House and Senate proposals to shift money from other federal programs and use creative accounting to prop up the depleted Highway Trust Fund were criticized last week by some Democratic senators.
Rep. Dave Camp, R-Mich., chairman of the Ways and Means Committee, and Bill Shuster, R-Penn., chairman of the Transportation and Infrastructure Committee, released a package of measures to provide emergency relief for the Highway Trust Fund through the end of May 2015. The Senate Finance Committee also approved the Preserving America's Transit and Highways (PATH) Act, a compromise between Chairman Ron Wyden, D-Ore., and ranking member Orin Hatch, R-Utah.
Action is necessary because the account for highway user fees, which enables states to get aid for constructing and repairing highways, is expected to reach a zero balance by the middle of next month as the shortfall between gas taxes and projected highway spending increases. The Department of Transportation has already warned states that it won't have the flexibility to immediately reimburse states for completed projects. The cash-management effort means states will get less money and be paid on a bi-weekly basis. State departments of transportation have said the funding uncertainty will force them to scale back new projects, which could lead to layoffs in the construction industry.
The Congressional Budget Office estimates the HTF will need $8 billion in additional revenues to meet its 2014 obligations. The situation is a function of inflation eating into the trust fund because motor fuel taxes have not been adjusted since 1993 and less revenue because of more fuel-efficient vehicles. Meanwhile, there is strong opposition in Washington to raising the gas tax.
The Camp-Shuster legislation, H.R. 5021, endeavors to remain revenue neutral because of Republican antipathy to borrowing more and raising the deficit.
So-called pension smoothing would raise $6.4 billion, and $3.5 billion would come from customs user fees. The bill would allow employers to contribute less to pension fund to meet minimum asset rules by changing how interest rates are determined, as was done in the 2012 MAP-21 surface transportation act that expires at the end of September. When interest rates are low, pension plan liabilities are estimated to be higher, and employers must contribute more to meet their obligations. The bill allows pension plans to use an average of interest rates going back 25 years, resulting in a higher interest rate calculation and lowering employers' pension liabilities. Since contributions employers make to their pension plans are not taxed by the federal government until the benefits are paid to workers, allowing companies to contribute less to their plans raises revenue for the federal government.
Finally, the two lawmakers would transfer $1 billion from the Leaking Underground Storage Tanks account, which actually is financed by a 0.1-cent tax on motor fuel sold nationwide.
Camp said the bill would give Congress time to decide on a long-term renewal of MAP-21 that would have provisions for raising additional revenue for transportation programs. He said a bill that only keeps the HTF solvent through the end of the year would "only lead to another backroom deal during the lame-duck session" and "stick the American people with a massive increase in the gas tax — just about the worst tax increase Congress could hit hardworking Americans with."
The PATH Act
is designed to temporarily plug the HTF shortfall gap with $10.8 billion of new revenue and other adjustments over 10 years. It would charge an additional .3464 percent in customs user fees to raise $2.9 billion over the period. Pension smoothing would raise an estimated $2.7 billion, and another $1 billion would be transferred from the Leaking Underground Storage Tanks account. The bill raises the levy the IRS can charge Medicaid providers for delinquent taxes, which the committee projects would raise $818 million. The proposals would require more reporting on information related to the mortgage-interest deduction (an estimated $2.1 billion in savings) and clarify the current six-year statute of limitations for overstatements of income (an estimated $1.3 billion in savings).
The bill was modified from a previous version that included a provision to double the heavy vehicle use tax to $1,100 for trucks with a gross weight above 75,000 pounds.
Sen. Barbara Boxer, D-Calif., chairman of the Environment and Public Works Committee, and Sen. Tom Carper, D-Del., who chairs the Transportation and Infrastructure Subcommittee, criticized the House plan as a temporary patch of the HTF.
"The House Republicans' proposal to put off a long-term fix to the Highway Trust Fund crisis until next spring is a flawed strategy that will further undermine the ability of states and cities to invest in transformative, large-scale transportation projects, hinder private sector job creation, and will likely continue a harmful cycle of short-term extensions indefinitely," Carper said in a statement. "We know all that we need to know about the options for fixing the Highway Trust Fund and fulfilling our promise to states to be a partner in infrastructure investment. We've already been contemplating this problem for more than five years. Giving Congress another year will not reveal any new solutions; it's only stalling and dodging the hard decisions that voters sent us to Congress to make."
Carper, a member of the Finance Committee, also said he would vote against the PATH plan on the Senate floor for the same reason.
Wyden defended his compromise legislation. "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'm not willing to let that happen," he said.
Despite the Boxer and Carper opposition toward kicking the can down the road, most political observers of the situation believe there is little chance Congress will debate, let alone pass, a multi-year transportation bill this session, with mid-term elections looming in November and lawmakers heading out of town early in the fall to campaign.
The American Trucking Associations, which favors raising the fuel tax, welcomed the House and Senate efforts to produce a short-term solution, but said further delays next year would harm the economy.
"Our industry pays $18 billion each year into the federal Highway Trust Fund through taxes and fees — more than 40 percent of total highway user fees — because the highway system is the trucking industry's workplace. Companies that fail to maintain and modernize their plants and equipment inevitably fail. The highway system is no different,” ATA President Bill Graves said in a statement.
Peter Ruane, president and chief executive officer of the American Road & Transportation Builders Association, issued the following statement: “While we appreciate the efforts of the House Ways & Means and Senate Finance committees to move forward this week on their respective plans to keep federal transportation funds flowing to the states, these actions must not be the latest ‘punt and leave the stadium’ strategy that has plagued the federal surface transportation program for far too long.
"The Highway Trust Fund has been limping from crisis to crisis for the past six years as America’s transportation network continues to decline. Therefore, our message to Congress is simple: Your job isn’t close to being done.
"It’s incumbent upon lawmakers in the House and Senate and officials from the Obama Administration before the end of 2014 to develop a long-term and sustainable Highway Trust Fund solution that supports future transportation capital investments. Anything less ignores the fragile state of our nation’s economy and does a great disservice to the tens of millions of American motorists, businesses, and workers who rely on the transportation network every day to support their livelihoods.”