State and federal officials in New York and New Jersey have reached an agreement on how to fund the construction of a rail tunnel connecting the two states, Gov. Andrew Cuomo on Thursday announced.

A major sticking point in the negotiations has been Cuomo’s push to have the federal government fund parts of the project, estimated to cost at least $20 billion, without loans.

In a statement released this morning, Cuomo said the federal government will put “real dollars” toward the project.

New York and New Jersey have said the states will pick up 50 percent of the estimated project cost. Amtrak and the federal government are also expected to finance the additional shares of the cost.

“Building this new tunnel is absolutely critical to the long-term vitality of New York and the entire northeast region. We have been working to break the federal logjam and get the federal funding that this massive undertaking requires, and for the first time, with this agreement, are partners in Washington are putting real dollars – not just loans – on the table,” Cuomo said in the statement. “New York and New Jersey’s offer to pay for 50 percent of the project was meant to provoke federal action, and I also thank Senator Schumer and Senator Booker for their support in accomplishing that goal. As soon as the federal government delivers the funding we will proceed – because our shovels are ready.”

In addition to managing the funding, the construction of the rail tunnel will be overseen by a separate development corporation within the Port Authority of New York and New Jersey, as called for by U.S. Sen. Chuck Schumer.

The construction of a new tunnel comes after the century-old tunnel that runs under the river and is used by New Jersey Transit and Amtrak was severely damaged by flooding during Hurricane Sandy.