The 2012 surface transportation law, “Moving Ahead for Progress in the 21st Century” (MAP-21), expires in less than seven months. While the primary House and Senate committees of jurisdiction have launched aggressive reauthorization efforts of hearings and other outreach activities, the fundamental reality remains that the timing, duration, and size of the next surface transportation authorization bill is directly contingent on how Congress addresses the Highway Trust Fund’s (HTF) repeated revenue shortfalls.
It’s All About the Highway Trust Fund
All public-access roads and bridges in the U.S. are owned and operated by state and local governments. Since 1916, however, the federal government has shared the cost of building and preserving major roads. Between 1956 and 2008, the HTF was the source of all federal investment in highways—and, since 1982, most federal investment in public transportation. The HTF supports these investments with revenues collected from the federal motor fuels tax and other highway user fees. During that time, there was no burden on the general fund and no impact on the federal deficit.
Beginning in 2008, existing revenues flowing into the trust fund were unable on their own to preserve investment commitments from the 2005 surface transportation law, SAFETEA-LU. In 2008, 2009 and 2010, Congress approved separate measures to supplement trust fund revenues with general funds—the cumulative amount of these transfers ($35 billion) was equivalent to past resources diverted from or denied to the trust fund.
The need for general fund transfers in FY 2008-10 was not due to a collapse of HTF revenues, but to lower revenues than projected in the SAFETEA-LU measure. Revenue forecasts at that time assumed travel would continue to grow as rapidly as in the recent past, and SAFETEA-LU’s investment levels were set to expend all projected revenues. But, beginning in FY 2008, actual revenues fell short of projections, and general fund transfers were needed to cover HTF outlays. This cash flow shortfall was exacerbated by SAFETEA-LU’s structure, which intentionally set in motion a path to deplete the trust fund by setting investment levels that required the use of both incoming trust fund revenues and liquidation of the trust fund’s then multi-billion dollar surplus. Congress also created two independent commissions in SAFETEA-LU that were directed to come up with proposed solutions to the problem the law created—proposals on which Congress did not act.
While trust fund revenues have rebounded and now exceed pre-recession levels, they are still not sufficient on their own to support the investment levels put in place by SAFETEA-LU. As a result, MAP-21 supplemented HTF revenues with $20 billion in resources from elsewhere in the federal budget to enable the new law to preserve existing levels of federal highway and public transportation investment for FY 2013 and FY 2014.
The Elephant in the Room
Members of both parties and on each side of Capitol Hill are promoting reforms they want to see in MAP-21’s successor. ARTBA and other stakeholder groups have also worked to develop policy priorities to advance during the reauthorization debate. Ensuring the operation and structure of the federal highway and public transportation programs deliver maximum benefit for the American public in terms of transportation improvements will always be a key ARTBA priority.
There are, however, two realities to the discussion regarding the next surface transportation bill: MAP-21 was almost entirely a policy reform bill and most of those reforms will not have been implemented when the measure expires at the end of September; and no reauthorization bill will move forward until Congress addresses in some capacity the looming HTF revenue shortfall.
ARTBA has been reporting for almost a year that the Congressional Budget Office (CBO) projects existing trust fund revenues will be unable to support any new highway or public transportation investment in FY 2015. This means current federal highway investment of $40.3 billion and transit funding of $10.7 billion would need to be reduced to zero in FY 2015 unless Congress acts.
New Wrinkle in February CBO Report
The CBO’s February 4 HTF revenue and spending projections add a new wrinkle to this dilemma as they now show the fund’s Highway Account will likely run short of cash to pay bills before FY 2014 ends. Due to lowered projections regarding overall U.S. economic performance, CBO now estimates the Highway Account will end FY 2014 with only $1 billion, which would cause cash-flow imbalances that could force the Federal Highway Administration (FHWA) to delay some payments to states for construction work performed on federal-aid highway projects. An injection of $3 billion would be needed to pay all anticipated bills for the remainder of the fiscal year and allow FHWA to manage cash-flow.
In addition to the funds needed before the end of FY 2014, a three-month extension of MAP-21 will now require an infusion of $3 billion into the Highway Account, while a six-month extension would require just under $5 billion. No additional funds would be needed for the Mass Transit Account. A one-year extension of MAP-21, through September 2015, would require a revenue infusion totaling $19 billion—$3 billion for FY 2014 and $16 billion for FY 2015, including $13 billion for the Highway Account and $3 billion for the Mass Transit Account. A full six-year reauthorization funding the highway and mass transit programs at their current level, plus annual adjustments for inflation, would require a revenue infusion of just under $100 billion or an average of slightly less than $17 billion per year.
While this situation clearly seems daunting, the fact remains that we have been here before. Congress has demonstrated time and again that the vast majority of members from both parties have no interest in massive cuts in highway and public transportation investment. In fact, Congress has on four separate occasions since 2008 overwhelmingly approved legislation to stabilize the HTF in the short-term and preserve existing levels of surface transportation investment.
What’s Past is Prologue
The last reauthorization process was stalled from October of 2009—when SAFETEA-LU expired—to February 2012—when the Senate Finance Committee developed a bipartisan plan to provide revenues to stabilize the Highway Trust Fund for two years. President Obama signed MAP-21 into law about four months later.
Shakespeare wrote, “What’s past is prologue.” This perspective applies well to the current reauthorization situation—just as was the case with MAP-21, the next bill’s duration and investment levels, as well as when we are likely to see legislation move forward, will be defined by how and when Congress addresses the HTF’s recurring revenue shortfalls. This is why ARTBA’s primary focus since the enactment of MAP-21 has been educating members of Congress on the need to generate new revenues for the HTF, and working with our allies in the transportation community to engage the congressional tax committees and leadership of both parties about methods to advance a trust fund solution.
The only people who see the reauthorization of the federal highway and public transportation programs as a quick process are those who have already given up. Two things that are clear at this point: we are in for a long haul; and ARTBA will be there until this journey ends.
The preceding article has been reprinted with permission from the American Road & Transportation Builders Association (ARTBA). AGC of Texas is an affiliate of ARTBA. For more information, visit www.artba.org.