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The Fiscal Implications of the Senate Highway Bill (S.1813) — Part II

Posted by Ken Orski on Tuesday, March 20th, 2012

Innovation NewsBriefs
Vol. 23, No. 12

On March 14, by a vote of 74-22,  the Senate passed an 18-month highway bill (S. 1813) reauthorizing the federal surface transportation program through the end of FY 2013. Twenty-two senators, all Republican, voted against the final bill.

While Washington stakeholder interests and advocacy groups applauded the Senate action as a “victory for bipartisanship,” the question of the House response and the possibility of another temporary extension has cast a shadow on the celebration. House leadership is far from certain they have the votes to pass the 18-month Senate bill. As the House reconvenes after a week’s recess, the goal is still to move a five-year bill according to House Speaker John Boehner’s spokesman.  

But many conservative  House and  Senate members would just as soon see the current law extended  past the November elections in the hope that a Republican-controlled Senate next year would enable them to craft a long-term bill more to their liking.  Whether they will get their wish remains to be seen.  According to the latest reports, the House will not take up the reauthorization bill until it returns from the Easter break on April 16, so a temporary extension is a foregone conclusion.  However its duration is not yet known.  

The self-congratulatory mood among the Democrats and their industry allies was also tempered by a realization that the bill is essentially a short-term fix. In six months’ time “we’ll have to start all over again,” Sen. Boxer herself reportedly acknowledged. State DOT officials have long maintained that a longer term legislation is required to enable them to plan major projects.

Nor has it escaped any one’s notice that coming up with the money for the bill required some creative thinking. As one Senate aide told us, ” The measure is popular with our members because they see it as a ‘jobs bill.’ That’s why so many of them were willing to hold their noses and vote for it, knowing full well that the bill uses budgetary accounting gimmicks to cover up the [$12 billion] shortfall.”

Sen Bob Corker (R-TN) put it more diplomatically: “The highway bill is so popular that members on both sides of the aisle are willing to kick the can down the road … But passing a bill that spends money over 18 months and tries to recoup it over a 10 year period is a road to insolvency.”

Sen. John Cornyn (R-TX) summed up what many of his colleagues are probably thinking when he noted, “The Highway Trust Fund is broke and we’re trying to figure ways to deal with that, but unfortunately we seem to be piddling around the edges rather than dealing with the root causes.” (Quoted in Politico’s Morning Transportation)

The Highway Bill’s Tortured Arithmetic

How, exactly, is the Senate bill being paid for? Our colleague  Gary Hoitsma, editor of the widely-read Washington Letter on Transportation (published by the Carmen Group). has revisited this question in his latest issue (March 19) with a more detailed account than the one provided (and reported by us) last week.  Along with Hoitsma, we agree that the question of the bill’s finanacing  deserves far more scrutiny than has been accorded to it by the national and trade press—and by the transportation community for that matter.

Hoitsma notes that within the final hours before final passage of S. 1813, significant changes to the bill’s financing package were incorporated into the legislation through amendments approved in roll call votes and through “unanimous consent.” “It is doubtful,” he writes, “that many senators or other outside observers were fully aware of these changes or their significance, just as it is equally doubtful that many members or observers had earlier attempted to delve into the murky details of the convoluted pay-for legislation the Senate Finance Committee originally marked up on Feb. 7 and further modified thereafter.”  

Here, in Hoitsma’s own words,  are the highlights of  how the Senate bill’s finance package has been put together:

  • There is an outright $5 billion transfer in direct appropriations from the General Fund, comparable in nature to the $35 billion in General Fund transfers made over the past three years. No specific offset for this transfer is identified. The transfer is assumed to be paid for through a variety of pension and tax-related adjustments over 10 years. It is noteworthy that no mention of the $5 billion General Fund transfer was made in any of  the Senate Finance Committee’s public deliberations or documents  that were issued in the months of February and early March. Its first mention only appears on March 13, burried in the 221-page “Second Manager’s Amendment” adopted on the Senate floor by unanimous consent without debate. The transfer was made public the following day, March 14, when it was posted online just a few hours before the final 74-22 vote on the bill.  
  • There is an immediate transfer of $3 billion to the Highway Trust Fund from the Leaking Underground Storage Tank (LUST) Trust Fund.  No offsets are deemed necessary because these monies are said no longer to be needed to fulfill LUST obligations.
  • A total of only $9.3 billion is transferred to the HTF through the end of FY 2013, i.e. during the life of the Senate bill. This includes a transfer of tariffs on imported vehicles ($1.6 billion) in addition to the General Fund transfer ($4.5 billion) and the LUST transfer ($3 billion).  Another $4.6 billion is to be transferred to the HTF over the subsequent eight years (FY 2014-22) for a total ten-year  transfer of $13.9 billion.
  • The bill claims to raise $3.4 billion in the first two years and  $17.1 billion over 10 years in 12  offsets to pay for the HTF transfers and for the bill’s newly-designated non-HTF spending (at least $1.4 billion, pending further CBO scoring that is sure to increase this number significantly). A total of $9.9 billion of this revenue comes from three pension-related provisions; up to $7.2 billion is derived from  loophole-closing items.
  •  The bill includes no spending cuts as offsets to pay for the bill.  Without any compensating spending cuts in other parts of the federal budget, the bill’s spending would violate the Budget Act by breaking through the discretionary spending caps set in law in last year’s national debt deal. Facing a point-of-order challenge on this very issue, the Senate voted 66-31 to expressly “waive the Budget Act”.

Note: For those who wish to get an even more detailed picture, the March 19 issue of the Washington Letter on Transportation contains a detailed line-item summary of the S.1813 Finance and Revenue Provisions. The summary is broken down to show  two-year and 10-year totals.

Will the House Assert its Authority Under the Origination Clause?

It is these transfers and offsets, extending over a period of up to 10 years to cover 18 month’s worth of expenditures, that have drawn the most pointed criticism among many Senators and that might  become a  bone of contention in any eventual House-Senate conference on the bill. As a Boehner spokesman  pointedly reminded reporters, “they [the Senate] need to consult Article I of the Constitution.”  He was refering to the so-called Origination Clause of the Constitution (Article 1, Section 7, Clause 1)  which stipulates that the House has exclusive authority to introduce bills raising revenue ( “All bills for raising revenue shall originate in the  House of Representatives.”)

According to the Congressional Research Service, when a Senate-introduced revenue bill is passed by the Senate and sent to the House for its consideration, the House may place a “blue slip” on the legislation noting the House’s constitutional prerogative, and return it to the Senate without taking further action. This “blue-slipping” procedure is meant to affirm the constitutional provision that the House is the sole body authorized to introduce revenue or appropriations legislation. (The Origination Clause of the U.S. Constitution: Interpretation and Enforcement, James Saturno, Congressional Research Service, March 15, 2011, pp.9-10).  It is not clear whether the House will choose to follow this formal procedure or simply ignore the Senate bill, but  Boehner spokesman’s remark suggests that House leadership is quite aware of  its constitutional prerogative.

Implications for the Future

The contortions that the Senate Finance Committee had to go through to come up with offsets to cover a mere $12 billion funding gap, presages an even more difficult challenge in the years ahead. By October 2013, when the 18-month bill (if approved by both Houses) will have reached its end, new offsets will be even harder to find—especially for a multi-year bill. What we may be faced with in the future, one House staffer speculated, is a permanent condition of serial short-term (one- or two-year) reauthorization bills each of which would require only modest amounts in offsets to achieve a balance between expenditures and revenue.  If a longer period of funding certainty were desired, entirely new methods of raising multi-year sums of transportation revenue would need to be devised.

For now,  the Senate is merely toying with half  measures that give an illusion of a legislative success but in reality leave all the fundamental  questions unanswered.

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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One Response to “The Fiscal Implications of the Senate Highway Bill (S.1813) — Part II”

  1. Tom Stevens says:

    This bill has already passed the senate. Please contact your representatives in congress and instruct them to vote no for senate bill 1813 before it is too late.

    If you do not act now soon some ignorant socialist congressman will introduce a law to take away your drivers license for some frivilous reason. Seriously it willl happen if this bill becomes law.

    Also instruct your representatives to vote no for any bill that limits freedom for Americans.

    Everyone knows the problem with the deficit is spending. You could take away everyone’s passport and driving license and you still would not be able to fix the deficit.

    These soviet style tactics of limiting peoples freedom is going to backfire. As was in the other repressive societies the wealthy and middle class people will just leave the USA permanently and start paying their taxes to another country that does not have soviet style repression. As you should know this is already happening. Many wealthy and middle class people are already leaving the USA.

    This bill is causing stress and strife in the country and polarizing the American people. This is never a good situation.

    Please instruct your representatives to focus on the problem of spending and stop these repressive tactics that accomplish nothing but the polarization of the people.

    Seriously soon some ignorant socialist congressman will attempt to take away the drivers licenses of the American people for some frivolous reason that will accomplish nothing and further erode American values and pride.

    There is an ever growing erosion of American pride and an ever increasing embarrassment of being American. Bills and laws that limit American freedom and erode American pride are making the USA the laughing stock of the world.

    When I see attachments to bills like the one giving the IRS power to suspend or revoke an Americans right to travel it makes me sick. It makes me feel embarrassed to be an American. Please try to stop the politicians from destroying our country.

    Also Instruct your representatives to initiate a bill that makes the ability to travel a right and not just a privilege so the politicians will never be able to do this repressive act in the future. I don’t want the government of my country to be able to limit travel and control Americans like other repressive governments. I want to be free and proud of my country the USA.

    Also please instruct your congressman to talk to other congressman to stop this bill from becoming law.

    The link to contact your representative.

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