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May 27, 2011

Status of Federal Transportation Reauthorization

The current federal transportation authorization legislation, SAFETEA-LU, expired at the end of September 2009. Since then, states, MPOs, and other project implementers have been operating under a series of extensions, the latest of which goes through the end of this federal fiscal year, September 30, 2011 .

Back in June 2009, Rep. James Oberstar of Minnesota, then Chairman of the House Transportation and Infrastructure Committee, put forth a reauthorization bill intended to increase transportation funding significantly and enact many policy reforms beneficial to metropolitan areas. Overall, transportation funding would have increased to $500 billion over six years, including $337 billion for highways, $100 billion for transit, $50 billion for high-speed rail and $13 billion for other smaller programs. It would have consolidated the many federal funding programs into four core programs, created a metropolitan mobility program for regions over a million in population, and streamlined the project delivery process.

Unfortunately, the bill did not propose how to fund such a program. As a comparison, SAFETEA-LU was also a six year program, funded at a total of $286 billion. However, today the Highway Trust Fund, which derives revenues primarily from the federal gas tax, is not bringing in enough to sustain even that level of funding.

The elections in 2010 changed the landscape, with Republicans taking control of the U.S. House. In what seemed to be a minor change -- but could actually have a significant impact on the transportation program -- a House rules change has effectively put transportation funding back into the federal budgeting process. The new language guarantees that the Highway Trust Fund will only be used for transportation purposes, but it eliminates the requirement that funding levels will be set as established in the authorization legislation. This way, money could be kept in the Highway Trust Fund to help reduce the national deficit and balance the budget.

Prior transportation authorizing legislation, TEA-21 (passed in 1998), created a type of firewall for the Highway Trust Fund. It required budget appropriators to fund the full amount that the authorizing legislation specified, and because surplus funds in the Highway Trust Fund could not be used to balance the budget, there was no advantage in not fully spending down the fund. For the past several years, with the Highway Trust Fund not generating enough revenues to meet the authorizing levels, bailouts from the General Revenue Fund have been necessary.

2011 brought a new Chairman to the House Transportation and Infrastructure Committee: Rep. John Mica of Florida. He recently held a series of field hearings across the country where he made it clear that he was opposed to any increase in the federal gas tax, which was last raised in the early 1990s. Mica's focus seems to be on streamlining the project delivery process and "doing more with less."

Earlier this month, he stated that his committee would be releasing a bill in the next month or so, and he suggested that it will be in the range of $210 billion over six years. That figure is consistent both with what the Highway Trust Fund currently generates and with the FY 2012 federal budget recently passed by the House of Representatives.

Conversely, there is also the Administration's proposal for reauthorization that included as part of its FY 2012 budget resolution. It calls for a six-year reauthorization bill at a level of $556 billion, including $336 billion for highways, $119 billion for transit, $53 billion for high-speed rail, and $50 billion for an infrastructure jump start – basically another type of American Recovery and Reinvestment Act program. It also includes a number of policy changes very similar to what Rep. Oberstar had released two years earlier. But again, the problem is a lack of sufficient money to fund this bill, and the administration does not support a gas tax increase at this time.

So here is the broad outline of some of the potential outcomes:

  • First, there could be a six-year bill along the lines of what Congressman Mica has proposed. While this would bring about a number of policy reforms (including consolidating many existing federal programs), it does so at a funding level of 30 percent less over the next six years, compared to what is currently being provided. Such a program could be devastating to the ability of our region and others to maintain their current transportation systems, much less move toward a state of good repair.
  • Second, a six-year bill at a level of $500 billion is unrealistic without a significant increase in funding either through an additional gas tax or other revenue source. Innovative financing sources like public private partnerships (which were just authorized last week for Illinois state transportation projects) have a real potential to close this gap in some places, but they will not nearly make up that difference.
  • Third, funding could continue via more extensions of SAFETEA-LU, but with the changes in the House rules, it most certainly would be at the level of Highway Trust Fund receipts – about a 30 percent decrease from what we have now. This option has the additional problem of not instituting any desired policy and program reforms.
  • Finally, there could be a shorter length bill – two or three years – that would be funded at the lower level but still have the desired policy and program changes. Then, after the two- or three-year period, the economy will hopefully have made a comeback, and conversations about increasing the gas tax won't be doomed from the start.

The only sure thing is that something will have to happen by the end of September.

GO TO 2040 emphasizes more strategic investment decisions by the federal government in regards to transportation. While the plan recommends strategies for doing more with limited resources, it also calls to raise the federal and state gas taxes and index these taxes to inflation. These rates have not been raised since the early 1990s—meanwhile, the rising cost of construction and operations, coupled with inflation, has significantly undercut the purchasing power of these revenue sources.