Obama on Wednesday proposed a four-year, $302 billion spending plan for
repairing and upgrading the nation's highways, bridges and transit systems, and
said half the money could come from a one-time transfer of revenue that arises
from any pro-growth business tax reform Congress enacts.
It includes $10 billion for what would be
the nation’s first dedicated freight fund to support domestic and international
Meanwhile, on Capitol Hill, House
Ways and Means Committee Chairman David Camp, R-Mich., presented his own
transportation funding plan, while Rep. John Mica, R-Fla., clashed with
proponents of raising the gas tax during a Transportation and Infrastructure
Committee meeting with industry and labor representatives.
The action took place against the
backdrop of legislative preparations to reauthorize surface
transportation programs by Sept. 30, when the fiscal year ends and the
two-year, $105 billion MAP-21 spending blueprint expires.
The Congressional Budget
Office (CBO) projects that the Highway Trust Fund (HTF) — where federal
gasoline and diesel fuel taxes, as well as excise taxes on trucks are deposited
for allocation to states by formula — will go into the red in August, creating more
urgency for lawmakers on Capitol Hill to swiftly pass a transportation bill
that includes new ways to raise more revenue.
Many experts and industry groups, including the American Trucking Associations, favor increasing fuel taxes as an easy and immediate way of raising money for highway and bridge repairs, and new capacity. The gasoline (18.4 cents per gallon) and diesel (24.4 cents per gallon) taxes haven’t been raised since 1993, which has reduced the government’s buying power over time as construction costs rise. The stagnant value of the tax, along with more efficient vehicles and other factors, have flattened revenue growth as traffic and the need to upgrade deteriorating road networks continues to increase.
During the past 30 years, traffic volume on the nation's highways has increased 150 percent, but capacity has only increased 15 percent, according to transportation officials.
The solvency of the HTF is in jeopardy for the simple reason that money collected today goes to pay for yesterday’s projects, which were approved when regulators forecast more money coming into the system, officials have warned. The Federal Highway Administration gives states authority to enter into contracts based on their size and donations to the system, which then binds the federal government to reimburse states for those contracts, which usually are executed over several years. Outlays since 2009 have outpaced revenues, which have remained flat, forcing Congress to transfer $50 billion from the Treasury’s General Fund to the HTF in recent years to maintain infrastructure spending at the status quo. MAP-21, enacted in the summer of 2012, included $82 billion for federal-aid highways, highway safety and highway research-and-development, $20 billion of which came from general taxes.
The CBO projects that revenues in fiscal year 2014 through September will total about $33 billion, and outlays will total about $46 billion.
Political observers say congressional leaders are not willing to offer any more HTF bailouts given the budget deficit. If spending is maintained at current levels, Congress would have to transfer another $15 billion to prevent a shortfall in fiscal year 2015.
The August shortfall is simply a cash flow problem — the DOT says it needs $4 billion to make payments that month, and the balance in the highway account (the HTF also funds transit) is expected to be less than that, but an extra deposit in the HTF by the end of the fiscal year will make states whole. After that, the shortfall becomes more permanent. Without legislation that creates more revenue from increased user fees or other sources, the FHWA won’t be able to pay all bills in fiscal year 2015, and new projects could come to a halt unless states want to risk paying the entire cost themselves. Bringing the trust fund into balance would require entirely eliminating the authority to obligate funds in 2015 — projected to be about $51 billion — raising the taxes on motor fuels by about 10 cents per gallon, or undertaking some combination of those approaches, according to CBO testimony to the House Transportation and Infrastructure Committee last summer.
The federal government essentially needs to double revenues to pay for highway, bridge and transit obligations. At the end of fiscal year 2013, according to the CBO, the DOT had about $66 billion in outstanding obligations, with another $30 billion in allocated money that states had not yet assigned to any specific projects.
The transportation infrastructure plan announced by Obama
is shorter in length than the five- or six-year bill some transportation
advocates prefer in order to provide funding certitude so states can
confidently launch large-scale projects, essentially is the administration's
recommendation to Congress on how it thinks a transportation infrastructure
bill should be structured. More details will be provided in the White House’s fiscal year 2015 budget request next week. The
President said he would work closely with Barbara Boxer, chairman of the
Environment and Public Works Committee in the Senate, and House T&I Chairman
Bill Shuster on a bill that would benefit the economy and is open to all ideas
for modernizing the nation’s transport infrastructure, including a national
infrastructure bank that he has previously supported.
Speaking at a light rail terminal in St. Paul, Minn., that was modernized into a regional transport hub with help of a Department of Transportation grant, Obama couched his transportation proposal as a job creation program
, saying rebuilding roads, airports and other infrastructure would put thousands of people to work and attract global companies looking for efficient shipping options.
"I'm going to send Congress a budget that funds rebuilding our transportation
infrastructure in a more responsible way — by doing it over four years, which
gives cities and states and private investors the certainty they need to plan
major projects," he said.
Neither Obama nor Camp plans create a permanent funding stream for increased infrastructure investment.
House said the $150 billion bonus generated from tax simplification and closing tax loopholes would not only fill the funding
gap in the Highway Trust Fund, but would also increase surface transportation investment over
current projected levels by nearly $90 billion over the next four years. The
plan calls for $63 billion to go to the Highway Trust Fund and “Fix-it First” priority
investments for needed repairs of highways, bridges, subways and bus service,
with particular attention to improving roads and bridges in rural and tribal
“Fix-It First” is the White House’s
three-year-old proposal for $50 billion in urgent repairs of aging
infrastructure, including $10 billion to capitalize an infrastructure bank.
with existing revenues, the one-time infusion of funds would provide $206
billion for the highway system and safety programs, including a 22-percent
annual increase, totaling $199 billion for infrastructure investment. The plan
also would provide $19 billion of dedicated funding for rail programs, including
$5 billion for high-speed passenger rail.
The Obama administration would also make
permanent and provide $5 billion over four years, more than doubling current
appropriations, for the TIGER multi-modal discretionary grant program. It also
proposes $4 billion for competitively awarded funding over four years to
incentivize local innovations that produce better transportation outcomes and
deliver projects at lower cost.
Another $10 million would go for a new grant
program to support investments in multimodal infrastructure.
The White House also said the proposal will
include policy reforms to institutionalize best practices for cutting red tape
taken through executive order to cut project timelines in half, continue
funding for the TIFIA loan program, create incentives for planners to develop
more resilient designs for infrastructure, and use technology to reduce fuel use
and conserve energy.
Also on Wednesday, Rep. Camp unveiled a draft tax reform bill
, which includes $126.5 million in dedicated funding for the HTF for eight years funded by taxes from repatriated overseas corporate profits. The bill would reduce the double-taxation burden associated with profits earned in other countries to encourage companies to invest money at home.
Camp's legislation also includes a recommendation to increase by 6 cents per gallon the 20-cent-per-gallon user fee paid by inland waterways towboat operators into the Inland Waterways Trust Fund for construction and repair of navigation projects.
Representatives for the construction industry, labor unions, the trucking industry, inland waterways users, and state transportation departments issued statements saying they were encouraged by the new focus in Washington on fixing the transportation funding challenge.
facing the Highway Trust Fund and our national transportation infrastructure is
very real. It is good news that the Administration and congressional leadership
in both houses are looking seriously at strategies to invest in transportation
and maintain the solvency of the Highway Trust Fund and the programs it
supports," Bud Wright, executive director of the American Association of State Highway and Transportation Officials, said in a statement.
"It is heartening that both President Obama and Chairman Camp recognize the critical need for revenue to finance infrastructure improvements. While a sustainable source of long-term funding would be preferable, given the apparent reluctance to embrace traditional, user-funded revenue streams, ATA is prepared to keep an open mind when looking at financing options for the Highway Trust Fund," Bill Graves, president and chief executive officer of the American Trucking Associations, said.
Earlier in the day, the House Transportation and Infrastructure Committee held an informal roundtable with transportation stakeholders who strongly encouraged lawmakers to build on the policy reforms of MAP-21 and find a long-term revenue source for the Highway Trust Fund.
Several panelists said Congress should look for lessons to the 10 states that last year successfully raised revenues for transportation using innovative techniques. Virginia, for example, eliminated its 17.5-cent-per-gallon tax on motor fuels and replaced it with a 3.5 percent wholesale tax on gasoline and 6 percent tax on wholesale diesel fuel. It also increased the state's sales tax by 0.3 percent, with the increased designated for highway maintenance and operations, among other steps.
There was widespread agreement among the eight lobbyists that the gas tax should be increased and indexed to inflation, at least in the near term to make up for years of under funding and maintain the system.
"We're not always in favor of raising the gas tax. It's the least bad option in terms of spreading the base and making sure that user connection is there," Greg Cohen, the head of the American Highway Users Alliance, said. "The fact is, it's worked well for 52 years."
But conservative, first-term Republican Larry Bucshon of Indiana said he faces two challenges when trying to vote for a gas tax hike: his constituents lack confidence in the government to spend money wisely and would wonder if any gas tax increase actually went to pay for infrastructure, and they see the government spending money to rebuild other countries but not to make improvements at home.
"I consider myself a pretty informed person before I came to Congress, and I had no idea where the federal gas tax money went," he said, putting himself in the category of most Americans who don't understand how the system works and how it applies to their daily lives.
Former T&I Committee Chairman John Mica tore into Janet Kavinoky, director of transportation infrastructure for the U.S. Chamber of Commerce, for the business federation's persistent support for raising the gas tax.
"Unless you're on another planet they [the T&I Committee and full House] are not going to pass a gas tax increase. Period!" he said, adding that to think otherwise is to ignore political reality.
Continuing to push lawmakers for a gas tax is only "sending people off the cliff," Mica said, referring to Bucshon's remarks. "Get off the gas tax. It's not going to happen!"
And before the public is educated about how transportation policy and funding, industry groups need to educate members of Congress, he said.
"Over half the members have been here less than two terms," he said.
He mentioned a sales tax indexed to inflation or taxing crude oil instead of gas at the pump as potential alternatives to a fuel tax hike. He also suggested that Congress would likely not be able to pass a transportation reauthorization bill before the mid-term elections this year and would be forced to approve a short-term extension of the existing funding level. Next year, Congress will probably only have a six-month window to get a bill completed, he said.