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U.S. states ramp up transportation spending with funding law

Commuters arrive at Holland Tunnel to drive into New York from Jersey City, New Jersey November 7, 2012, in the aftermath of Hurricane Sandy
Commuters arrive at Holland Tunnel to drive into New York from Jersey City, New Jersey November 7, 2012, in the aftermath of Hurricane Sandy

WASHINGTON (Reuters) - State and local governments are spending more on highways, roads and bridges now that they have a long-standing funding commitment from the federal government, according to a recent report from the American Road and Transportation Builders Association.

The group, the oldest transportation construction-related association in the United States, found that from October 1 through February 15, federal, state and local transportation departments have set aside $7 billion in federal funds for capital works projects, a 56 percent increase from the same period last year.

In January alone, the transportation departments obligated $2.3 billion, 13 percent more than in January 2012, the group said in a special report released last Friday.

"The current obligations levels are much more in line with what we expect to see in the marketplace," ARTBA Chief Economist Alison Black said in a statement, adding that they had been "quite low" the previous two years.

Transportation departments obligate, or set aside, money for projects about to be bid and constructed, and are an indicator of states' spending plans.

Legislation authorizing federal funds for transportation, commonly known as the "highway bill," expired in 2009 and states relied on a patchwork of temporary extensions until the middle of 2012 when a new, two-year law was passed. States spent cautiously during extensions, unsure of what amounts they would receive six months out.

Now, many in construction are worried about how federal budget fights will affect road and highway projects.

The main account for surface transportation, the Highway Trust Fund, which is filled with revenue from a gas tax charged at the pump, is not subject to the automatic federal spending cuts set to begin in 10 days.

But even though the account is exempt from "sequestration," it is still under threat in later years, said the Associated General Contractors of America on Monday.

The group estimated the trust fund, along with the Airport Improvement Program, Department of Veterans Affairs, and General Services Administration, which also escaped sequestration, will face $1.5 billion in funding cuts in the next few years because of caps the federal government has placed on its spending under the Budget Control Act.

(Reporting By Lisa Lambert; Editing by Maureen Bavdek)

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