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Legislative Prospects for the Transportation Bill: An Update

Posted by Ken Orski on Monday, August 22nd, 2011

Innovation NewsBriefs
Vol. 22, No. 23

“The Senate’s approach is a clear rejection of the 34 percent cut in funding proposed by the House, which would result in 630,000 jobs being lost.” Sen. Barbara Boxer, Chairman of the Senate Environment and Public Works Committee.

“I’m going to use every lever possible…whatever it takes to get long-term authorization.” Rep. John Mica, Chairman of the House Transportation and Infrastructure Committee (quoted in WSJ, August 6)

The continuing stalemate over FAA funding offers a foretaste of what awaits us in September when Congress will get down to discussing the transportation bill. Only the stakes will be much higher and the consequences of a deadlock much more serious. That is the sober assessment offered by seasoned Washington observers on both sides of the political divide.

Opposing House and Senate Postures

Indeed, the House and the Senate are poles apart in their position on the nature and funding of the reauthorization bill. The House bill, unveiled by Chairman John Mica (R-FL) on July 7, 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 ($201.6 billion in the Highway Account and $30.9 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 are supported by Trust Fund tax receipts.

The Senate bill on the other hand, whose outline was released by the Senate Environment and Public Works (EPW) Committee on July 20, 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. Since the Highway Trust Fund is expected to receive not more than $75 billion over the next two years, the Committee proposed to partially fund the shortfall by drawing down the entire unspent Trust Fund balance expected to be left over at the end of FY 2011 ($14.8 billion in the Highway Account and $6.9 billion in the Transit Account according to CBO projections.). That still left an unfunded shortfall of $12 billion.

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 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 EPW Committee said consideration of the two-year reauthorization bill could be postponed.

A Philosophic Divide

As one Washington analyst observed, “a two-year Senate bill that keeps spending at current inflated levels and has an unresolved $12 billion shortfall, and a six-year House bill that reduces spending to no more than current revenues are so fundamentally different that it is hard to imagine they could be reconciled in a conference committee.”

Moreover, 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, 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 programs that are of no federal interest and have only a peripheral relation to transportation. These mandates 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 projects of national significance, concentrate resources on legitimate federal objectives, restore the highway program?s lost sense of purpose and give states and localities more voice and responsibility in determining their transportation future.

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 the Senator and her fellow Democrats on the committee, the federal-aid transportation program appears to be, first and foremost, a tool of job creation.

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 a true measure aimed at improving transportation 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.

Even in the Senate, Sen. Boxer’s bill is likely to receive less than overwhelming support. One sign of a partisan divide is a bill, the State Transportation Flexibility Act (S. 1446), introduced by Sen. Tom Coburn (R-OK) and co-sponsored by 13 other GOP senators. The bill would allow states to opt out of the Federal-aid transportation program and let individual states collect and spend gas tax revenue on transportation priorities of their own choosing, free of federal mandates and restrictions. Although the measure is thought to have little chance of enactment, its backing by many influential GOP senators suggests that the Boxer bill is not necessarily assured of a 60 vote majority.

A Look Forward to September

In the previous version of this Brief we questioned whether Congress can complete action on a reauthorization bill by September 30 when the current law is set to expire. It has since become abundantly clear that the bill cannot be passed in the 11 legislative days that Congress will be in session during the month of September  (i.e., three days in the week of September 5 and four days each in the weeks of September 12 and 19; Congress will be in recess again during the week of September 26.)

Facing up to this reality, Sen. Barbara Boxer has proposed a “clean” four-month extension (essentially a continuing resolution), to give both Houses enough time to debate their respective bills, reconcile their differences and  pass a multiyear reauthorization bill by January 31, 2012. It is not yet known if Rep. Mica has agreed to this schedule.

But even this timetable leaves some questions.  Let us assume that the bills will be passed by both houses of Congress by the end of the year despite other pressing business on the congressional calendar such as passing the FY 2012 appropriation bills, and despite the distraction of the second phase of the congressional debt reduction negotiations in November and December.

In light of the ongoing deadlock on the FAA funding bill, is it reasonable to assume that the House and Senate will settle their differences and produce a compromise bill during the month of January 2012?  Given Rep. Mica’s determination to pass a six-year bill will the Senate give in? Or will the negotiations drag on inconclusively, necessitating yet another extension of the existing law? Will the parties succeed in eventually resolving their differences during the remaining pre-election months of the 112th Congress and if so, what shape will the compromise bill assume?  Or should we once and for all give up the hope of seeing a multi-year reauthorization enacted before 2013?

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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