Funding questions are front and center in proposed surface transportation bill

On the heels of President Obama’s recently released proposed fiscal year 2012 budget request, there have been no shortages of opinions regarding the transportation components of the budget, most notably the proposed six-year, $556 billion surface transportation reauthorization proposal.

As LM reported, this proposal, if enacted, would be more than 60 percent above the inflation-adjusted levels of SAFETEA-LU (The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users), which expired on September 30, 2009, and has been kept afloat at the same funding level by a series of continuing resolutions since expiring.

White House officials said that this new authorization would “modernize the country’s surface transportation infrastructure, create jobs, and pave the way for long-term economic growth,” adding that President Obama will work with Congress to ensure the plan will not increase the nation’s deficit.

Included in this new six-year plan are:
-funding for highways, transit, highway safety, passenger rail;
-a National Infrastructure bank, which would be allocated $30 billion in loans and grants to support individual projects and broader activities of significance for the Nation’s economic competitiveness; and
-a proposal to boost transportation spending by $50 billion above current law spending in the first year of the authorization for roads, railways, and runways, among other components.

From a fiscal perspective, this bill tops the one proposed by former House Transportation and Infrastructure Committee Chairman James L. Oberstar. And as was the case back then, how to fund such a large bill remains a bit of a quandary, even though the White House made it clear that the current framework for financing and allocating surface transportation investments is not financially sustainable. Officials explained that the President is committed to working with Congress to ensure that funding increases for surface transportation do not increase the deficit. And they said that this budget proposes to make all surface transportation reauthorization programs subject to PAYGO in which federal funding comes from available financing rather than borrowed sources of capital.

What’s more the primary funding mechanism for surface transportation—the federal gasoline tax at 18.4 cents for gasoline and 23.4 cents for diesel—has not been increased since 1993.

“The White House has identified what the needs are and has some creative approaches for how to meet them,” said Mort Downey, senior advisor at infrastructure firm Parsons-Brinkerhoff. “The big unknown is how they pay for it and they are very frank in that it will require some additional resources…but the budget is structured so that these proposed programs would be mandatory and therefore subject to PAYGO requirements, which means they are inviting a discussion with the Congress that basically says ‘if you like this, let’s talk about how we can get it paid for.’ This will make for an interesting conversation, but at least they are starting from a very high point in describing what we need to be investing in.”

Leslie Blakey, executive director of the Coalition of America’s Gateways and Trade Corridors, noted that even with the jury still out on funding options, there are a good concepts and proposals pertaining to goods movement infrastructure in this proposal.

She added that this proposal is a confirmation that the President and his transportation team are putting a priority on transportation infrastructure and establishing the need to a large extent has been accomplished.

“It is a question of how to deal with a need and where does the money come from?” said Blakey. “It is an ongoing conversation in progress. “[Shippers] should be encouraged by the fact that the administration seems to care very deeply about trying to propose something that is going to make a huge difference in our ability to do business in the years to come. And they care enough about it to really extend themselves to put their necks out there and then becomes a question of how quick this Congress is going to be to chop them off, because of the disconnect between the desire to cut spending rather than extend federal programs.”

Without a viable funding source or mechanism in place, Blakey said that the country is going to see broad diminishing returns with more constraints on its ability to compete in the global marketplace.

The need for funding was also echoed by Janet Kavinoky, U.S. Chamber of Commerce Director of Transportation Infrastructure and head of its Let’s Rebuild America campaign.

“We are, of course, disappointed that the budget proposes expanding eligibility for uses of the Highway Trust Fund without addressing the underlying revenue needs for highways and transit, much less pinpointing additional revenue sources that would support the expansion to 100 percent of transit and passenger rail,” she said. “So in all, a big vision, but without leadership on funding, one that is not going to be realized.”

Perhaps the most pointed remarks regarding funding came from Ken Orski, editor of Innovation News Briefs.

In a recent newsletter, Orski said that this budget submission provides more questions than answers.

“The President has said that he is committed to working with Congress to ensure that funding for surface transportation does not increase the deficit,” wrote Orski. “This vague expression of intent is hardly appropriate in a Budget message in which Congress expects the Administration to provide concrete proposals for deficit-neutral funding to accompany the President’s programatic initiatives.”

Orski also explained that the Republican House leadership has already announced its intent to limit the future surface transportation budget authority to tax revenues deposited into the Highway Trust Fund. The tax revenues generated by the gas tax over the next six years are estimated to total only $230 billion according to the Congressional Budget Office, Orski said, leaving the question of how the White House proposes to bridge the $326 billion funding shortfall between income and expenditures.

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