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March 25,2010
The
Federal Surface Transportation Program Gets a New
Lease on Life
The HIRE Act (Hiring Incentives to Restore Employment
Act, H.R. 2847, P.L 111-147), signed by the President
on March 18, has placed the federal surface
transportation program on a firm footing and taken the
pressure off the lawmakers and the White House to come
up with a more permanent solution — at least for a
while. While efforts to develop a long-term
transportation strategy are expected to continue for
the remainder of this year, Congress and the White
House are likely to take their time enacting a
multi-year legislation. This is the near-unanimous
judgment of informed congressional observers and
Washington insiders whom we consulted over the last
several days.
In addition to extending the authorization of the
surface transportation program through December 31,
2010, the HIRE Act transfers $19.5 billion from the
General Fund into the Highway Trust Fund (to reimburse
the Fund for interest payments not received since
1998); restores an earlier $8.7 billion rescission of
contract authority; and allows the Highway Trust Fund
in the future to collect interest on its deposits. The
General Fund transfer, when added to the projected
revenue stream from the gas tax, is expected to
support highway and transit programs at the levels
authorized for Fiscal Year 2009 through the end of
Fiscal Year 2012 and into FY 2013 according to the
Congressional Budget Office. Our interpretation of
CBO's latest projections (Highway
Trust Fund Projections, March 19, 2010)
suggests that both the Highway Account and the Transit
Account of the Trust Fund could remain solvent as long
as the second or third quarter of Fiscal Year 2013
(i.e. mid-2013).
Lack of Adequate Long-Term Funding
The main obstacle standing in the way of enacting a
multi-year bill continues to be the inability to come
up with adequate funding. To close the gap between the
projected revenue into the Highway Trust Fund
(estimated by CBO to be $234 billion from 2010 through
2015 ) and the program needs as estimated by Chairman
James Oberstar (D-MN) ($450 billion for highways and
transit) would require an extra $216 billion over the
life of the next authorization (or $145 billion if
only to cover outlays, according to the estimates of
House Transportation and Infrastructure Committee
staff .) Adding a proposed $50 billion for the
high-speed rail program would raise the total unfunded
six-year shortfall to over $200 billion. Where is
this money to come from? No one has yet found an
answer.
Gas Tax Increase No Longer Considered
The most obvious option --- to increase the gas tax---
has been taken off the table for the immediate future.
The Administration’s unwillingness to consider this
option was forcefully reaffirmed by
Transportation Secretary LaHood at the recent AASHTO
Briefing. "It’s easy for people who are not elected to
talk about raising the gas tax," the Secretary
observed. "They don’t have to face the voters." He
left no doubt that the Administration remains
unalterably and unequivocally opposed to this
option—at least as long as the country finds itself in
an economic recession.
Supplementing the Trust Fund With General Fund
Appropriations
If not a gas tax increase, then how about
supplementing HTF revenues with General Fund
appropriations? This option has been pursued de
facto as a way of keeping the Trust Fund solvent
during the past year (with two transfers amounting to
$15 billion) and it will be used again to extend the
program through December 31 and beyond.
However, there are some serious objections to
expanding the use of General Funds to support the
surface transportation program over the long term. The
objections are threefold: their use (1) undermines the
user-pays principle; (2) threatens a potential loss of
contract authority, i.e. the ability to enter into
multi-year funding commitments for large capital
projects in advance of appropriations; and (3) opens
the surface transportation program to competition for
funds from other government programs. In addition, one
could expect Congressional opposition to using General
Funds to pay for a multi-year transportation bill. "We
cannot afford to continue funding our highways and
transit out of the General Fund," said Sen. Kent
Conrad (D-SD), Chairman of the Senate Budget
Committee. Any move to tap the General Fund for loans
to cover the projected shortfall in the Highway Trust
Fund would likewise meet with objections, a senior
Senate aide told us when questioned about a proposal
recently floated by Rep. James Oberstar.
A Lame Duck Session?
If electoral politics is the chief obstacle to voting
for a gas tax increase, how about bringing the matter
up in a lame duck session following the November
elections, after the partisan passions have been
spent? Some of our sources raised this possibility,
recalling similar circumstances back in 1982 when the
measure to raise the federal fuel tax from 4 to
9-cents per gallon finally cleared Congress in a lame
duck session on Dec 23, 1982.
However, the dynamics this year appear different than
in 1982. Unlike today, the Reagan White House and
Transportation Secretary Drew Lewis were openly
supportive of a gas tax increase and actively engaged
in helping to build a bipartisan coalition behind it.
By contrast, the Obama White House is not likely
to reverse itself and champion a gas tax increase
later this year.
And so, with no concrete ideas of where to find the
extra money, with fewer than 100 legislative days
left before congressional adjournment and, most
importantly, with adequate funding projected as long
as mid-2013, most Washington insiders believe there is
little likelihood of enacting a long-term
transportation bill during this session of Congress.
What is more likely to happen during the rest of this
year, according to our sources, is a low-intensity
effort to lay a foundation for future legislation.
This effort will include a series of hearings by the
Senate Environment and Public Works (EPW) Committee
under the chairmanship of Sen. Barbara Boxer (D-CA),
continued staff-level refinement of the House
bill, and the drafting of a set of policy
"principles" by the U.S. Department of Transportation.
These principles, according to Secretary Ray LaHood
who spoke at the IBTTA Legislative Conference on March
22, will eventually become the White House position
(we think only after a thorough vetting by OMB) and
will serve to guide the Administration's legislative
transportation strategy in 2011 and beyond.
Political Imponderables
Compounding the uncertainties surrounding a multi-year
bill is the possibility of a major political
realignment in Congress next November. Once considered
a remote possibility, a Republican take over of one or
even both Houses of Congress now appears as a distinct
possibility according to serious political observers
such as National Journal's Charlie Cook. Would a
Republican Congress (or a still Democratic Congress
but with only a thin margin of votes) make major
reforms in the current transportation program more or
less likely? Would it be less or more averse to a gas
tax increase? And how important will the imperative
of deficit reduction figure in future congressional
decisions about major infrastructure investments?
The answers to these questions will become clearer
after the mid-term elections. In the meantime, the
state legislatures and DOTs, the construction
industry, private investors and the rest of the
transportation community will have to suspend their
long-term calculations and confront a future still
shrouded in uncertainty. |
