Highway trust fund rescues carry risk

Highway trust fund rescues carry risk    Continued reliance on general taxpayer revenues to prop up the Highway Trust Fund threatens to undermine the rationale for a dedicated stream of user fees and jeopardize needed infrastructure investment, Capitol Hill operatives say.
   The longer it takes to debate and pass a six-year surface transportation reauthorization bill that identifies other revenue sources for highways and transit, the greater the likelihood lawmakers will get used to shifting funds to the trust fund and think it is expendable, said Jack Schenendorf, vice chairman of the National Surface Transportation and Policy and Revenue Study Commission that submitted recommendations to Congress in January 2008.

Schenendorf

   The upshot is that user fees could be funneled straight to the U.S. Treasury, leaving transportation projects subject to the whims and vagaries of the annual appropriation process.
   Schenendorf, a transportation attorney affiliated with Covington & Burling and former chief of staff of the House Transportation and Infrastructure Committee, said the current situation plays into the hands of slow-growth advocates and other opponents of highway expansion who like the fact that transportation would compete for money in the general fund with other priorities such as education, defense, housing and a host of social programs.
   User fees are critical to providing long-term stability for capital intensive transportation projects, he elaborated in an interview with American Shipper following an address to the American Association of State Highway and Transportation Officials (AASHTO) earlier this month.
   'To make systemic changes and to build big projects over time you need the assurance of money coming. And that really doesn't work in the general fund, year-to-year press for funding,' Schenendorf said.
   Congress has bailed out the Highway Trust Fund on three occasions the past two years to keep approved expenditures for highway construction and safety programs on track. The trust fund has been supported for decades by gas and diesel taxes as well as excise taxes on things like truck tires and commercial vehicle sales, but receipts have declined in recent years along with the economy and more fuel-efficient vehicles. The HTF has depleted an $11 billion balance it had in 2005. Meanwhile, the purchasing power of the trust fund has eroded by almost 40 percent because fuel taxes have not been increased since 1993 to keep up with inflation.
   The Department of Transportation uses a complex formula to apportion funds from the HTF to states for highway maintenance and upgrades.
   President Obama signed a job incentive bill Thursday that includes a $19.5 billion transfer from the general fund for interest that the HTF was not permitted to earn on its receipts since 1998. It also halts annual payments the HTF makes to the general fund as reimbursement for tax-exempt users of the highway program, such as state and local fleets and transit providers. And the provision repeals an $8.7 billion rescission of unobligated balances of approved spending.
   Congress provided bailouts of $15 billion in 2009 and $8 billion in 2008 from the general fund to keep the HTF solvent. Receipts in 2008 totaled $38.7 billion from highway and transit users, down about $500 million from 2007, while expenditures reached $43 billion. The highway account within the HTF channels about $33 billion in user fees to states.
   Investment to rehabilitate an aging highway system has not kept pace with increases in vehicle miles traveled, forcing governments at all levels to defer hundreds of billions of dollars in maintenance and upgrades, according to transportation officials and engineers. At the federal level alone, the annual investment gap for maintaining highways and transit systems at current conditions and performance is $46 billion, and the figure rises to $64 billion per year if needed improvements are included, according to another federal panel of experts that studied the problem.
      The bailouts essentially have paid back the trust fund for interest and other accounting diversions to the general fund. Now that most of the money has been returned by Congress, any new support must come from taxpayer revenue over which the HTF has no prior claim.
   States will lose so-called contract authority if more than 10 percent of HTF money is not sourced from user fees, which could occur by 2013 if the current trend is not reversed. Contract authority provides states with advance knowledge of future federal highway funding commitments and allows them to enter into multiyear projects with the confidence they will be reimbursed in a consistent manner. Failure to meet the user fee threshold will force transportation expenditures to fall into the annual appropriation cycle.
   Groups such as the National Resources Defense Council and the Sierra Club that want to decrease reliance on automobiles consider elimination of a dedicated trust fund as a good way to limit investment in new highway capacity because programs will be up against other national priorities.
   Peter Orzag, director of the Office of Management and Budget, last year proposed getting rid of contract authority and funding transportation through the appropriation process, but backed off under stiff opposition from committee leaders in Congress.
   Some lawmakers even question the value of infrastructure spending, which they view as waste for special interest groups.

DeFazio

   Rep. Peter DeFazio, chairman of the House Transportation and Infrastructure highway and transit subcommittee, supports spending on transportation infrastructure as a means to economic prosperity, but said alternative revenue sources are necessary because of political opposition to raising the gasoline tax.
   Proposals he has made include taxing oil and financial transactions, with half the money from the latter source going to transportation and job creation and the rest to deficit reduction.
   DeFazio 'seems to be willing to delink the connection between the user and who pays for the system,' Ruth VanMark, minority staff director for the Senate Environment and Public Works Committee, said at the AASHTO conference. 'We believe it's very critical that we keep that user pays link going. That is the hallmark of the trust fund and what made it strong for so many years.'
   Jim Tymon, minority staff director for the House Transportation and Infrastructure highways and transit subcommittee, agreed that 'if we start to move away from this user pay principle we're going to start losing our grasp on a dedicated revenue source over the long run.' ' Eric Kulisch