Congress has eight more months to work on the highway reauthorization bill that funds highway projects. The most recent legislation, the Surface Transportation Extension Act of 2004, will set funding levels until May 2005 and is the sixth such extension.
The previous spending extension expired for highway programs on Sept. 24, and for all other programs on Sept. 29. The new legislation appropriates roughly $24.5 billion for highways, $5.2 billion for transit systems and $287 million for motor carrier safety. Those funding levels are a slight increase over funds states received during the first eight months of 2004.
What does this mean for the highway/transit sector of the construction industry? Funding is secured for projects over the next eight months, but as far as long-term spending is concerned, no multi-year replacement for the original TEA-21 bill has been adopted. Both House and Senate leaders, however, have promised to eventually pass a five- or six-year funding bill, although it will not likely happen before elections on Nov. 2.
Although the latest extension was approved unanimously in the Senate, it was not passed without some hesitation. The extension uses about $2 billion in unobligated transportation funding that was authorized in 1998. Approximately $700 million of those funds will guarantee all states get a 90.5 percent minimum rate of return in highway funds compared to what they pay in fuel taxes, a major issue for states that pay more in fuel taxes than they get in transportation funding.
The extension bill changes the previous tax exemption on ethanol fuels to a general tax credit for 2004, which will increase revenue going into the Highway Trust Fund. Now the 2.5-cent-per-gallon tax on ethanol-blended fuel goes into the Highway Trust Fund rather than the general fund.
“Its ironic that these tax preferences, intended to reduce U.S. reliance on imported oil, actually diverted revenue from being used to address our nation’s tremendous transportation infrastructure needs,” Stephen Sandherr, chief executive of the Associated General Contractors of America, commented about the ethanol tax exemption.
The extension bill also restored the hours-of-service trucking rules the U.S. Court of Appeals ruled invalid in July. The bill specifically allows the Federal Motor Carrier Safety Administration’s policy for hours of service for commercial truck drivers to stay in effect until Sept. 30, 2005, or until a new hours-of-service rule is adopted.