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February 12, 2015

Obama Administration Releases Transportation Reauthorization Proposal

On February 2, 2015, the White House proposed a $478 billion, six-year transportation reauthorization program as part of its FY16 budget request.  The reauthorization proposal would substantially increase transit and passenger rail funding, provide dedicating funding for freight improvements, make permanent the Transportation Investments Generating Economic Recovery (TIGER) program, incentivize private investments in transportation infrastructure, and further streamline the permitting process.  These provisions build upon those in the $302 billion, four-year GROW AMERICA Act, proposed by the Administration in spring 2014.  The current transportation authorization law, MAP-21, was originally set to expire in September 2014 but was extended last summer through May 2015.

Highlights of significant transportation funding proposals include:

  • Transit. The proposal would substantially increase transit funding to $115 billion over six years, including a substantial increase to the Capital Investment Grants (or "New Starts") program.  This represents a 75 percent increase in funding above current levels.
  • Passenger rail.  The proposal would substantially increase support for passenger rail, including higher-speed service, to $28.6 billion over six years.
  • Freight. The proposal would establish an $18 billion multimodal freight investment program over six years.
  • TIGER.  The proposal would make the popular grant program permanent, and substantially increase its funding to $1.25 billion annually.

Highlights of significant provisions aimed at leveraging resources and accelerating project delivery include:

  • Private investment.  The proposal would establish a National Infrastructure Bank, new bond instruments (America Fast Forward Bonds and Qualified Public Infrastructure Bonds), and continue the Transportation Infrastructure Finance and Innovation Act (TIFIA) credit assistance program at $1 billion annually.
  • Permitting.  The proposal would continue the Administration's recent efforts to expedite the federal review process for transportation projects, including improved transparency and better coordination across reviewing agencies via a new Infrastructure Permitting Center.

Additionally, the proposal would increase funding to the federal highway program, providing about $45 billion annually or about a 29 percent increase over current funding levels.  The proposal would also establish a new Critical Immediate Safety Investments Program focused on improving pavement conditions and deficient bridges.  It would continue the GROW AMERICA Act's proposal for a new Fixing and Accelerating Surface Transportation (FAST) program, funded at $1 billion annually and split evenly between highway and transit programs.  FAST would be a competitive grant program to spur innovation in state and metropolitan planning.  Like the GROW AMERICA Act, the current proposal would transform the Highway Trust Fund into the Transportation Trust Fund, and move numerous programs (e.g., TIGER and New Starts) from discretionary to mandatory spending.

The following table summarizes the overall funding levels included in the reauthorization proposal.

 

Proposed six-year funding total

Highways

$317 billion

Transit

$114.6 billion

Highway safety

$10.6 billion

Rail

$28.6 billion

TIGER

$7.5 billion

Total

$478.3 billion

Source: IDOT and CMAP staff analysis of President's FY16 budget proposal.

The Administration's proposal would rely on two revenue sources: the existing federal gas tax (raising $240 billion) and a new tax on overseas earnings held by American companies (raising $238 billion).  More specifically, the Administration proposes a one-time, 14 percent tax on overseas profits for American firms, regardless of whether those profits are repatriated to the United States. 

Administration Proposal and CMAP Policy Positions

GO TO 2040 calls for sustainable, robust federal funding for transportation, as articulated in CMAP's reauthorization principles.  Further, the plan supports increased, consistent investments in transit, improving the efficiency of the freight system, and strategic investments, including innovative financing.  While the Administration's proposal would advance these positions, providing a substantial increase in annual funding levels compared to MAP-21, the funding sources it relies on are inconsistent with CMAP's policy positions.  CMAP supports transportation user fees, such as the gas tax, and calls for enhancing these rates and pegging them to inflation in the short term.  CMAP recognizes that a different approach will be required in the long term as vehicle technologies and travel behavior continue to evolve.

The Administration's current proposal is not the first to rely on a one-time infusion of revenues from corporate income tax reform.  Similar approaches to transportation funding have been proposed over the past year, including the Administration's GROW AMERICA Act, a comprehensive tax reform proposal from the House Ways and Means Committee, and more recently a proposal from two Senators.  CMAP is concerned that these proposals would move the federal program away from the user-fees system, and that they lack provisions for the long-term sustainability of transportation funding. 

Looking Ahead

It is clear that the federal transportation program faces challenges.  In January 2015, the Congressional Budget Office estimated a ten-year shortfall of $168 billion in the Highway Trust Fund.  This estimate assumes current federal spending levels plus a modest inflationary increase, despite the broad consensus among transportation stakeholders that current funding levels are inadequate.  Additional revenues are needed, but these revenues must come from sustainable sources with a rational nexus to the transportation system.  A vigorous debate on the future of the funding the transportation program will be an essential component of this year's transportation reauthorization process.

As the reauthorization process unfolds, CMAP will continue advocating for its reauthorization principles in support of GO TO 2040.