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Prospectus Blog Patching Trust Fund Gap May Trump Fast OK Of New Transpo Bill

For those who follow transportation policy closely, last week was an eventful one.
The week started with a June 22 release by the House Transportation and Infrastructure (T&I) Committee of its 775-page draft surface transportation bill, a “blueprint” of which had been released the previous week. Secretary of Transportation Ray LaHood’s decision (also released the previous week) to seek an 18-month extension of the existing surface transportation law was met with approval by some, regret and resignation by others, and incredulity and defiance by still others. In seeking a delay, Secretary LaHood 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. Our first priority, the Secretary said, must be to fix the Highway Trust Fund shortfall so that money continues to flow to the states without interruption.
The urgency of acting promptly, i.e. before the Highway Trust Fund runs dry in mid-August, was reinforced by a June 22 letter from Governors Ed Rendell (PA) and James Douglas (VT), to the congressional leadership. Writing in their capacity as chairman and vice-chairman respectively of the National Governors Association, they urged the lawmakers to pass an extension to eliminate the impending shortfall “as soon as possible” so that states can continue planning for and funding critical highway programs. The letter left a clear implication that the governors considered ensuring the continuity of funding offered by Sec. LaHood’s proposal to take precedence over a long-term reform of the program – especially given the uncertainty of finding the money to pay for the long-term program.
Further support for the Administration’s proposal came from the Senate side.


Already the previous week, Sen. Barbara Boxer (D-CA) chairman of the Senate Environment and Public Works (EPW) Committee, who will steer the Senate version of the authorization bill, 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. There were solid indications toward the end of the week that most of her colleagues on the committee, including Ranking Member Sen. James Inhofe (R-OK) and influential Sen. Max Baucus (D-MT), would support her.
Cracks also began to appear in the support of the bill’s even staunchest advocates. James Corless, director of the Transportation for America (T4 America) coalition, a steadfast supporter of Rep. Oberstar’s efforts, admitted that the legislation was not yet ready for prime time, having left many questions unanswered. “Streetsblog,” a lively online discussion forum on topics of “livability,” with a pronounced green bent, likewise turned critical. Elana Schor, Streetblogs’ regular Washington columnist, referred to the “quixotic nature of the House quest to pass a new transportation bill without support from the Senate or the administration.” “All hope for this particular bill is not yet lost, but a number of very difficult questions will have to be answered to turn this blueprint into a bold new transportation law” noted another Streetsblog contributor.
The leadership of the House T&I Committee, however, remained defiant. “The challenges facing the nation’s surface transportation system cannot be addressed by making simple alterations to the existing set of surface transportation programs,” committee chairman James Oberstar (D-MN) contended in a statement accompanying the release of the marked up subcommittee bill. Added Rep. Peter DeFazio (D-OR), chairman of the Highways and Transit subcommittee, “We must finish the bill in 2009 so we don’t disrupt the 2010 transportation construction season.” Forty-three Democratic members of the Committee followed up with a letter to President Obama, expressing “profound disappointment in your Administration’s proposal to extend the current surface transportation programs for 18 months.”
Senate EPW Committee: Overwhelmingly in Favor of an Extension
Toward the end of the week, however, it became clear that the House Committee attempt to push its bill to passage during this session of Congress was doomed. At a June 25 hearing of the Senate EPW Committee on “Impacts of Expected Highway Trust Fund Insolvency” Sen. Lautenberg (D-NJ) spoke for most of his colleagues when he said, “the only option we have is an extension long enough to afford an opportunity to work on a long term bill – and get it right.” He did not speak, however, for the soon retiring Sen. George Voinovich (R-OH) who made an impassioned plea to go ahead with the bill as drafted by the House T&I Committee. EPW Committee chairman Barbara Boxer (D-CA) disagreed: “Until I know how we are going to pay for it, I am not ready to move ahead with a long term bill,” she announced.
After a lengthy and heated discussion, the Committee agreed on a two-track strategy: approving (by week of July 20) an 18-month “clean” extension of the existing law (presumably, this means without earmarks and without even the minor policy reforms desired by the Administration), “in order to bring stability to the program in the short run,” while committing itself to work on a multi-year bill.
The Senate committee left it up to the Administration to come up with the $20 billion cash infusion necessary to ensure the continued solvency of the Highway Trust Fund through March 2011. One possibility, proposed by Sen. David Vitter (R-LA): amend the stimulus bill to permit the use of its money. Another suggestion, proposed by Sen. Inhofe (R-OK): recoup the interest due on the Highway Trust Fund (amounting to $13 billion).
The pressure of time – roughly six weeks before the Highway Trust Fund is expected to run out of money – left the Senate Committee little choice but to proceed with an extension as proposed by Secretary LaHood. As Sen. Boxer pointed out, “there is no consensus today on how to pass a “transformative” bill.” Will conditions be any more favorable to enacting major reforms 18 months from now? Much depends on the economy and the price of fuel prevailing at the time. The Administration may be betting that the economic climate by mid-2011 will have improved sufficiently to allow the President 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. But to fund the proposed $500 billion program ($83 billion/year), the federal gasoline tax would need to be increased by 24 cents/gallon (current federal fuel tax and other excise taxes are expected to generate no more than $235 billion at current rates over the FY 2010-2015 period, leaving a $265 billion funding gap.) Will Congress find the political will to vote such an increase 18 months from now, with presidential elections approaching? And will OPEC cooperate by keeping the price of gas roughly as it is today? Both are legitimate questions but no one at the Senate hearing chose to speculate on them.