Taking a Critical Look at the Senate Highway Bill

Posted by Ken Orski on Monday, June 4th, 2012

Innovation NewsBriefs
Vol. 23, No. 18

Over the last several weeks, members of the House conference committee and their staffs have been poring over  the 1,600-page Senate bill (MAP-21), trying to fathom its complex and sometimes obscure finance and revenue provisions. Lately, a detailed analysis by the staff of the Joint Committee on Taxation  has made the bill’s revenue provisions more explicit  (“Comparison of Revenue Provisions of H.R 4348 and MAP-21,”  JCX-42-12).   

According to Sen. Barbara Boxer (D-CA), chairrman of the Environment and Public Works (EPW) Committee, “approximately 80 percent” of the  EPW Committee portion of the bill is non-controversial. This assertion could be correct, for many of  the transportation reforms espoused by the committee— such as  program consolidation, environmental streamlining, credit assistance (TIFIA) and performance-based program management— also meet with House approval.  However,  the  financing aspects of the bill  are far more controversial. They have become the central point of contention between House and Senate conferees.
More specifically,  the Senate bill employs the concept of “offsets” or “pay-for’s” to compensate for additional revenues deposited into the Highway Trust Fund. The deposits are made necessary to cover the shortfall between the available trust fund revenue and proposed expenditures totaling $109 billion during the 15-month term of the bill (June 30 2012 -September 30, 2013).
The largest  deposit  into the HTF is an outright $4.46 billion appropriation from the General Fund, “out of money in the Treasury not otherwise appropriated”: $2.183 billion is to be transferred in FY 2012 and  $2.277 billion in FY 2013  (Sec 40313 of MAP-21). This sum is only partially offset over the life of the bill. Indeed, of the total $9.279 billion in general funds deposited into the HTF over two years, only  $3.069 billion is offset during the term of the bill.  The balance of the deposits —more than $6 billion—  would  be offset  over a period of  five to ten  years. This approach has been widely criticized as  “accounting gimmickry.”
“Spend now, pay later doesn’t cut it for the American people,” said Rep. Paul Broun (R-GA) who plans to introduce a motion to instruct House members of the transportation conference committee to limit funding to not more than $37.5 billion for FY 2013, the projected amount of the gas tax to be deposited in the Trust Fund. In a statement, Broun elaborated further:  “Our motion would simply restore the inherent limits which were built into the Highway Trust Fund and ask that the conferees only obligate the funds which are equal to what the CBO projects the government will take in via the federal gas tax through the end of  fiscal year 2013. …It is time for the gimmicks to stop.” Broun’s motion has found support among the conservatives.   “Constraining spending at levels no greater than projected HTF revenues is the only fiscally responsible path forward,” reads a statement by  a coalition of conservative public interest groups.      
While the legitimacy of the “pay-for’s” is  the most contentious feature of the Senate bill, other aspects of MAP-21 also are being questioned:
1.  The  bill includes over $6.8 billion in new non-HTF spending that has nothing to do with the core purpose of the bill.This includes the RESTORE Act ($3.8 billion over 10 years) and the creation and extension of two non-transportation programs: a National Endowment for the Oceans, Coasts and Great Lakes (Sec. 1603(4) of MAP-21) and a seven-year re-authorization of the Land and Water Conservation Fund (Sec. 1701 of MAP-21). The latter has been criticized by Rep. Doc Hastings (R-WA), chairman of the House Resources Committee, as not worth its price tag of  $1.4 billion.
2. The  bill contains the controversial “Bingaman amendments” (named after its sponsor, Sen. Jeff Bingaman (D-NM)) These provisions would discourage public-private partnerships by penalizing states that enter into long-term toll concession agreements with the private sector. The amendments  would also eliminate the use of Private Activity Bonds and prohibit accelerated depreciation, thereby increasing  private investors’  costs. Taken together, these provisions would have a “chilling effect” upon future private investment in infrastructure according to the Building America’s Future coalition and other transportation stakeholders.
3. The largest single revenue-raising offset ( $3.1 billion over two years)  is “Pension Funding Stabilization.”  Indeed, of the $10.1 billion in  General Funds deposited  into the HTF over ten years, no less than $9.5 billion  is paid for (offset) by this one provision. The provision would make changes in the way pensions plans are funded, allowing employers to “stabilize” (euphemism for  “decrease”) their annual contributions to the pension systems. This, in turn, would allow for taxable incomes to rise, providing increased tax revenue to the government.  While pension stablilization has found support among a  wide segment of the business community, it has been criticized by conservatives as making taxpayer bailout of the federal agency that backs up pension commitments (the Pension Benefit Guarantee Corporation) more likely.
4. Other MAP-21 provisions that have raised questions include a requirement that every new motor vehicle beginning in 2015 be equipped with a recording “black box” designed to store data relating to vehicle safety; and authority to revoke passports of suspected tax delinquents as a way of encouraging them to pay up (which the bill estimates would raise $743 million in offsets over ten years.)
5. An amendment (the so-called Cardin-Cochran compromise) affecting the treatment of “transportation enhancements” shifts the flexibility to decide how to spend the enhancement set-aside money from state DOTs to local government agencies. The amendment has substantially modified an earlier agreement reached by EPW Committee Chairman Sen. Barbara Boxer (D-CA) and Ranking Member Sen. James Inhofe (R-OK).
Whether all these issues can be successfully resolved remains to be seen. Many observers doubt that a compromise can be reached by the conferees in the next 30 days when the current program extension is set to expire.  The House leadership seems to be of the same mind.   The House Majority Leader’s schedule of legislative items to be considered before the August recess does not include the transportation bill.  And getting anything accomplished after the summer recess,  in the two months  immediately preceeding the election or during the lame duck session, seems highly unlikely in the view of most congressional observers.

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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