Highway bill is “dead” for this year

At least that’s the consensus of the dozen or so transportation associations, coalitions and advocacy groups surveyed by Ken Orski for his Innovation  Newsbriefs newsletter. The feeling is that with health care, the economy, two ongoing wars and various bailouts and boodoggles, the Obama administration has enough on its plate.

Ken’s survey was not scientific, but the comments he received are revealing. The crux of the problem is that most everybody realizes we need a $500 billion transportation bill, but we don’t have the proper funding mechanisms to raise this kind of cash nor the political will to double the gas tax in the current economic climate.

So where does that leave the transportation construction industry? Probably with an 18 month extension of the current program. This is undoubtedly for the best. If I have one primary complaint about the new administration is that they thought they could wave their magic pen and overnight solve every problem with the eternal sunshine of their brilliant minds.  Anybody who hasn’t been breathing the helium knows our transportation infrastructure problems are going to take a lot of time, effort and debate to sort out, gain public approval and then execute. This 18-month period is just such an opportunity for the government and the industry to develop answers to a number of issues including:

* Is there a role for public-private partnerships in transportation infrastructure?

* Should we develop an national infrastructure bank that sells infrastructure bonds as proposed by governors Schwartznegger and Rendell?

* How are we going to account for gas tax funding if hybrids, electric cars and the new CAFE standards substantially raise the fuel efficiency of the average automobile?

* How do we begin the process and how do we sustain a long term plan for redesigning our cities and transportation grid so that dwindling supplies and the increasing price of petroleum don’t wrack our economy, boost world food prices or set off more resource wars around the globe.

The full text of Ken’s latest newsletter is below the Read More break. If you’d like to sign up to receive his e-mails, go to his website at www.innobriefs.com.

July 9, 2009
Survey Shows Support for an Extension of Existing Law

Two weeks ago we contacted some one dozen trade associations, transportation coalitions and advocacy groups as well as a number of colleagues in the transportation community, including some on Capitol Hill, and solicited their views about the prospects for a new surface transportation legislation in light of the Administration’s proposal for an 18-month extension of the current law . We wrote as follows:
“We are asking for your reaction to a speculation that we have been increasingly hearing both on Capitol Hill and within the transportation community. The speculation runs something as follows (we are paraphrasing):
“In light of the events of the past week, there appears almost zero chance of getting a six-year bill passed this year. Even if Rep.Oberstar votes his bill out of the committee, Speaker Pelosi probably won’t give it floor time and Sen. Boxer, along with most of her colleagues on the EPW committee, have already endorsed the Administration’s 18-month extension. Nor do Rep. Charles Rangel and Sen. Max Baucus, whose committees would be responsible for the tax and revenue title of the $500 billion bill, seem eager to wade in. Without a revenue title the bill cannot move forward.”
What follows is a summary of the reactions we have received to our email. We promised to treat all responses on a not-for-attribution basis in order to allow for the freest expression of views. We publish the results with a caveat that the summary does not pretend to offer a scientifically accurate sample of the transportation community’s sentiments. Several associations chose not to reply to our solicitation or let us know informally that they do not wish to comment despite our offer to treat their responses in confidence. Nevertheless, we believe the opinions expressed in the survey, as summarized below, reflect accurately the thinking of a large segment of the transportation community — even though some stakeholder groups may not wish to be publicly identified or associated with these views.
An overwhelming proportion of respondents concurred with the proposition that a long-term surface transportation bill is “dead” in this session of Congress. While Rep. Oberstar commands widespread respect, his dogged pursuit of a long-term bill during this session of Congress has struck even his supporters as unrealistic— given the opposition from both the Senate and the Administration and given the absence of a politically viable funding mechanism to support a $500 billion bill. “While we would ideally like to see a comprehensive bill passed this year,” wrote one association respondent, ” the legislation should not be rushed through at the expense of missing key elements that are critical for moving to a more performance-based intermodal transportation network… In its current form the House T&I bill misses a number of opportunities to advance 21st century solutions.”
As for the reasons behind the Administration’s proposal, speculation has focused on a mix of tactical and strategic motives. Tactically, most respondents thought there is no way Congress is going to get a bill to the President by September 30 given the crowded congressional calendar. Health reform, the climate bill and the Supreme Court confirmation hearings were cited as the legislative priorities preempting the Senate’s fall calendar. In addition, many respondents noted that no one has come up with meaningful solution to financing a $500 billion transportation program. As one respondent observed, other than holding a hearing, the Ways and Means Committee has shown no sign of tackling the tax and revenue title of the bill which is essential to moving the bill forward. The pay-as-you-go budget rules would require a tax increase which neither the House nor the Senate leaders are willing to consider given the fiscal demands of the health care and energy legislative proposals. (Note: an August 8 column in TheHill.com by Katelyn Ferral and Kevin Bogardus confirms that House Ways and Means committee members doubt whether the committee will have time to take up the highway bill this session given their responsibility on the health care legislation. The article quotes committee member Rep. Artur Davis (D-AL) as saying “It’s fair to say the priority of the House Ways and Means Committee is healthcare reform, not the highway bill.. I would rather see a highway bill put off than have a tax increase on my constituents…”. Republican members of the committee interviewed by the reporters were equally skeptical.)
There might have been also other motives for proposing a delay, our respondents speculated. Frequently mentioned was a desire by the White House to play a more proactive role in shaping the long-term surface transportation legislation. According to one respondent, the Administration has had virtually no input to the House bill. An 18-month extension would give the Administration time to “get its act together” and formulate its own transportation policy. Designing a new policy architecture that accomplishes national objectives and is acceptable to stakeholders will take time, wrote one respondent.
Some respondents suggested another possible justification for a delay: it would allow time to identify other funding sources to support a long-term program. Indeed, several respondent speculated that the economy might improve sufficiently in the next 18 months to enable the Administration to safely propose (and Congress to endorse) a gas tax increase. They suggested that Secretary LaHood purposely used a qualifier “as long as there is a recession” to underscore the fact that the Administration’s “no-gas-tax-increase” stand may change once the economy improves.
The Administration’s Proposal
In the meantime, more details have come to light about the Administration’s intent concerning the 18-month extension or, as it prefers to call it, “Stage One Reauthorization.” In a July 1 release, the White House proposed to maintain the solvency of the Highway Trust Fund during the 18-month period with a $20 billion transfer from the general fund ($18 billion for the highway account and $2 billion for the transit account). The general fund would be reimbursed for this transfer over ten years. There was no suggestion as to what the potential sources of reimbursement might be, other than a vague promise to “work with Congress to identify appropriate revenue-raising measures.”
Despite the stated desire of Sen. Boxer (D-CA), chairman of the Senate Environment and Public Works Committee, to produce an extension “clean as a whistle,” the Administration has proposed two sets of “carefully thought-out reforms” as part of the extension bill. The first set of reforms (cost: $300 million) is aimed at improving performance-driven decision making by helping states and localities build the capacity for the collection, analysis and reporting of data on transportation goals and outcomes of transportation investments. A further $10 million would be devoted to improving the federal government’s project assessment tools, developing performance goals and establishing guidelines for project evaluation.
A second set of proposed reforms would address efforts to “improve regional access and mobility and enhance the livability of communities.” The announcement does not assign any dollar value to these latter reforms which would include developing guidelines for regional access plans and livable community plans.
Concurrently, the Administration released proposed design principles for a National Infrastructure Bank. The Bank would be “an independent entity within U.S. DOT” with an initial focus on transportation-related investments. It would support “regionally and nationally significant, high-value projects (minimum threshold: $25 million) funded through a merit-based selection process.” The Bank would offer both grants and credit assistance in the form of loans and loan guarantees. As for the Bank’s capitalization, the prospectus only mentions the congressional budget resolution which includes $2 billion this year and $5 billion next year – clearly an inadequate sum to capitalize the bank in the long run but sufficient to support it in its launch stage.
As several respondents pointed out, limiting the Bank to transportation investments and locating it within U.S. DOT, might satisfy transportation advocates but would go counter to the objective of creating an autonomous entity that could finance a wide spectrum of the nation’s infrastructure needs, as envisioned in a pending House legislation (HR 2521),
A Legislative Stalemate?
Few respondents were willing to speculate as to the ultimate resolution of the legislative stalemate. One respected colleague wrote, “I would imagine that Chairman Oberstar may wish, and be able, to prevent the enactment of an 18-month extension bill. Thus we could face the prospect of a series of [short-term] extensions of SEFETEA-LU, as we witnessed in 2003-2005, and annual “emergency funding” measures for the Highway Trust Fund… In a word, it could be a mess unless the Administration, the House and the Senate are willing and able to find a compromise position.”
One compromise solution might be a shorter interim bill. However, passing major “transformative” legislation on the eve of the mid-term elections — especially if it is to involve a hike in the gas tax—probably is not a realistic option.
Another possible compromise is Sen. Boxer’s preferred solution — a “clean” bill providing for a cash infusion to the Highway Trust Fund but without any “bells or whistles.”
The nature of the compromise should become clearer later in the month when the Senate EPW Committee takes up a bill to extend the existing surface transportation program.
Please feel free to forward or reprint this item with appropriate citation. All correspondence, including requests to subscribe and unsubscribe, should be addressed to: C. Kenneth Orski, Editor/Publisher;  email: korski@verizon.net; tel: 301.299.1996; fax: 301.299.4425. Please make sure that your email account is set up to accept incoming mail from korski@verizon.net