"This rescission will amount to real dollar losses to programs and projects, and will impact many state departments of transportation," said John Horsley, executive director of the American Association of State Highway and Transportation Officials. "It will reverse some of the positive gains brought about by the highway spending provided for by the recovery act."

FHWA had notified states Aug. 31 regarding the terms of the rescission. That notice is available at tinyurl.com/FHWA-RescissionNotice831.

Although state DOTs had been aware of the rescission for years, it was believed that the current economic downturn was sufficient justification for Congress to enact a repeal. Many states, relying on the widely held belief that the rescission would be nixed, had programmed those funds to specific projects. Those states now face real cuts of several hundred million dollars to their transportation plans for the coming year.

Oklahoma Describes Impact of Rescission

Gary Ridley, director of the Oklahoma Department of Transportation, illustrated his state's predicament in a letter sent Thursday to fellow members of the AASHTO Board of Directors.

Ridley noted that Oklahoma now expects to receive about $36 million in federal highway funds this month, far less than the amount it expected. Oklahoma's first obligation is to cover $28 million in bond payments due this month, Ridley wrote, leaving the state with only $8 million remaining to fund the next month's projects. The department had planned to let contracts next month using $53 million in federal funds, but it will now be forced to hold many projects until next spring.

"Obviously ODOT will not be able to finance all of the projects, and depending on the amount received in each category of funding, ODOT may not be able to finance any of the projects," Ridley wrote. "It is quite possible this delay will cause the withdrawn November projects to not be awarded by the Transportation Commission until February."

Oklahoma was forced to give $136 million in contract authority back to FHWA on Thursday after the rescission went into effect. The immediate impact on the state’s program is $40 million, Ridley said. The remainder of the impact will be felt over the next 12 to 18 months.

Senate Attempted to Move Rescission Repeal

In the waning hours of SAFETEA-LU's existence, the chairwoman and ranking minority member of the Senate Environment and Public Works Committee reached an agreement to move through the Senate a three-month extension of federal transportation authorization which would have repealed the $8.7 billion rescission. While the House bill contained a three-month extension, it did not address the rescission, because House rules known as "pay as you go" required a partial offset from other spending or revenues.

EPW Chairwoman Barbara Boxer, D-CA, and Sen. James Inhofe, R-OK, proposed taking the offset by reducing the $700 billion Toxic Asset Relief Program, which aids distressed financial institutions, but encountered objections. A suggestion to use unobligated economic recovery funds also met with objections. Without unanimous agreement to proceed, action on the extension and repeal came to a halt Wednesday evening on the Senate floor.

Boxer noted a promise was made when SAFETEA-LU was enacted that Congress would not let the rescission take effect. She pledged to continue working to repeal the rescission after the fact.

"I am not going to give up," she said. "We will have this battle on the floor. We'll get time to debate this agreement and to have votes on these two different offsets. ... We could fix it at a later date, but every day that goes by makes it more difficult."

Inhofe said Thursday on the Senate floor, "Republicans and Democrats were equally responsible for not getting it done." He noted the majority leadership knew for years the rescission was coming but did not schedule floor time to debate a repeal bill. "Hopefully we will find some way to overcome this problem," he added.

House Extension Did Not Include Rescission Repeal

House Transportation and Infrastructure Committee Chairman James Oberstar, D-MN, did not include the repeal in the legislation the House passed last week to extend federal transportation authorization by three months. (see related story regarding authorization) He cited the problem that a rescission repeal would violate House budget rules that require any increase in spending to be offset with a corresponding spending reduction or tax increase.

Oberstar issued a press statement Wednesday calling on the Senate to simply pass the House-approved measure extending authorization until the end of December and allowing the rescission to take effect. The statement noted Oberstar's objections to the Senate extension amendment's treatment of contract authority for Projects of National Significance, National Corridor, and Magnetic Levitation programs.

"I also have serious concerns that the Senate amendment earmarks the overwhelming majority of significant highway discretionary program funds to only a small, select group of states," Oberstar said in the statement. "This is unfair to the 47 other states, and unacceptable to the House."

The Obama administration made no statement about the rescission repeal.