Straight Talk About the Highway Trust Fund
The Highway Trust Fund (HTF) is a mess. What’s worse is that Congress seems pleased with themselves to keep it that way. Back in May, Congress passed a measly two-month extension that expires July 31(just days after this article goes to print) — and this was after a six-month extension back in September 2014. Now they’re about to kick the can again.
On July 15, 2015, the House of Representatives passed a five-month authorization extension that transferred roughly $8 billion from the Department of Treasury’s general fund to HTF accounts to meet obligations. To pay for these five months of solubility, the House plan is a patchwork of future accounting gimmicks. The largest offset ($3.1 billion) comes from revenue from Transportation Security Administration (TSA) fees between 2024 and 2026. The remainder of the offset changes IRS reporting requirements to increase revenue over the next 10-year period. Yes, that means the House has chosen to pay for the next five months of HTF project authorities by using revenues raised as many as 10 years in the future. It’s robbing Peter to pay Paul.
The following week, the Senate announced a bipartisan agreement and began parliamentary proceedings to take up, debate and amend its package. This bill will fund the HTF for three years and authorize the program for six years at slightly higher levels; however, it’s nowhere near the levels required to keep up with the needs. Raising $47 billion by primarily reducing the dividends the Federal Reserve pays to banks, as well as selling 101 million barrels of oil from the Strategic Petroleum Reserve, will fund three years of HTF expenditures. However, it does not provide a sustainable funding source for highway projects, which is the primary problem. Rather than fix the real problem, Congress seems content to perpetuate the funding mess. The only difference is how far into the future the can gets kicked.
These two different approaches are setting the House and Senate up for a showdown. If the Senate is able to pass a multi-year authorization with several years of funding, and that’s a big if, then that could put the House in a very difficult position approaching the July 31 deadline. If the Senate isn’t able to pass a long-term bill, it will be because of politics surrounding amendments entirely unrelated to the HTF that have been making news. In either situation, we are still talking about extensions rather than solutions.
If you ask House Republicans why a five-month extension was chosen, they will tell you it aligns with an opportunity to enact “meaningful tax reform.” At the end of the calendar year, Congress passes a package that has become known as “Tax Extenders.” This is a series of specific tax provisions that are set to expire at the end of the year. The House GOP will tell you the Tax Extenders package provides an opportunistic vehicle to finance the HTF with reforms to the tax code. Repatriation, an approach requiring some of the nearly $1 trillion in U.S. company foreign assets to finance the HTF and other infrastructure programs, and an idea NUCA has supported, is one example of the tax reforms being considered.
But we’ve heard about tax reform before. In 2014, former Ways and Means Committee Chairman Dave Camp proposed an overall tax reform plan that went nowhere. The fact is, in both chambers tax reform has been discussed for more than two years and Congress has had ample opportunities to enact change and fix the problem, they simply haven’t had the appetite. If you believe that appetite has changed, as many House Republicans are indicating, then what’s one more short-term extension to get a long-term vehicle and funding source? But it’s certainly a gamble.
The Senate, on the other hand, seems to be more closely aligned with NUCA and our partners’ distain for another patch extension. While short of the initial goal of a six-year authorization, the three-year bill does provide the first long-term (more than two years) reauthorization in more than a decade. But don’t get too excited, this bill won’t help us avoid this conundrum in the future; in fact, it may only exacerbate the problem. Here’s how: Both the House and Senate fund their extensions with funds largely derived from future accounting changes. In three years, it seems likely that those accounting maneuverings will be insufficient to fund HTF obligations, which are significantly underfunded even at the Senate’s proposed modest increases, and revenues raised from the gas tax will decline as vehicle efficiency increases. If you believe the political environment will be different in three years and Congress will be less contentious and political, then a three-year extension could provide a better opportunity to enact a long-term, dedicated funding source. But it’s another gamble.
What’s entirely missing from the discussion on Capitol Hill is that there are two plans that Congress could enact immediately to give relief and multi-year sustainability to the HTF. Both repatriation and increasing the gas tax have bipartisan, bicameral support and both could infuse enough money into the HTF to sustain funding into the foreseeable future.
But why take your money to the bank when you can gamble at the Capitol?
Will Brown is NUCA’s Director of Government Affairs.
