The impending Highway Trust Fund insolvency has garnered a fair amount of press in the recent weeks because it is the major financing facility for U.S. highway and bridge infrastructure. Higher fuel economy standards and mediocre economic growth have suppressed fuel taxes, which are the major revenue source of the Fund. For the last two years and most likely again this year, Congress has provided a special general fund appropriation to support the Fund. The chart below shows just how much total public construction spending has fallen off since the last recession. Moreover, the lack of sufficient funding for critical infrastructure has raised the salience of infrastructure financing and last week the U.S. Senate took up a bill titled the Partnership to Build America Act. The proposed bill would establish the American Infrastructure Fund (AIF) and make loans to state and local governments to build or replace schools, bridges and water quality projects. The funding for the AIF would be a repatriation tax holiday of overseas corporate cash. The promulgation of this Act would have spillover effects in the corporate bond world, too. Nonetheless, the decline of total public construction spending is one of the factors limiting municipal supply in 2014. Another reason for the decline in municipal debt supply is the limited ability to finance capital projects because State and Local balance sheet strength has not returned since the last recession. We noted this weakness, last week, in our State of the States Study bullet. Going forward, we can expect reduced municipal debt supply to persist as long as the debate about infrastructure financing continues but the debate might be settled sooner because of the pending insolvency of the Highway Trust Fund.