a federal budget impact that would violate House rules.

While Congress passed a one-month extension of funding for the highway program, this extension did not deal with the rescission issue. As a result, states would be faced with a nearly 30 percent cut in their federal highway allocations, or a prorated amount equivalent to $11.9 billion for fiscal year 2010. House and Senate transportation committee leaders on both sides of the aisle have stated their commitment to address the potential funding shortfall and a resolution is possible as early as today.