Highway trust fund solvency trumps reauthorization, expert says

Highway trust fund solvency trumps reauthorization, expert says    The recent realization by a group of Senate leaders that the federal government again needs billions of dollars to plug the hole in the Highway Trust Fund indicates that a long-term fix in the form of a multi-year transportation reauthorization bill is not in the cards this year, according to a transportation policy expert.
   In a May 26 letter to President Obama, Sen. Barbara Boxer, chairman of the Environment and Public Works Committee, and other committee leaders with jurisdiction over transportation, requested a meeting with Office of Management and Budget Director Peter Orzag, Transportation Secretary Ray LaHood and senior White House officials, to discuss an anticipated $5 billion to $7 billion shortfall in the trust fund by the end of the fiscal year on Sept. 30, as well as new funding mechanisms for the next transportation spending cycle.
   The Obama administration has also notified Congress that it estimates another $8 billion to $10 billion will be needed to maintain federal highway aid to states at current levels through 2010.
   Last summer, Congress had to provide an $8 billion bailout from the general fund to keep the Highway Trust Fund solvent due to a decline in fuel tax receipts precipitated by the economy's pinch on travel and increasing use of more fuel-efficient vehicles. In the past, the growth in vehicle miles traveled meant more spending on a flat tax rate and thus higher revenue for the government. Uncertainty about whether the trust fund would go in the red caused state highway and transportation officials last year to slow investment in highway construction until they could be certain that the federal government would reimburse them for project expenditures. Gasoline and diesel tax revenues have declined each month from January through April compared to last year.
   'I think [the letter] was a clear signal that there is not an expectation by some that there will be a reauthorization that will provide even a medium-term solution to the level of federal funding,' Bryan Grote, a principal at Mercator Advisors, said last Wednesday at a transportation infrastructure conference in Washington organized by Infocast.
   Grote was a member of the National Surface Transportation Infrastructure Financing Commission that earlier this year released a report calling for a switch to a vehicle-miles traveled fee and raising the gasoline and diesel tax by 10 cents and 15 cents, respectively, until a VMT fee system can be implemented nationwide. Along with a series of other measures, the proposal sought to raise $20 billion per year for the Highway Trust Fund.
   The $286 billion SAFETEA-LU surface transportation bill that set spending levels for highway, transit and safety programs since 2005 is scheduled to expire at the end of September. House leaders have indicated they intend to propose and vote on a new authorization bill this summer, but the Senate is taking a more deliberate approach and most observers do not anticipate Congress to finish a consolidated bill until at least mid-2010.
   Grote, who previously served as chief financial officer for the Department of Transportation and also headed its TIFIA infrastructure credit assistance program, said that outside of the House Transportation and Infrastructure Committee, led by Rep. James Oberstar, D-Minn., reauthorization 'is on a slow track.' Instead, there will be near-term efforts to restore the balance in the Highway Trust Fund, he added.
   Last week, Oberstar said in an interview with Congressional Quarterly that despite the uncertainty surrounding the transportation reauthorization, he has no intention of passing any bills to extend the life of SAFETEA-LU and provide highway aid at existing levels, essentially threatening to throw transportation funding into the overall appropriations process without a dedicated stream of funding. SAFETEA-LU itself took two extra years, and a dozen extensions, to pass after the expiration of the previous comprehensive surface transportation bill because of bickering over the total cost and how funds are allocated to states.
   'Without an infusion of new funding into the Highway Trust Fund, existing formula programs and spending would be cut dramatically. A lack of consistent and dependable federal funding would also make it difficult for transportation officials to address not only the nation's current infrastructure crisis, but also to improve the surface transportation network to accommodate the expected population increases and growth in freight traffic,' the senators wrote in favor of a dedicated funding source.
   Tyler Duvall, a senior transportation advisor with McKinsey and Co. who was acting under secretary for policy at DOT until January, said it would be bad to rush through a highway spending blueprint because any bill produced now would be 'fairly static.' There is no consensus yet on Capitol Hill on how to reform surface transportation programs and forcing a bill through now would only allow for incremental changes when massive amounts of new investment are needed, he said.
   'I wouldn't stay up late that night [Sept. 30] waiting for the president to sign' a new reauthorization bill, Mortimer Downey, a senior advisor with Parson Brinckerhoff and former deputy secretary of transportation who headed the Obama administration's transportation review team during the transition, told the Infocast audience. ' Eric Kulisch