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After the Dust Has Settled… Some Reflections on the New Transportation Law (MAP-21) Update

Posted by Ken Orski on Wednesday, July 18th, 2012

Innovation NewsBriefs
Vol. 23, No. 21 (Rev)

By a vote of 373-52 in the House and a vote of 74-19 in the Senate, the lawmakers approved a two year reauthorization (October 1, 2012 through September 30, 2014) of the federal surface transportation program, just one day before the program was set to expire on June 30. In so doing, Congress passed the first multi-year reauthorization in almost seven years and put an end to a three-year long series of nine short-term extensions that kept the transportation community in a state of perpetual uncertainty. The bill, which also extended the existing authorization through the end of the current Fiscal Year (September 30)  was signed into law at a subdued White House ceremony on Friday, July 6.

Stakeholders and the construction industry applauded the bill as one “that will bring us 27 months of much needed funding certainty and program stability” in the words of Kirk Steudle, AASHTO’s president. Political observers praised the compromise bill as a commendable example of bicameral give-and-take. Even many think tank conservatives privately admitted that the bill was far better than they had reason to expect.

About the only sour note was sounded by environmentalists and advocates of so-called “active transportation” (i.e. the bike/ped lobby). They felt cheated by what they considered too many concessions made by Senate negotiators eager to pass a bill at any price.”A substantial capitulation,” and “a major step backward,” was how the disappointed Transportation for America (T4America) advocacy group characterized the conference bill in its press release. “Bad News for America,” headlined the Rails-to-Trails Conservancy. Smart Growth America thought the bill “fails to provide the kind of visionary…transportation reform America deserves.” Nature Conservancy deemed it “a sad event in the history of American conservation.” And an anti-automobile civil liberties activist called the bill ‘The most hyperpartisan and least productive that I’ve seen in decades.”  Collectively, the green advocacy groups gave vent to their frustration that Congress did not embrace enough of their agenda.  

As with any negotiated compromise, neither Senate Democrats nor House Republicans felt completely satisfied. But in the end, fear of being accused of killing a”jobs bill” five months before a critical election, plus a genuine desire to put an end to three-years of uncertainty, tipped the scales in favor of a compromise. The prospect of a 27 month respite from having to revisit the transportation authorization also weighed in favor of approving the measure, despite reservations on both sides.

Lingering Fiscal Concerns

Although the bill was welcomed, its failure to address the problem of long-term solvency of the Highway Trust Fund did not escape notice. “A good step forward,” said former Governor Rendell, co-chairman of the Building America’s Future coalition, but the bill lacks a “long-term sustainable and significant funding source.” Echoed ARTBA’s President Pete Ruane, “The tough job of coming to grips with how to fund the nation’s investment in transportation over the longer term remains.” So did Sen. Orrin Hatch (R-UT), ranking member of the Senate Finance Committee who observed that “The revenue title kicks the can down the road, failing to put the Highway Trust Fund on a sustainable path forward.”

Fiscal conservatives complained about the questionable way the $118 billion bill ($105.2 billion bill in obligation authority for FY 2013-14) is to be paid for. To fully fund it, the bill supplements the Highway Trust Fund (HTF) with an $18.8B transfer from the general fund and an additional $2.4B transfer from the LUST (Leaking Underground Storage Tank) Trust Fund.

To pay for these transfers, the bill uses “a remarkable array of budget gimmicks voters aren’t supposed to notice,” in the words of  the Wall Street Journal. The main source of offsets is the projected revenue from the so-called Pension Funding Stabilization reform which will allow employers to lower their contributions to defined benefit pension plans. Since pension contributions are tax deductible, reducing them will increase employers’ taxable income and hence allow the government to collect more taxes.  Also used for offsets will be projected increases in premiums paid to the Pension Benefit Guaranty Corporation. FY2012-2014 offsets will only amount to $8.077B. To fully pay for the 27 months of funding, ten years worth of offsets will be required. “It is simply nonsensical to pay for this measure for at least eight years after it expires,” noted Sen. Hatch.

While pension funding stabilization has been called “phantom savings” by the Wall Street Journal, and criticized as problematic by conservative groups such as the American Enterprise Institute and the Competitive Enterprise Institute, it is not without supporters. They include, primarily, corporate  employers who feel that current regulations require them to set aside more funds than is necessary.

With a long-term funding source nowhere in sight, there is a growing sense among seasoned observers that the days of long-term transportation authorizations may be over. The prevailing fiscal and political climate makes it difficult if not downright impossible to raise hundreds of billions of dollars in a single legislative package. For example, at FY 2013-14 levels of expenditure, a six-year surface transportation authorization would require approximately $300 billion in obligation authority. Highway Trust Fund revenue and interest over the same time frame is expected to generate only $210 billion, leaving an unfunded shortfall of $90 billion. Faced with this dilemma, Congress may embrace short-term bills that require only relatively modest amounts of general fund supplements and offsets, such as MAP-21, as the only practical solution.        

The Winners

Major credit for passing the bill goes to Sen. Barbara Boxer (D-CA) chairman of the Senate Environment and Public Works Committee who, having formed a bipartisan alliance with the Committee’s Ranking Member James Inhofe (R-OK), never wavered in her determination to get a bill passed during the current session of Congress, and was willing to meet John Mica halfway in order to gain the House Republicans’ support. Sharing in the credit is Rep. John Mica (R-FL), Chairman of the House Transportation and Infrastructure Committee who had to contend with and persuade a diverse and independent-minded group of conferees of his own party to accept some unpopular Senate provisions. Major credit also goes to Speaker John Boehner (R-OH)) who put his prestige on the line and skillfully traded his major trump card, the Keystone XL pipeline, at a crucial point in the negotiations with Senate Majority Harry Reid (D-NV) for important Senate concessions. Just how extensive and significant those concessions have been, will become apparent from the summary below.

Two Substantive House Victories

The House can point to two substantive victories:

It prevailed upon the Senate to agree to stronger reforms to the project delivery process, including an expanded use of the “categorical exclusion” process. The conference bill provides for setting a 4-year deadline for project approval and for exempting more categories of projects from environmental assessments (EIS). The exemptions now include repair of existing highways and bridges, reconstruction of projects damaged in natural disasters; projects within an existing ROW; and projects receiving minimal Federal assistance ($5M or less).

The House was also successful in reining in the Senate’s “Transportation Enhancement” program. The conference bill renamed the program as the “Transportation Alternatives” (TA) program. (Sec. 1122). It eliminated funding eligibility of certain “Enhancement” projects (such as transportation museums, public art). And it folded the  “Recreational Trails,” and “Safe-Routes-to-School” programs into the overall Transportation Alternatives program, thus depriving them of their own dedicated funding.  

The new TA program is funded with a set-aside amounting to 2 percent of total federal highway funding. Fifty percent of the set-aside is allocated to local agencies and the other 50 percent to the states. However, states can transfer their allocation to other uses if they get a backlog of 150 percent of an annual set-aside. Effectively, the Enhancement (TA) program will be reduced from 1.2B in FY 2011 to $808/820 million/year in FY 2013/2014, a reduction of approximately 30 percent.

The conference bill also allowed expanded authority to toll new lanes on the Interstates so long as the current toll-free lane capacity is not diminished. It allowed conversion of HOV lanes to High Occupancy Toll (HOT) lanes (Sec 1512); and it required US DOT to compile “best practices” for working with the private sector and to develop guidance for P3 in public transit.(Sec. 1534). Provisions favoring tolling and public-private partnerships had been missing from the Senate bill.

Left on the Cutting Room Floor…

In return for dropping the Keystone XL Pipeline amendment and the proposal to curb EPA coal ash regulation, and in return for abandoning Congressman’ Mica’s earlier goal of a six-year bill (H.R. 7), the House was able to win significant concessions from the Senate. Left on the cutting room floor were:

+ The Senate bill’s “Bingaman amendments.” The amendments would have penalized states for entering into public-private (P3) toll concessions by withholding formula funding for privatized interstate toll roads and eliminating accelerated depreciation and use of Private Activity Bonds for P3 transactions. Defeating the amendment was a major goal of the financial community.

+ The Senate bill’s Title III, Surface Transportation and Freight Policy Act of 2012. However, the bill keeps modified Senate provisions establishing a national freight policy, designating a primary freight network of 30,000 miles and requiring the development of a national freight strategic plan.

+ The Senate bill’s Title V, National Rail System Preservation, Expansion and Development Act of 2012.” House conferees opposed this measure because it would increase funding for Amtrak and high-speed rail, and add provisions that “stifle private sector competition in passenger and commuter rail service and lay the groundwork for re-regulation of the rail industry.” Striking out Title V was another nail in the coffin for the Administration’s high-speed rail program.

+ The Senate bill’s seven-year $1.4 billion proposed reauthorization of the Land and Water Conservation Fund, a National Park Service program within the U.S. Department of the Interior. The measure was opposed  by the House conferees as too costly and totally unrelated to the purpose of the bill.

+ The Senate bill’s proposal to create a new National Endowment for the Oceans, Coasts and Great Lakes, to be housed in the Department of Commerce, another measure totally outside the scope of the transportation bill.

+ The Senate bill’s provision to continue the TIGER grant program, a favorite of the Democrats but opposed by the Republicans as  “executive earmarks” that are lacking transparency and are used to promote the Administration’s own priorities. In its place, the conference bill created a new program of Projects of Regional and National Significance ($500M in FY 2013) intended to fund competitive grants for large highway and transit projects. Unlike TIGER, which was open to local governments and metro areas, only states and transit agencies can apply.

 The Senate bill’s provision authorizing the issuance of TRIP Bonds.

+ The Senate bill’s provision for a National Infrastructure Bank, a White House priority but opposed by House Republicans as creating a redundant financial bureaucracy. Instead, the bill retained a bipartisan provision to boost TIFIA program funding from $122 million/year to $750 million in FY 2013 and $1 billion for FY 2014; and to increase the maximum project cost share from 33% to 49%. The conference bill eliminated most of the discretionary selection criteria such as “sustainability.” An increase in TIFIA funding had been strongly promoted  by the financial community.

+ The Senate bill’s set-aside for the “Job Access and Reverse Commute” program (JARC). The program was moved  to Section 5307 Urbanized Area Formula Capital Grants.

+ The Senate bill’s provision that would allow transit agencies to use a limited portion of their Sec. 5307 formula funds for operating assistance during periods of high unemployment for up to two years, a measure championed by transit advocates.

+ The Senate bill’s restoration of an expanded tax benefit for transit commuters. (It goes back to $125/month for transit but remains at $240/month for parking); another measure supported by transit advocates.  

+ The Senate bill’s provision that would require automakers to equip cars with “Event Data Recorders” that record and store the vehicle’s operation immediately before and after an accident. House conferees expressed concern that this provision would constitute an invasion of motorists’ privacy.

+ The Senate bill’s “Complete Streets” provision.  This provision would have established standards for the “safe and adequate accommodation …of all transportation network users, including motorized and non-motorized users,” but was seen by the critics as another way of advancing the green advocates’   bike/ped agenda.

+ The Senate bill’s controversial offset giving the IRS the power to lift the passports of American citizens who owe more tha $50,000 in back taxes. The Senate Finance Committee had estimated the passport provision could have brought in more than $500 million in collected back taxes in its first five years of operation, but House conferees opposed it as being of doubtful constitutionality.

By yielding so much ground, the Senate conferees showed a genuine willingness to meet the House halfway. This they did without sacrificing the Senate bill’s fundamental objectives of maintaining current funding levels and bringing funding certainty and stability to the transportation program. The House, in turn, won major concessions on two issues important to the Republicans—environmental streamlining and reining in transportation enhancements. It also got rid of the most questionable and objectionable provisions of the Senate bill in a quid pro quo for giving up the Keystone XL pipeline. Both parties can truly claim to have achieved their main goals.  And, importantly, Congress has demonstrated that it can still get things done — even in the highly partisan and supposedly gridlocked pre-election season.

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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