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Another Temporary Extension As House and Senate Confront Their Differences

Posted by Ken Orski on Tuesday, September 6th, 2011

Innovation NewsBriefs
Vol. 22 No. 25

With Congress in session for only 11 days during the month of September, there is not enough time to act upon substantive transportation legislation which expires at the end of the month. Consequently, both the Senate and House transportation leaders have agreed to support a temporary extension of the existing  transportation authority (SAFETEA-LU) and its revenue title. With President Obama and numerous transportation stakeholders adding their voices to stress the urgency of not letting the law expire, the passage of a short-term “clean” extension is virtually assured. However, its length and level of funding still have to be agreed upon. Moreover, a short-term extension through the end of next January, as proposed by Sen. Barbara Boxer, may not be long enough to allow House and Senate negotiators to resolve their differences. And reaching a compromise later in the year, when the Presidential race is in full swing will be a daunting challenge.

Meanwhile, Pres. Obama is expected to propose an independent infrastructure initiative as part of his jobs plan to be presented to a joint session of Congress on September 8. The proposal may include already funded “high priority infrastructure projects” whose approval is within the control and jurisdiction of the federal government.  How  this initative might affect congressional action on the surface transportation reauthorization remains to be seen.
House and Senate Bills Differ Widely

As Congress resumes consideration of the transportation bills during its fall session, House and Senate remain poles apart in their position on the nature and funding of the federal-aid transportation program. To recapitulate, the House bill would extend the transportation program for six years and has a price tag of $230 billion or an average of $38.3 billion/year. That is roughly the amount of tax revenue expected to be earned by the Highway Trust Fund over the six year period of the proposed bill (FY 2012-2017) as projected by the Congressional Budget Office in its latest (August 30) projections: $204.2 billion in the Highway Account and $30.2 billion in the Transit Account. In setting this level of funding, the House Transportation committee followed the House Budget Rules that instructed the committee to hold spending down to levels that can be supported by Trust Fund tax receipts. Rep. John Mica (R-FL), chairman of the House Transportation and Infrastructure Committee, says he is determined to pass a long-term bill: “I’m going to use every lever possible…whatever it takes to get long-term authorization,” he told the Wall Street Journal on August 6.

The Senate bill on the other hand, would extend the program only for two years (FY 2012-13) at a price tag of $109 billion or an average of $54.5 billion/year, roughly the current level of spending. Since the Highway Trust Fund is expected to receive not more than $75.5 billion in tax revenue over the next two years, the Committee proposed to partially fund the shortfall by drawing down the entire unspent balance of the Trust Fund left over at the end of FY 2011: $14.2 billion in the Highway Account and $7.0 billion in the Transit Account according to CBO calculations. But that still left a sum of $12.3 billion unfunded.

Finance Committee Chairman Max Baucus (D-MT), bound by a pledge to finance the bill “in a way that does not increase the deficit,” has been exploring various offset options to cover the unfunded shortfall but so far has been unable to come up with a solution that would satisfy his fellow Republican committee members. Should revenue offsets not be agreed upon by September 8— the date of the proposed markup of the bill— Sen. Boxer (D-CA), chairman of the Environment and Public Works (EPW) Committee, said consideration of the two-year reauthorization bill could be postponed.

A Philosophical Divide

The gulf that divides the two parties is not confined to just the technical parameters of the bills. Democrats and Republicans differ fundamentally on what the proper federal role in transportation should be. The Highway Trust Fund, Rep. Mica wrote in a letter to the US Chamber of Commerce, has evolved into a slush fund with less than 65 percent of its receipts dedicated to legitimate purposes (which in Mica’s view are highway-related programs), and with much of the remaining money funneled into federally-mandated “enhancement” set-asides that are of no federal interest and have only a peripheral relation to improving mobility. These “hitchhikers,” as Sen. James Inhofe (R-OK) calls them—such as highway beautification,  historic preservation and “livability” projects—have depleted the Highway Trust Fund to the point of bankruptcy. Their continued support, Mica wrote, is “unproductive and misguided at best.”

Republicans in Congress, along with many conservatives at large, view the new climate of fiscal restraint as an opportunity to return the federal-aid program to its original roots. Greater spending discipline, they contend, will refocus the federal mission on substantive transportation programs, target resources on legitimate federal objectives, eliminate wasteful spending, restore the highway program’s lost sense of purpose and give states and localities more control and responsibility over project selection.

The Senate view, as articulated by Sen. Barbara Boxer, is more expansive. The Senator considers the bill as a vehicle “to help create jobs, jumpstart our economy and build the foundation for long-term prosperity.” To Sen. Boxer and her fellow Democrats on the committee, the federal-aid transportation program appears to be, first and foremost, a tool of job creation.

The Case Against a Short-Term Bill

But spending money on “shovel-ready” transportation projects, House Republicans argue, has had no demonstrable effect on lowering unemployment, and the $109 billion bill is not truly a  measure aimed at enhancing mobility or reducing congestion but a thinly disguised short-term economic stimulus bill. The Senate bill will only “extend the spending binge of the stimulus era without offering a chance to plan for long-range investments,” one House GOP aide told us. “A two-year bill will merely allow states to enter into short-term contracts and create  temporary jobs, as the experience with stimulus spending has demonstrated.” This sentiment seems to be shared by many state-level transportation officials. The Senate bill, they contend, deprives state DOTs of the certainty they require for planning large-scale infrastructure investments without offering any assurance that the fiscal and political environment two years down the road will allow for a more generous funding of the transportation program. On the contrary, the likelihood of a GOP-controlled Senate in 2013 and beyond suggests a continued climate of fiscal austerity and no letup in discretionary spending constraints.

What Can We Expect Beyond September?

While passage of a temporary extension of the existing transportation law is virtually assured, its length and level of funding are still to be determined. Sen. Boxer has proposed a four-month extension at current levels of funding. For Rep. Mica, the overriding consideration is to set funding levels that will not impair the solvency of the Highway Trust Fund.  Reaching mutual agreement on the terms of the extension (essentially a continuing resolution) should not be overly difficult.

The same cannot be said of the substantive legislation.  Assuming that both houses of Congress will pass their versions of the bills by the end of the year—an assumption open to question given the crowded congressional legislative agenda that includes passing the FY 2012 appropriation bills—there remains the potentially contentious matter of reconciling the House and Senate bills.  Is it reasonable to assume that the two houses will settle their differences and produce a compromise bill early in 2012?  Or will the negotiations drag on inconclusively, necessitating yet another extension? Will the parties succeed in resolving their differences during the remaining months of the 112th Congress while the presidential race is in full swing? Or should the transportation community give up the hope of seeing a multi-year reauthorization enacted before 2013? The answer depends on whether the parties are willing to negotiate in good faith and are ready to make mutual concessions  — a spirit that appears to be in short supply on Capitol Hill these days.

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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