If no action is taken this session to increase the trust fund revenues, it will be necessary, in order to avoid serious delinquencies in our payments to the States, to halt for a period of about 9 months all further approvals of construction, engineering, and purchase of right-of-way against apportionments which have been in previous years and now remain unobligated, in order to permit revenues to catch up with expenditures. Even then it would be impossible to reimburse the States promptly this fall by an amount which will accumulate to maximum of about $400 million in January but which would reduce to a deficit of about $150 million by the end of the year. This is a critical situation.

Gentlemen, this is the immediate problem. It is extremely acute, and I certainly hope it will be solved. But of itself it has no direct relation whatsoever to the long-range financing problem which is brought about by the 1958 estimate of the cost of completing the Interstate System. The same immediate problem would have prevailed as a result of the 1958 act if the cost estimate proposed in 1955 had been used. It would merely have meant under those circumstances that the equivalent dollar amount of increased work resulting from the 1958 act would correspondingly be eliminated in the last years of the program. In other words, expediting it in fiscal 1959, 1960, and 1961 would have meant reducing the size of the program during the late 1960's and early 1970's by the amount of the earlier acceleration.

The executive budget recommendation of a 12-cent increase in the motor fuel tax through fiscal 1964 is an interim financing measure, and was purposely not advanced as a solution to the long-range prob lem. The reason is that in 1961 a report, which has been under careful preparation and development since the 1956 acts, will be submitted to the Congress. This report will furnish information on both highway user and nonuser benefits so that an adjustment can be made between those benefits and existing taxes if such is found necessary. Another matter of significance is that a new estimate of the cost of completing the Interstate System will also be presented in 1961. Thus, at that time, the Congress will have the opportunity to develop a long-range financing plan in the light of factual, up-to-date information on all highway beneficiaries, the cost of completing the system, and existing revenues going into the trust fund.

Inaction by the Congress at this session regarding the temporary increasing of trust fund revenue would result in the following:

(1) a 9-month stoppage of all contracting for new highway construction and right-of-way acquisition;

(2) the delayed payment of many vouchers submitted by the States for reimbursement of money already expended by them for outstanding contracts; and

(3) nearly cut in two the total Interstate Highway construction authorized for the fiscal years 1960 through 1963.

The recommended temporary motor fuel tax increase would for all practical purposes solve all of those problems.

However, since the committee has indicated an interest in the longer range financing problem, we have worked out an analysis of what it would entail in the way of a construction stretchout in order to complete the Interstate System within the terms of the existing 1956 and

1958 acts, necessarily disregarding the specified date of completion of the entire system and termination of the trust fund. In order to do this we have projected the ABC program at an average of $925 million annually through the remaining expected life of the Interstate construction program, which amount is the authorized level for that work for fiscal 1961.

On the Interstate program, after the moratorium period, construction work could be resumed in 1961 at an annual $1.5 billion level, at which rate it could continue through fiscal 1964, and from which time on to the end of the program it could increase progressively until it reached a maximum $2.4 billion per year in 1975. This schedule would take until the middle of fiscal year 1978 to finish the program. It should be pointed out that the Interstate System is being designed to accommodate with top efficiency the traffic forecast of 1975, and thus these premises are not in precise balance.

The attached tables 1-A, 1-B, and 1-C are included for the record to show the apportionments that could be made, the obligations, the expenditures and condition of the trust fund under the various assumptions of conditions which I have indicated.

I strongly recommend that the Federal-aid programs continue at the authorized level. To hold both the ABC and the interstate highway program for a 9-months period would represent a serious setback in the construction of highways necessary to properly and safely serve the increase in motor vehicles and in traffic. It is even more important now that these highway improvements be quickly accompplished from a defense point of view, considering the increasing dependence upon adequate highways for every imaginable type of war and civilian survival efforts in case of enery attack.

A delay would seriously affect State highway department organizations, contractors, equipment, and material companies, all of whom have built their capacities of manpower, material, and equipment for a continuing program and one based on contemplated authorizations. The holding of many vouchers for reimbursement to the State for expenses to which they have been put, starting in October, of this year, and which there was an agreement to meet, will work financial hardships upon the States and the contractors.

We do not believe, however, that it is desirable at this time to develop a solution to the long-range financing problem in view of the desirability of predicating it upon the fundamental reports of cost and user and nonuser benefits to be submitted to the Congress in January of 1961. At that time, in the light of the most up-to-date basic information, a plan can be created which will probably reflect with greater certainty a proper distribution of highway costs.

I appreciate the opportunity the committee has afforded for the presentation of the problem as we see it and trust that the committee will take action at an early date to solve it.

The CHAIRMAN. Mr. Tallamy, you want these tables included in the record, do you not?

Mr. TALLAMY. Yes, I do, Mr. Chairman.

The CHAIRMAN. Very well. Without objection, they will be included at the conclusion of your statement. (The tables referred to follow :)

TABLE 1-A.-Interstate apportionments, obligations, and expenditures, and trust fund balances, with 11⁄2 cents additional motor fuel tax, 1960–64

1 1958 act authorizations; actual apportionments would depend on revenue available after 1964.

TABLE 1-B.—Interstate apportionments, obligations, and expenditures, and trust fund balances, under existing legislation

TABLE 1-C.—Interstate apportionments, obligations, and expenditures, and trust fund balances, with moratorium and contract controls

Mr. TALLAMY. I have another statement, which has to do with the comparison of the cost between the 1955 and 1958 estimates. Before reading that, however, relating to the statement I have just read, I would like to show you some charts which I have prepared to show the finance situation, as I think it will help the committee in appraising this deficit problem. May I present them?

The CHAIRMAN. Yes, you may, Mr. Tallamy. (Large chart displayed.)

CHART 1-A

FISCAL

YEARS

2

Mr. TALLAMY. Gentlemen, this chart, which is called 1-A, shows what the situation would be with a 12 cent additional motor fuel tax for 1960 through 1964 in terms of apportionments, obligations, and expenditures that could be made and the result in the highway trust fund.

You will notice that under "Apportionments" we start with fiscal 1957, at which time we apportioned $1 billion; 1958, $1.7 billion; 1959, $2.2 billion; and 1960, $2.5 billion. There is presently contained in the legislation authority to apportion $2.5 billion for 1961. The remaining authorizations in the 1956 act for the fiscal years through 1964 are for $2.2 billion annually. The suggestion for the 12-cent motor vehicle fuel tax, therefore, would enable apportionments to be made as presently authorized in the highway legislation, and that would amount to $16.5 billion from 1957 to 1964, inclusive. Obligations that could be made under this suggestion of 12-cent motor vehicle fuel tax increase would be as indicated by this chart 1-A showing an estimated total of $2.4 million for 1960, $2.5 billion for 1961, and that we would drop down to $2.2 billion for 1962 on through the end of the period, for a total of $17 billion in obligations against an apportionment for that period of $16.5 billion.

Let me explain how we can have greater obligations than appor

tionments.

The reason is that this chart of apportionment does not show the 1965 apportionment. Of course, the 1965 apportionment would be made a year before the time it would apply. We always apportion during the fiscal year ahead. So obligations would be made against the 1965 aportionment to the extent of the difference shown.

Expenditures would gradually increase to a $2.4 billion level in 1963, and then go down to $2.3 billion in 1964 as the result of dropping down from an apportionment of $2.5 billion to the $2.2 billion level.

The net result at the end of each of the fiscal years from 1957 to 1964 would be a balance in the highway trust fund. We have the maximum balance occurring in 1958, of a little over a billion dollars; at the end of 1959, it will be about $500 million. Then it would reduce to a little below the levels indicated in this chart. The reason for the balance being lower than shown in the chart is that this chart of balances is based upon the development of additional revenue if legislation had been enacted July 1 of this year. Of course now it could not be enacted until September. So there is a reduction from the amounts shown in this chart consisting of the loss of revenue between July 1 and September, but there would still be positive balances in the trust fund.

(Next chart displayed.)

Mr. TALLAMY. Chart 1-B shows what the situation would be under existing legislation. I define "under existing legislation" as the situation which would prevail if we were to permit contractual obligations to be made under authorizations which have already been apportioned to the States; in other words, apportionments which have been made but against which contracts have not yet been placed; and the continuing application of section 209 (g) of the 1956 act.

Under section 209 (g) and the apportionments of the $1.6 billion last year in excess of the trust fund's ability to liquidate, we can make