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Fund, with borrowings from general funds of the Treasury, if any, required to be repaid by the close of the fiscal year during which the borrowings occur. Starting in 1959, it was necessary to establish a limitation on future reimbursable payments, variously referred to as "reimbursement planning" or "contract controls", to insure that current commitments for future obligations would not exceed the amounts that subsequently could be liquidated from Trust Fund revenues when the work was done and vouchers submitted by the states claiming reimbursement for the Federal share of costs.

Since November, 1966, the rate of obligations has been controlled by additional limitations imposed by the Administration on "contract authority" (commonly referred to as cutbacks). These contract authority limitations have been primarily for the purpose of "curbing inflationary pressures. The contract authority limitations apply to aggregate obligations within a given time period under all programs not specifically to individual programs. Since 1966, they have been well within the ability of the Highway Trust Fund to support. They have followed an on-again-off-again pattern, the net effect of which has been a slight slow-down in the rate of cumulative obligations.

of the $3.743 billion increase in the unobligated balance from June 30, 1967 to June 30, 1971 (Table 2, column 6), it is estimated that about $2.2 billion results from the aggregate of contract authority limitations. The remainder of the increase is the result of the normal time lag for the substantially increased apportionments for fiscal years 1970, 71 and 72 over previous fiscal years.

The limitations on contract authority do not affect the funds apportioned to states under Congressional authorizations, nor do they affect the availability of revenues in the Highway Trust Fund. Apportioned funds to the states but not obligated during a fiscal year because of the contract authority limitations remain available for obligation later. Revenues accruing to the Highway Trust Fund and not required for current expenditures are invested by the Treasury in public debt securities, and remain available to the credit of the Trust Fund, plus interest, for making payments to the states at a later date.

Thus, despite rather widespread belief to the contrary, contract authority limitations (or cutbacks) have not resulted in loss of apportionments to states nor planned expenditures from the Highway Trust Fund. They have resulted in a "dampening" in the rate of contract obligations, aggregating about $2.2 billion over a five year period an amount equivalent to less than half of the estimated contract obligations for the current fiscal year. In other words, the net effect of contract authority limitations has been to extend the total highway program by about five months without reduction in total size or scope.

Column 7 of Table 2 shows disbursements from the Highway Trust Fund, by fiscal year, covering the Federal share of costs of completed work under Federal-aid highway programs. The amounts through the fiscal year ending June 30, 1970 are official. The amounts for the 1971 and 1972 fiscal years are recent estimates by the Secretary of the Treasury. Cumulative disbursements are shown in column 8. The estimated total through the fiscal year ending June 30, 1971 is $49.474 billion.

Unliquidated obligations at the end of each fiscal year are shown in column 9, Table 2. They are the differences between the cumulative contract obligations against the Trust Fund, column 5, and the cumulative disbursements. The estimated unliquidated obligations the amount owed by the Fund on June 30, 1971 total $7.501 billion. That amount is a legal requirement of the Trust Fund to finance the work already under contract obligation as it is completed and vouchers are submitted by the states for reimbursement.

Figure 3 shows graphically the relationship of Trust Fund disbursements to total contract obligations through the fiscal year ending June 30, 1971. At any point in time the vertical distance between the disbursement and obligation lines represents the amount of unliquidated obligations remaining to be paid from the Highway Trust Fund as work under contract is completed. For any dollar amount the horizontal distance between the two lines represents the time lag for cumulative disbursements to equal cumulative obligations. On the average, about three years passes from the time authorizations are apportioned and made available to the states until an equivalent amount of work has been completed and paid for from the Trust Fund.

Revenues accruing to the Highway Trust Fund, by fiscal years, are shown in column 10 of Table 2. The amounts through

[graphic]

RELATIONSHIP OF
HIGHWAY TRUST FUND DISBURSEMENTS
AND FEDERAL-AID HIGHWAY
CONTRACT OBLIGATIONS

FIGURE 3

BILLIONS OF DOLLARS

6-30-75

FISCAL YEARS the fiscal year ending June 30, 1970 are official. The amounts for the 1971 and 1972 fiscal years are recent estimates by the Secretary of the Treasury. Cumulative revenues are shown in column ll. The estimated total through the fiscal year ending June 30, 1971 is $53.122 billion.

Column 12 of Table 2 shows the Highway Trust Fund cash balance at the end of each fiscal year the difference between cumulative revenues, column ll, and cumulative disbursements, column 8. By law the Trust Fund must have a balance at the end of each fiscal year. Trust Fund revenues in excess of current expenditures are invested by the Treasury in public debt securities with interest on the borrowings credited to the Trust Fund. The estimated 1971 fiscal year Trust Fund revenues of $5.75 billion, shown in column 10 of Table 2, include $180 million in interest payments on borrowings from the Trust Fund during the year.

The estimated Trust Fund cash balance on June 30, 1971 is $3.648 billion. This is not a surplus, contrary to opinions held by many, because unliquidated obligations against the Trust Fund the amount owed as obligations come due on the same date are estimated at $7.501 billion. The difference, $3.853 billion, represents an unfunded liability against the Trust Fund over and above the indicated cash balance on June 30, 1971. If the Federal-aid highway programs were all terminated as of June 30, 1971, and no further contract obligations made against the available unobligated balance (column 6), revenues to the Trust Fund would need to be continued for approximately eight months to meet the unfunded liabilities on June 30, 1971.

The net status of the Trust Fund at the end of each fiscal year Trust Fund balance less unliquidated obligations is shown in column 13, Table 2. At any point in time there has always been an unfunded liability, or deficit. This has not presented any problem in Trust Fund operations, nor has it limited progress on the Federal-aid highway program, because of the normal time lag between contract obligations and equivalent reimbursements.

Figure 4 shows graphically relationships of the Federal-aid highway authorizations and contract obligations to Trust Fund revenues and disbursements since 1956, together with status as of June 30, 1971.

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