House and Senate committee’s working on plans to keep Highway Trust Fund solvent

Within the next few weeks, the Highway Trust Fund (HTF) is expected to run out of money.

That development does not come as a surprise to many, considering that the main funding mechanism for funding the HTF, the federal gasoline tax, has not been increased since 1993. HTF funds are allocated for federal highway, transit, and highway safety programs.  Diesel taxes represent about 90 percent of Highway Trust Fund (HTF) net revenues, which are vital when it comes to fixing, repairing and developing the country’s transportation infrastructure.

In recent days, both the Senate Finance Committee and the House Ways and Means Committee have been working on bills that each have the intention of keeping the HTF afloat, but, unsurprisingly, neither calls for what would appear to be the easiest way of doing so, which is the simply raise the tax. But even though several industry stakeholders have called for that, it has been consistently dismissed by both the White House and Congress as a political non-starter.

The Senate Finance Committee’s Preserving America’s Transit and Highways Act, which was led by Senate Finance Committee Chairman Ron Wyden, D-Ore., and Ranking Member Orrin D. Hatch, R-Utah, includes:
-the transfer of $1 billion from the Leaking Underground Storage Fund (which addresses petroleum releases from federally regulated underground storage tanks) into the HTF, which would have no revenue effect;
-require the Secretary of Transportation to charge and collect a fee of .3464 percent ad valoreum on merchandise formally entered or released into the U.S, effective through June 30, 2021, and extend the merchandise processing fee and the .3464 rate through January 7, 2024 and is expected to raise $2.9 billion over ten years; and
-extend pension smoothing relief that was enacted in 2012 as part of the MAP-21 legislation and would allow employers to continue to use historic interest rate averages to calculate their pension contributions, which is estimated to raise $2.9 billion over ten years, among others.

“Allowing the Highway Trust Fund to go insolvent next month, clogging the roads Americans use every day and costing us hundreds of thousands of jobs, would be legislative malpractice and I am not willing to let that happen,” Wyden said in a statement. “I’m pleased that Senator Hatch and I were able to compromise on a solution and deliver a true bipartisan path forward. At the same time, we must push forward to define a sustainable long-term plan to modernize our infrastructure needs.”
The House Ways and Means Committee this week passed a voice vote that would secure roughly $11 billion for highway funding through May 31, 2015, which is in line with the Senate Finance Committee’s targeted funding.

Like the Senate Committee, the House one focuses on similar things, none specifically transportation-focused, to stem the HTF’s losses, including pension smoothing, customs user fees and a transfer from the Leaking Underground Storage Tank Trust Fund. This is expected to be voted on by the House next week.

House Ways and Means Committee Chairman Dave Camp (R-MI) said that there is no need to jeopardize critical road and transit projects and the thousands of jobs they provide, adding that the “House and Senate can easily pass this legislation.”

Should things not change in regards to the dire state of the HTF’s financial status, it could lead to myriad transportation projects throughout the country being postponed or cancelled altogether.

The Department of Transportation said recently that the HTF could dip below $4 billion by the end of this month, which stands as the minimum amount DOT “prefers to keep…in order to properly manage day-to-day financial transactions,” according to the American Association of State Highway and Transportation Officials (AASHTO). The HTF kicked off fiscal year 2014 on October 1, 2013 with a balance of $1.6 billion and after the beginning of the fiscal year it received a $9.7 billion transfer from the United States General Fund. But even with this bridge loan of sorts, DOT said “the surface transportation program continues to outlay at a greater pace than receipts are coming in.” In other words, it is functioning as a model of insolvency.

Numbers from other sources don’t make the situation any more optimistic either, with the House Transportation and Infrastructure (T&I) Committee recently noting that by the end of 2014, a total of $54 billion will have been transferred from the General Fund into the HTF in order to remain solvent, including an $18.8 billion transfer signed off on by Congress as part of the federal transportation bill, MAP-21, which is set to expire in this September. 

James Burnley, a partner at Washington, D.C.-based law firm Venable LLP and former Secretary of Transportation under the late President Ronald Reagan, told LM that both the Senate and House’s plans represent short-term patches to keep the HTF solvent, and when they expire things would be akin to the current situation in regards to the HTF shortfall.

“The key players in Congress are all signaling that since the transfers from the general treasury accounts into the HTF have been going on for six years, this go around is again a short-term fix, and they are running out of off-sets and are scraping the bottom of the barrel,” he said. “Doing these short-term patches has gotten harder, and because of basic underlying trends each time we go through this, we need more money as the shortfall is growing. It is time for leadership in both parties to try to come to a consensus to a longer-term remedy, whatever that means, and find other alternatives. Political leadership in both parties in Congress is saying they have run their string out with short-term patches in this round and are not likely able to keep doing this.”