Delays Ahead in Needed Roadwork
By Kathryn A. Wolfe, CQ Staff

Surface transportation reauthorization bills have never been easy. But lately each turn of the cycle, which is designed to run every six years, seems to be harder than the last. The current stalled effort has been particularly difficult. Why? In a word: Money.

At the moment, lawmakers in charge of finding a way forward on transportation spending are stuck in a kind of suspended animation. And the problem is again an economic one. There’s just not enough money to fund everything lawmakers want to do.


BUYING TIME: In 2009, Congress allocated billions of dollars in stimulus money for transportation projects. Some experts say that while such efforts help states get by, they dilute political momentum for a highway bill. (BLOOMBERG NEWS / TIM RUE )









Even worse, there seems to be little hope of agreeing on a way to find more funding, at least in the foreseeable future. And Congress has yet to dig into what has traditionally been the really tough part: how that money gets distributed among states, each of which has its own political champions in Congress.

At present, the only concrete legislative proposal for reauthorizing surface transportation programs has been around for a year, and it has seen little action since its introduction. This is in large part because its author, House Transportation and Infrastructure Chairman James L. Oberstar, is locked in a fight with the administration over how to fund it. “The obstacle to moving forward with this important legislation is how to pay for it,” the Minnesota Democrat said during an April 14 hearing on transportation financing options.
 
Oberstar’s draft would authorize $337.4 billion for highways, $99.8 billion for public transit, $12.6 billion for highway and motor carrier safety, and $50 billion for high-speed rail — in total, a robust $500 billion over six years.

Though Oberstar’s bill is an ambitious document, it doesn’t contain the all-important revenue mechanisms needed to actually pay for its spending, a situation that goes to the heart of the current problem in moving a reauthorization measure forward.

Oberstar has suggested raising the gas tax to pay for the additional spending, or instituting a new user fee that would be based on the number of miles a vehicle traveled. The White House has repeatedly rejected both approaches as undesirable, particularly while the economy is struggling.

This sharp divide between the House’s transportation chairman and the White House was brought into focus last year. In June 2009, just a few months before the last surface transportation bill was set to expire, Oberstar moved to mark up his draft in one of his panel’s subcommittees. But on the eve of the markup, the administration dropped a bomb that’s still resonating through the debate.

In what has thus far been its only real legislative proposal, the White House requested that the bill be delayed and that Congress instead extend the old authorization through the end of 2010. This was intended to give the administration more time to decide how it wanted to fund transportation programs over the long term.

Piqued, Oberstar proceeded with his markup and declared that he wouldn’t support any extensions. But his bill has yet to see action in the full Transportation Committee, and Congress has enacted an extension through the end of the year. This has left Democrats in the lurch waiting for the White House to articulate a way forward.

At a conference sponsored by state transportation departments in March, Transportation Secretary Ray LaHood said he plans to unveil some “principles” intended to inform debate on the bill sometime this month. So far they have yet to be released, and LaHood spokeswoman Olivia Alair could give no updates on a timetable for their release.

In the Senate, California Democrat Barbara Boxer, who chairs the Environment and Public Works Committee, which has jurisdiction over much of the bill, has endorsed the administration’s approach. The most she has said is that she wants to get a bill through her committee by the end of the year. Boxer, who is facing a tough re-election this year, also opposes raising the gas tax, a position that puts her in direct opposition to Oberstar.

All of these factors point to the likelihood that Congress will kick the whole issue down the road until at least after the midterm elections, possibly into next year.

The 2009 economic stimulus gave infrastructure spending a $64.1 billion shot in the arm, funding that states have used for repaving old roads, fixing worn-out bridges and more.

Although states welcomed the funds, which helped blunt job losses and bolster local economies, some transportation advocates were concerned that such a large amount of money might remove the impetus for a new surface transportation bill or dilute the political will for moving one that contained as much spending as stakeholders wanted. Last summer, just before the last reauthorization was set to expire, the American Road and Transportation Builders Association started a media blitz to stress the message that without a new bill, construction jobs created or saved by stimulus spending could be lost.

“We learned the hard way over the period 2001 through 2005 that uncertainty about long-term federal investment in state and local highway and transit programs, combined with a national recession and state budget problems, leads to an overall stagnated transportation construction market,” William Buechner, the organization’s vice president for economics and research, said during a media briefing in July 2009. “Absent congressional action on a long-term surface transportation investment bill this year, the conditions are again lined up to kill job growth in the construction sector and related industries.”

Reality Check

The pace at which the current surface transportation reauthorization bill is proceeding is not necessarily a reason to hit the panic button. Temporary extensions of highway bills have become almost the norm while lawmakers work out longer-term policy.






CAMPAIGN ISSUE: Boxer, who chairs the Senate Environment and Public Works Committee, has said only that she wants to move a bill this year. (GETTY IMAGES / JUSTIN SULLIVAN)






The problem is that this task is becoming harder just as infrastructure needs are growing and money to pay for those needs is in decline.

The reference point for transportation policy experts is the 1991 overhaul, or the Intermodal Surface Transportation Efficiency Act (“ISTEA”), which was signed into law by President George Bush less than a year after the administration unveiled the first proposal.

That wasn’t because it was a small endeavor, though. The law was considered a landmark at the time because it was the first post- Interstate construction reauthorization; it overhauled the way states received and could use federal transportation money, and it governed all forms of surface transportation, not just highways.
“The bill actually got through relatively quickly,” said Jack Basso, director of program finance and management at the American Association of State Highway and Transportation Officials (AASHTO). Prior to his current job, Basso served during the Clinton administration as the Transportation Department’s assistant secretary for budget and programs and as its chief financial officer.

“There were probably people back then who thought that took a little long. But it went smoothly. One, we actually had money at the time, which helped,” Basso said.

Though there were fights — some bruising — over how much money each state would take home, the money was nevertheless available for spending. The administration’s opening proposal was $105 billion; the enacted figure was $151 billion spaced over six years.

As is the case today, lawmakers considered but — due to pressure from the White House — ultimately rejected, a gas tax increase, which would have taken the per-gallon tax on fuel from 14 cents to 19 cents at the time.
The prime mover of the gas tax increase proposal, Democratic Rep. Robert A. Roe of New Jersey (1969-93), had hoped to woo lawmakers by promising to use the revenue primarily for earmarks, but ultimately the White House prevailed with a veto threat. However, the bill did prevent a gas tax reduction scheduled to take place in 1995 that would have reduced it to 11.5 cents per gallon.

The next surface transportation bill, which structurally speaking is the genesis of modern surface transportation authorizations, is known as TEA-21. President Bill Clinton signed it into law June 9, 1998, less than a year after ISTEA expired.

Pennsylvania Republican Rep. Bud Shuster (1973-2001) took charge of the reauthorization that time around and mounted an effort to take the Highway Trust Fund — the fund in which gas taxes are deposited and that feeds the majority of federal transportation spending — off-budget. His effort ultimately failed, but it was a very close vote.
Instead, Shuster wrote into the bill what are known as “budgetary firewalls,” which essentially moved the Highway Trust Fund out of the category of spending controlled by appropriators — a structure that remains in place today.
In this manner, the trust fund is protected from being diverted to other, non-transportation uses. Since the money is spent in multi-year cycles, rather than through year-to-year appropriations, states can make better planning decisions. That is because states often need to know in advance what sort of federal funding they can count on for future projects that may take several years to complete.

As is habitually the case, lawmakers representing their states and districts jockeyed for position in terms of how much money they would eventually bring home. But Shuster had the very significant benefit of writing TEA-21 during a time of projected budget surpluses.

Additionally, lawmakers — led by Texas Republican Sen. Phil Gramm (1985-2002) and West Virginia Democratic Sen. Robert C. Byrd — were successful in reversing the diversion of 4.3 cents per gallon from the trust fund, which had been used to reduce the deficit, further increasing what lawmakers could spend.

“They pushed through that which made it very possible to create a much bigger bill financially. The administration compromised and agreed to all the budgetary structures,” Basso said. “The appropriators were limited, but that’s life, they didn’t win.”

In the end, TEA-21 was enacted as a $217.9 billion, six-year bill that gave transportation spending an enormous 40 percent increase over the previous bill.

The next — and at present, last — surface transportation bill was SAFETEA-LU, enacted Aug. 10, 2005, nearly two torturous years after TEA-21 expired. The bill, which Basso called a “horror show,” required 12 short-term extensions before being enacted into law.

Republican Don Young of Alaska, then chairman of the House Transportation and Infrastructure Committee, fought hard for a $375 billion bill funded partially by a gas tax increase. But President George W. Bush flatly rejected the new tax and said he would not accept a bill that spent more than $247 billion (he later modified this bottom line to $256 billion, after it became clear that Gramm and Byrd would succeed in halting the diversion of trust fund money for deficit reduction).

“The problem we had with SAFETEA-LU was money. We did not have the money,” Basso said.
In the end, the bill allocated $286.5 billion over six years, but finding that amount of extra revenue took some finagling (including some tax changes, such as the treatment of gasohol) and some budget tricks.

The bill also purposefully allocated more money than was estimated in gas tax receipts over the covered time period, a decision that would come back to haunt authorizers today.


CONCRETE IDEA: Shuster, left, promoted the idea of a ‘firewall’ around transportation funding to protect it. (CQ FILE PHOTO / DOUGLAS GRAHAM)



According to the Government Accountability Office (GAO), when SAFETEA-LU was enacted, estimated outlays from the highway account of the trust fund exceeded estimated gas tax receipts by about $10.4 billion. The bill relied on covering this gap by drawing down $10.4 billion in unobligated balances from the trust fund, which at the time stood at $10.8 billion — leaving “little room for error,” according to GAO, which noted that even a 1 percent revenue shortfall would result in a negative balance sheet.

Though the bill as written was a six-year authorization, because it took so long to get it enacted, it was effectively only a four-year bill.

One of the main ways transportation authorizers draw support for their priorities inside surface transportation bills is through earmarking, and SAFETEA-LU had the most of any — more than 5,000 separate earmarks for “high priority projects” totaling more than $14.8 billion, compared with about 1,850 similar earmarks worth $9.4 billion in TEA-21, according to the Congressional Research Service.

In every case, the overarching problems these bills had — and the way those problems were eventually solved — was with money. In the past, though, these money fights mostly were about how to slice up the pie.

Basso recalled a spreadsheet he called “the 3:16 a.m. table” developed as part of ISTEA that showed exactly how much money each state got. “That was the key to getting the signoffs. You look at the table in the corner, and see it was run at 3:16 in the morning the day it passed, and I was the one running the damn thing, so I know,” Basso said.

But this time around, money’s in short supply.

Due in part to a bridge collapse in Minnesota in 2007 that killed 13 people and injured nearly 150 more, infrastructure in general — and bridge infrastructure specifically — enjoyed renewed attention for a time. The intense media scrutiny the bridge collapse received three years ago has mostly faded, but the needs remain.

According to Transportation Department statistics from 2008, of the nearly 601,000 bridges across the country, more than 12 percent were categorized as “structurally deficient,” and nearly 15 percent were categorized as “functionally obsolete.”

That same year, AASHTO estimated that it would cost about $140 billion to repair every deficient bridge in the nation.
Virtually every interest involved in the debate about transportation planning agrees that America’s infrastructure needs are great. The American Society of Civil Engineers, which puts out a periodic “report card” grading the state of U.S. infrastructure, gives the country no higher than a C+ in any infrastructure category, with most being lower.

The most recent report, from 2009, says the United States will need $2.2 trillion over the next five years to bring the country’s infrastructure into good repair. This is up from the society’s 2005 report card, which placed estimated needs at $1.6 trillion over five years, mostly due to an inflationary adjustment.

“A significant increase in public funding is needed to keep America competitive. Additional private investment in our system is also needed,” it said, adding that the government may need to use more tolling and other methods to get revenue based on how much people use the system.

Declining Receipts

Currently, the main source of federal transportation spending is a tax on gasoline and gasohol amounting to 18.4 cents per gallon, which is deposited into the Highway Trust Fund. Most of that — 15.44 cents per gallon — goes into the highway account. A separate account for transit funding gets 2.86 cents per gallon, and 0.1 cent per gallon goes into what is called the Leaking Underground Storage Tank fund. The last time the gas tax was increased was in 1993.
 Adjusting for inflation, 18.4 cents in 2010 has the buying power of only about $12.2 cents in 1993, a nearly 34 percent decrease. The majority of traditional transportation stakeholders, including groups that represent states, are advocating for a gas tax increase, but this is a politically risky move even in the best of times.

Receipts into the Highway Trust Fund in recent years have been even less than previously estimated, due primarily to the flagging economy, a recent spike in motor fuel prices and a trend toward more fuel-efficient vehicles.

“The problem is simple: Revenues from motor fuels taxes and truck-related taxes to support the HTF . . . are not keeping pace with authorized spending levels,” GAO noted in a 2009 report. Because of this, GAO has placed surface transportation financing on its “high risk” list.

According to the Office of Management and Budget’s fiscal 2011 budget documents projecting future gas tax revenue, receipts for the highway account in fiscal 2010 should total $36.2 billion, about 3.7 percent more than in 2009. However, receipts into the fund will continue to decelerate through fiscal 2016, when they are estimated actually to begin decreasing. The break point, according to these estimates, will occur in fiscal 2017, after which receipts are projected to continue on a largely downward path.

In 2008, a bipartisan panel of transportation experts released a report on transportation planning and revenue options for the future. The report, which was mandated by SAFETEA-LU, concluded that upgrading the nation’s existing system and creating a more advanced surface transportation program will require an investment of $225 billion annually, from every source, over the next 50 years.

In the short term, the report concluded, the solution to revenue woes is to raise gasoline taxes between 20 cents and 32 cents over the next five years, and then index increases to inflation.

Republicans immediately shot down the gas tax suggestion, but it’s also a difficult sell for many Democrats on Capitol Hill, particularly in an election year, and especially considering that the White House is opposed. Although Oberstar is in favor of increasing the gas tax, his counterpart in the Senate isn’t. Boxer, who has tended to side with the White House on big-picture transportation debates, said last month that she would not support a gas tax increase.

Some transportation stakeholders privately hope the administration will relax its hard stance against a gas tax increase during a lame-duck session, but that’s by no means certain, and in any case represents a significant wait.

“It’s all about money to the extent that parties in both branches of government can come to agreement on how” to find it, said Jeff Solsby, a spokesman for the American Road and Transportation Builders Association. “The question is not how you’re going to pay for it; the question is are Congress and the administration willing to expend the political capital to enact those decisions.” Solsby’s organization is among those that support increasing the gas tax.

But many stakeholders, even some of the most die-hard fans of the current taxation scheme and the Highway Trust Fund, acknowledge that it’s a system that can’t be sustained forever.

“The Highway Trust Fund remains the simplest and most effective means to finance robust infrastructure investments for the near term. But if you look beyond a 20- or 30-year horizon you absolutely have to move to the next step,” Solsby said.

But the trust fund’s balances have already started running into the red, leading some to question whether the current financing scheme is too broken to continue to use, even in the short term.

Over the past year and a half, the trust fund has had to be supplemented with nearly $40 billion in money from general revenue to keep it solvent. At present, the Congressional Budget Office estimates that these transfers should suffice to keep the trust fund in the black through the second or third quarter of fiscal 2013.

The revenue commission report concluded that the current financing structure “will be viable until at least 2025,” but that federal and state lawmakers already must begin developing a strategy to transition to other revenue sources for the long term.

“Increasing disparities in vehicle fuel efficiency will gradually erode the equity of the fuel tax, and in the long run many vehicles may be operating on fuels such as electricity that are difficult to tax,” the report said. “After [2025], uncertainties concerning the ability of the fuel tax to serve as the financial base for highway and transit programs are great enough that Federal and State transportation agencies should plan on moving to an alternative revenue source.”




PUSHING FOR ACTION: Oberstar has been trying to push forward on a reauthorization, but he has differences with the administration on approach. (CQ / SCOTT J. FERRELL)



Which alternative revenue source policy makers will want to use remains to be seen. “There’s no one silver bullet,” Solsby said. “It’s making a series of necessary steps across the board to enact a series of revenue measures to pay for the programs.”

One option, charging a fee based on how much individuals actually drive, known as “vehicle miles traveled,” has been rejected by the administration, at least for now.

Other ideas are grouped into a catchall phrase called “innovative financing” schemes. Innovative financing is a term of art that generally encompasses several options: 

    • Toll roads, for which private companies would foot the cost of construction, financed on the back end by collecting tolls. The tolls could also be used to help maintain those roads once their initial costs were paid. 

    • Large-scale bonding, which would allow states to float bonds backed by the Treasury for large, multi-year projects. Congress has already endorsed something similar to this, known as Build America Bonds, which states and local governments can use for a variety of infrastructure projects. These bonds are taxable, but the federal government subsidizes much of the interest.
• Infrastructure banks, which would also allow big-ticket bonding for projects of national or regional significance.

President Obama has proposed a national infrastructure bank or a hybridized version of a bank in both of his budget proposals so far. These ideas usually involve setting up a government-owned entity that could borrow billions of dollars in federal funding to invest in infrastructure, primarily large-scale projects of regional or national significance.

Each of these options has proponents and detractors, and many of them, in the final analysis, involve borrowing money rather than creating a new source of revenue.

In any case, these kinds of proposals are mostly considered an ancillary part of the total financing mix. Oberstar said these ideas are important and will play a key role in addressing the country’s financing gap, but that they “supplement — not replace — the primary financing mechanism of federal motor fuel tax and the Highway Trust Fund.”

Most believe that until the administration engages with some other proposals for generating the kind of revenue infrastructure will need going forward, the surface transportation bill is likely to remain stalled.

In the meantime, transportation authorizers on Capitol Hill and stakeholders across the country continue to fret. Oregon Democrat Peter A. DeFazio, who chairs the Highways and Transit Subcommittee of the House Transportation panel, noted that the United States is being outpaced by its global business rivals. He said China spends 9 percent of its gross domestic product on infrastructure, compared with the United States’ 0.93 percent.

“We are dramatically under-investing in our nation’s surface transportation system. We aren’t even keeping pace and maintaining the infrastructure built by the Eisenhower generation,” DeFazio said.

Source: CQ Weekly

The definitive source for news about Congress.

© 2010 Congressional Quarterly Inc. All Rights Reserved.