Obama administration warns states face cuts in highway aid by August if Congress doesn't act

The Obama administration is warning states to expect a large pothole in their construction budgets if Congress doesn't reach an agreement quickly on how to pay for federal highway and transit programs.

Transportation Secretary Anthony Foxx says states will begin to feel the pain of cutbacks in federal aid as soon as the first week in August. That's because the balance in the federal Highway Trust Fund is dropping and will soon go below $4 billion, the cushion officials say is needed for incoming fuel tax revenue to cover outgoing payments to states. By late August, the balance is forecast to reach zero.

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President Barack Obama has proposed closing tax loopholes to pay for transportation programs, but Republican lawmakers have been cool to the plan.