The 0.5% December decline reverses the small gain in November. Heavy construction spending is now 2.3% below the stimulus boosted September level. As expected, the stimulus plan is not enough to offset the growing weakness in state and local government financial positions and the refusal of Congress to find a permanent source of funds for the federal highway program. President Obama has delayed discussing a highway fund fix until summer 2011. Until then, federal funding will remain at about the current level but will be effectively reduced by resumed inflation in highway costs. The proposed federal FY ’11 budget includes a 1% increase, although other transportation funding will be reduced more than $2 Billion.

Offsetting this, Obama proposes a $4 Billion infrastructure fund, of which $2.6 Billion would be obligated to specific large projects in 2011. But even if approved quickly, these funds would still leave federal highway funding at best unchanged after accounting for inflation. Infrastructure fund money would not be spent as fast as highway fund money because each state DOT would have to wait to find out how much, if any, Obama would give them. Most states would likely get nothing.

The presidents FY ’11 budget proposal also includes more than a billion dollar cutback in federal funding for water, sewer and environmental projects.

Heavy construction spending is projected to remain unchanged in 2010 and then expand 2-3% in 2011.