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A First Tentative Step Toward Reauthorization

Posted by Ken Orski on Thursday, November 10th, 2011

Innovation NewsBriefs
Vol. 22, No. 30

Last month we noted some encouraging signs, based on informal indications, of a narrowing of the partisan divide in congressional posture toward transportation legislation (“Bridging the Partisan Divide,” Innovation NewsBriefs, October 10, 2011). The unanimous vote of the Senate Environment and Public Works (EPW) on November 9 to approve the highway portion of the surface transportation reauthorization bill (S. 1813) has confirmed our initial impression.

The EPW bill, “Moving Ahead for Progress in the 21st Century (MAP-21)” makes small but important concessions on issues that could have otherwise derailed bipartisan support of the bill in the Senate. The concessions also will reduce potential roadblocks to reaching eventual House-Senate agreement on reauthorization legislation.

The first concession eliminates a federal mandate for three programs that have long been a subject of contention: the so-called Transportation Enhancements (bike paths, pedestrian walkways, scenic easements, highway landscaping, historic preservation, etc), the Recreational Trails program and the Safe Routes to School Program. The compromise preserves the funds for these programs but offers states the flexibility to use these funds also for other purposes that local officials consider more urgent, such as construction of high-occupancy vehicle (HOV) lanes and congestion reduction activities. Under current legislation states have no such option.

Providing states with this flexibility has been a long-standing goal of Senate Republicans, notably Ranking Committee member Sen. Jim Inhofe (R-MO), Sen. Rand Paul (R-KY) and Sen. John McCain (R-AZ). Flexibility has been also an objective of House Republicans. In a September 6 letter to President Obama, House Speaker John Boehner (R-OH) and House Majority Leader Eric Cantor (R-VA) wrote: “While many of the initiatives funded by this mandatory set-aside may be worthy projects, eliminating this required set-aside, would allow states to devote more money to the types of infrastructure programs you are advocating without adding to the deficit.” We suspect many state DOTs will take advantage of the new flexibility and use Transportation Enhancement funds for other, more urgent priorities.

While eliminating the Transportation Enhancement and related mandates was one of the toughest areas of negotiation according to Committee chairman Sen. Barbara Boxer (D-CA), it secured the necessary bipartisan support for the bill in the Senate, and will give House and Senate negotiators one less issue to argue about when the two sides sit down at a conference table to reconcile their differences.

The EPW Committee’s support of an expanded TIFIA program (to $1 billion), its encouragement of state infrastructure banks, and its noticeable omission of a National Infrastructure Bank (NIB) despite President Obama’s repeated entreaties to enact the NIB, could be viewed as another set of gestures by Senate Democrats to seek common ground with House Republicans. The latter have been vocal in their opposition to creating what Rep. Mica has called “another federally backed agency designed to pick winners and losers.” House GOP leaders support instead an expanded TIFIA program and infrastructure banks at the state level.

Other EPW Committee proposals that are likely to meet with House approval include consolidation of programs (from about 90 down to less than 30), elimination of earmarks, creation of a discrete freight program, introduction of performance management, and expedited project delivery. All of these reforms, in one form or another also appeared in the House T&I Committee’s reauthorization proposal unveiled last July.

Finally, Sen. Boxer’s willingness to consider a six-year transportation bill at current funding levels plus inflation “if it is fully paid for in a way that has bipartisan support…” as expressed in her October 26 letter to Rep. John Mica, may be viewed as another gesture toward a bicameral accommodation. Rep. Mica has been adamant about the need for a long-term bill and in this matter he has been supported by state DOTs. A two-year bill, state officials contend, would not enable them to plan major capital projects and would only prolong the uncertainty about the program’s future.

Finding the Revenue is Still a Challenge

However, finding the revenue to adequately fund a multi-year transportation program remains an elusive goal for both the House and the Senate. At the November 11 markup, Senate Finance Chairman Max Baucus (D-MT) confirmed what was already widely suspected: that the necessary offsets for the $12 billion/year shortfall in the proposed $109 billion budget have not been identified. If the necessary funding isn’t secured, it’s “back to the drawing board,” in the words of Sen. Inhofe. The bill cannot move forward until the required “pay-for” is found (and the transit and safety chapters of the bill have been approved by their authorizing Banking and Commerce Committees.)

Even if the required offsets were eventually to be found, committing the entire $109 billion to a two-year program may not be the most prudent thing to do, alleges Taxpayers for Common Sense in a November 4 memorandum. This action would effectively draw the balance in the Highway Trust Fund down to near zero and could result in Trust Fund insolvency if gasoline tax revenues failed to match expectations. To prevent such an occurrence, the Senate bill provides (in Sec. 4001) for mandatory reductions in the obligation limitation should the estimated balances in the Highway Account of the Trust Fund fall below a certain pre-determined level ($2 billion at the end of FY 2012 and $1 billion at the end of FY 2013). In other words, the Senate-proposed two-year program could end up at something less than $109 billion.

On the House side, finding additional funding that would pass muster with the fiscally conservative Ways and Means Committee appears equally uncertain and problematic. While Rep. Mica has not been specific about the dollar amounts he is seeking for his six-year bill, the Congressional Budget Office projects the six-year outlays (FY 2012-17) at $323.4 billion: $267.4 billion from the Highway Account and $56 billion from the Transit Account. (CBO estimates are based on “baseline budgeting” rules that require construction of current services budget levels using the most recent year’s appropriation level, with an adjustment for inflation.) At this level of expenditure, CBO estimates that the six-year revenue shortfall would require offsets totaling $68 billion: $55 billion in the Highway Account and $13 billion in the Transit Account. Using speculative revenues from future oil and gas leases as potential offsets, as proposed by some lawmakers, has been questioned as to its soundness as a budgetary approach.

Although the road ahead is still full of unresolved challenges, the Senate action has demonstrated that bipartisanship, at least in this one area, is not dead. Because of a willingness to compromise and thanks to a spirit of mutual respect and cooperation, the Senate committee has found bipartisan votes to approve a significant piece of legislation to improve infrastructure and create jobs— votes that had eluded the White House only a few days earlier.

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.

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