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Prospectus Blog House Transportation Bill: Where’s The Money, & Can It Pass In ’09?

Rep. James Oberstar (D-MN), Chairman of the House Transportation and Infrastructure Committee unveiled a blueprint for the next surface transportation authorization bill on June 18 to generally positive reviews (long version of blueprint here). However he left two key questions unanswered: Can the bill be enacted this year? and, Where will the money to fund the ambitious $500 billion program come from?
The first question has been pushed to the forefront by the Obama Administration. Last Thursday, Transportation Secretary LaHood surprised the transportation community and members of Congress with an unexpected announcement:  the Administration will seek an 18-month extension of the current surface transportation authorization. An estimated $13-$17 billion will be needed to fund the program extension.


“I recognize that there will be concerns raised about this approach,” the Secretary said in his statement. “However with the reality of our fiscal environment…we should not rush the legislation…If this step is not taken the (highway) trust fund will run out of money as soon as late August.”
Senator Barbara Boxer (D-CA) chairman of the Senate Environment and Public Works (EPW) Committee, who will steer the Senate version of the authorization bill, quickly endorsed Secretary LaHood’s proposal. “This will give us the necessary time to pass a more comprehensive multi-year bill with stable and reliable funding,” she stated.
Ensuring the continuity of funding offered by Sec. LaHood’s proposal seems to take precedence in some Senators’ minds over long-term reform of the program. Needless to say, Rep. Oberstar is of a different mind. He called any temporary extension of the law beyond September 30 completely unacceptable.
What has motivated the Administration to seek a delay in enacting a new transportation law? Secretary LaHood has joined a growing body of doubters that the crowded legislative calendar – controversial climate legislation, contentious health care reform, a Supreme Court confirmation, among others – would permit the House and the Senate to reach agreement on a new bill before the current law expires at the end of September, thus leaving the next years’s program funding in a precarious state.
“Even if the House were to pass a bill by September 30, it is highly unlikely that the Senate would,” LaHood said in an interview. “So rather than stringing Congress along with three-month or six-month extensions, let’s face reality,” he added, to justify the unusually long extension that would delay a new transportation bill by a full year and a half.
Other motivation may also lie behind Sec. LaHood’s proposal. The White House may reason that by mid-2011 the economic climate will have recovered sufficiently to allow the Administration to propose a gas tax increase without suffering serious political repercussions. With mid-term elections behind them, Congress also might be less reluctant to vote for a tax hike. Moreover, by pushing enactment of the new legislation closer to the next presidential election, the Obama White House could take credit for a major piece of legislation.
Another motive for a postponement could be the Administration’s desire to assert a more active role in influencing the multi-year legislation. Secretary LaHood may have taken to heart the advice he has received from several sources, that he should take a more proactive role in shaping the surface transportation legislation and not surrender all the initiative to the House T&I Committee. However, he has been unable to devote much attention to the bill, having had his hands full since taking office with the economic recovery bill, the high speed legislation and recruitment of key personnel.
His senior policy team is likewise spread thin. Some key policy officials – such as Deputy Secretary John Porcari, Assistant Secretary for Transportation Policy, Polly Trottenberger and FHWA Chief Counsel Karen Hedlund – are new to their jobs or still await confirmation. An 18-month postponement would afford the Secretary and his team a welcome pause “to catch their breath and get up to speed” as one U.S. DOT watcher put it to us. He thinks the DOT leadership would welcome a chance to revisit some of the provisions in Oberstar’s bill.
Finally, the decision to seek an extension could be motivated by the Administration’s legitimate concern that Congress has not put forward a solution to the central problem: how to raise the additional $265 billion needed to pay for the proposed $500 billion highway/transit/high speed rail program ($350 billion for highways and highway safety, $100 billion for public transportation and $50 billion for high speed rail ). According to estimates developed by the National Transportation Infrastructure Financing Commission and the Congressional Budget Office, the federal fuel tax and other excise taxes are expected to generate no more than $235 billion in revenue under current law over the FY 2010-2015 period.
The House T&I Committee bill does not include a revenue chapter. That is the responsibility of the House Ways and Means Committee whose subcommittee on Select Revenue Measures will hold a hearing on the funding options on June 25. At this time, no one knows what position the Ways and Means committee will ultimately adopt concerning the level of funding and how to bridge the potential $265 billion gap. Equally unknown are the positions of the House leadership and Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, whose assent to the bill’s funding provisions will be necessary.
One possible source of supplementary investment capital could be the much discussed National Infrastructure Bank. A bill that would establish such a bank has been introduced in the House by Rep. Rosa DeLauro (D-CT) and 26 Democratic co-sponsors (HR 2521). The proposed Bank, modeled after the European Investment Bank, would invest in transportation, environmental, energy and telecommunications infrastructure projects. Rep. Oberstar’s proposal would locate the Bank within the Transportation Department and capitalize it at a much higher level ($100 billion). The Bank would fund three new initiatives: Metropolitan Mobility and Access, Projects of National Significance and High Speed Rail. The “Bank” would be essentially a federal credit assistance program, to be financed either through Treasury or through externally raised private capital.
Any decisions about the level and form of the Bank’s capitalization are probably out of the hands of the T&I committee. Like Rep. DeLauro’s bill, the T&I Committee’s Bank proposal could be referred to Rep. Barney Frank’s (D-MA) Financial Services Committee or to the Ways and Means Committee. The possibility of enactment of either version of the bank during this session of Congress is uncertain.
Rep. Oberstar’s transportation bill leaves few other funding/financing options on the table. It explicitly forecloses tolling of the Interstate Highway System – a potentially large source of revenue — even though consumer surveys show that tolls are generally viewed more favorably than higher gas taxes.
The bill also severely constrains the use of private investment capital and concession-based public-private partnerships, approaches that potentially could be a source of significant supplementary revenue for transportation infrastructure. The bill would establish a new Office of Public Benefit within the Federal Highway Administration to review and approve (or reject) State plans for toll roads and to oversee new federal requirements for public-private partnership agreements. Instead of doing its best to create a climate favorable to tolling and public-private partnerships, the bill would appear to set up new barriers that could seriously discourage private investors from participating in the nation’s infrastructure renewal.
In the coming days, we can expect much discussion and analysis of the T&I Committee’s 100-page report that outlines the proposed policy and procedural reforms. Let us hope that some of the deep thinking will also be devoted to figuring out where the money will come from.