Debt ceiling deal leaves DOT mostly unscathed, but transportation, housing funds may still be at risk | Dump Trucks Charlotte NC

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President Joe Biden and House Speaker Kevin McCarthy struck a deal earlier this week to suspend the nation’s debt ceiling until Jan. 1, 2025, leaving federal agencies like the U.S. Department of Transportation to figure out how to implement the spending changes. As Transportation Secretary Pete Buttigieg put it in a YouTube video on Wednesday, “We're still assessing the best ways to accommodate the caps and restraints that are part of this deal.”

The Fiscal Responsibility Act will hold fiscal year 2024 nondefense discretionary spending near current levels, according to the Congressional Budget Office. The budget cap increases by 1% for fiscal year 2025. 

The impacts on the Department of Transportation “will be minimal,” said Marc Scribner, senior transportation policy analyst at Reason Foundation, in an interview. He noted that programs and funding from the 2021 infrastructure law are not at risk, and the electric vehicle tax credits funded by the Inflation Reduction Act are not affected.

However, Scribner noted that the debt limit deal claws back unspent COVID-19 relief funds, including unobligated funds destined for the Federal Highway Administration's highway infrastructure programs, which he estimated at about $2 billion.

A further wrinkle in the act will test Congress to pass the 12 annual appropriations bills by Dec. 31, 2024 or 2025. Failing that, and instead funding the government through continuing resolutions, would result in discretionary spending being cut by 1% in each fiscal year, Scribner said.

Other policy experts warned that funding for transportation, housing and urban development could be at risk — and not because of the debt limit deal. Jeff Davis, senior fellow and editor at the Eno Center for Transportation, said in an email that “the Transportation-HUD bill is uniquely disadvantaged in 2024 for reasons having nothing to do with the debt ceiling or spending caps.” He explained that the House and Senate Appropriations Committees could have to fill a $16 billion gap due to a “drastic drop in projected receipts from federal mortgage insurance programs” and other issues. 

Amy Thompson, director of public affairs at the American Public Transportation Association, echoed those concerns in an email, stating that the total allocation for THUD programs “will be critical to efforts to fund public transportation at the authorized levels of the Bipartisan Infrastructure Law.”

Nevertheless, federal transportation funding escaped the dire forecasts of 20% cuts to the DOT’s budget. “At the end of the day, this is a deal that is workable, that is consistent with our department's ability to meet its mission,” Buttigieg said.