Perspectives



Back to the Future: Transportation Funding Revisited

When we last visited the issues in January 2013, the focus was primarily on how a deal was reached between Congress and the White House to pass MAP-21 and what its new provisions would mean for the transportation community.  But we all know that MAP-21 is an interim measure--better than a continuing series of program extensions, but far from the stable, multi-year authorization that we would like to have.  What’s happening now?   It’s early in the process, but many signs point to a renewal of the gridlock that prevailed in the last cycle.

 

On a positive front, much of the new policy framework of MAP-21 is taking hold.  The increased funding levels for the TIFIA program have brought on an avalanche of applications, proving the demand for credit assistance as a means of project development, but at the same time straining the capacity of the Department of Transportation to process applications in the timely fashion implied in the MAP-21 language.  While most of these potential projects are toll roads or similar activities, there is some variety, including the possible use of TIFIA-enhanced toll revenues and special tax revenues to finance a transit extension in Northern Virginia.

The project acceleration features of MAP-21 are also proving valuable. Environmental reviews of some major projects, like the Tappan Zee Bridge replacement in New York, are moving through the process in record time.  The Obama Administration has moved quickly to help other projects advance expeditiously by expanding the scope of categorical exclusions which limit the review of routine and conventional transportation improvements.  And the concern that the MAP-21 provisions could only be applied to projects in the highway area was overcome with broad interpretations.  The Congress is using its oversight powers to review how these new policies are being implemented.

MAP-21 called for a new level of federal government interest in goods movement, and this is being carried out by both the Administration and the Congress.  The Department of Transportation is moving quickly to carry out MAP-21 provisions calling for a National Freight Strategic Plan to further the bill’s National Freight Policy and a National Freight Network (albeit one that has an extreme tilt towards highways).They are close to appointing a National Freight Advisory Committee, complementing the State Advisory Committees recommended in MAP-21. On Capitol Hill, the Congress is responding. The House Transportation and Infrastructure Committee, which authorizes all surface transportation programs (highway, rail, and water) through separate subcommittees, has created a special crosscutting panel to look at freight issues across all the modes in preparation for developing reauthorization legislation.

Finally, the performance driven policy and planning approach defined in MAP-21 is being implemented.  Certainly this will not mean immediate change across the board, but the various DOT Modal Administrations involved are doing outreach on appropriate factors against which real trends in performance can be measured.  This will take time to work through the planning cycle in states and metropolitan areas, but the direction is positive.

Does this all mean that we will be moving into a new era in transportation authorization?  Not likely, so long as the key issue of revenues and funding levels remains unsolved.  As my colleague, Jack Basso, is covering at greater length in this issue, there’s still an extremely wide gap between the parties that will take extraordinary measures to close.  The President, in his budget for the upcoming fiscal year 2014, again calls for both a short-term infusion of capital investment and a longer-term reauthorization at spending levels above the current baseline.  But his proposed “pay-for” is not new revenues, but rather the use of funds freed up by other measures including the so-called “peace dividend” created by the drawdown of military spending in Iraq and Afghanistan.  While in budgetary terms the President’s budget does move towards long-term budget balance, the Congressional reaction is that this strategy is just another form of deficit spending.

 

On the other hand, there is no sign that Congressional Republicans will rally around a measure that would provide for new revenues in the form of increased user taxes or other means.  The options for transportation budgets are limited.  Sustaining current levels for surface transportation without new revenues means, on the one hand, continuation of general fund transfers, which the House Republican Conference has ruled out through its version of the Congressional FY’14 Budget Resolution.  On the other hand, living within the current revenues means drastic program level reductions as previous project obligations are paid down, eventually leveling out at a much reduced level.  Some estimate that this could only be achieved by a 90% reduction in new highway projects and a total hiatus in new transit allocations during FY 2015. Transportation leaders, including the chairs of the key congressional committees, have recognized the problem this would create. Both House Chairman Bill Shuster (R-PA) and Senate Chairman Barbara Boxer (D-CA) have taken the position that all options should be on the table, but it is not clear how the issue will be engaged. There is still hope that transportation revenues could be a part of a so-called “grand bargain,” under which the President, the Democratic Senate, and the Republican House reach a compromise on spending for defense, discretionary programs, and entitlements and on revenues to be raised from tax increases.

Inclusion of transportation revenues continues to be suggested by outside parties, but those who would have to reach a compromise show few signs of getting to the negotiating table.  The Senate and House have passed widely different FY’14 budget resolutions and so far have not moved towards a Conference Committee process to resolve those differences.  Instead, the House Republicans in particular have insisted that there needs to be an overall framework agreement in place in order to begin conference talks, with the strong view that such an agreement cannot include any new taxes.

 
Without progress on the broader fiscal issues, a replay of prior years is taking shape.  Without a budget resolution, the two Houses will not be able to move on appropriations bills that are based on realistic assumptions, and the prospect of another year under continuing resolutions (CR) is real.  Without a broader agreement that supersedes the sequestration requirements of last year’s fiscal cliff settlement, the spending reductions imposed at the beginning of this calendar year will be renewed for a full year even as the implications of across-the-board budget cuts are becoming clear.  While trust fund programs such as highways and transit formula grants are not affected by the sequester, the general fund programs like transit New Starts and FAA air traffic control operations will be back on the cutting table and we have already seen in the latter example that capital investment will be sacrificed to keep operations whole.

All of this bodes ill for the goal of long-term transportation funding, although that’s still the desirable outcome that we hope the parties work towards.  But without some progress on funding, there’s a real likelihood of continuing resolutions instead of firm appropriations and authorization extensions instead of long-term bills.  Meantime, life does go on in Washington, and there is hope for progress in some areas.  In the near future, we will see a new Secretary of Transportation.  Anthony Foxx, now the Mayor of Charlotte, North Carolina, has been nominated by President Obama.  Early indications are that he will continue the level of support and enthusiasm set by his predecessor, Secretary Ray LaHood.  While Secretary-designate Foxx comes to the office in difficult times, he can look to Secretary LaHood’s record for keeping transportation issues on the national front burner.  Further steps in the successful implementation of the new MAP-21 policies should be an important part of the Foxx departmental agenda.

Congress, as well, is taking some steps to move important transportation legislative priorities.  While MAP-21 will continue in place through September 30, 2014, in addition to the oversight hearings on MAP-21 progress, the respective congressional authorizing committees have new legislative priorities on their respective agendas.  In the Senate, Chairman Barbara Boxer (D-CA) is following the successful MAP-21 precedent of bipartisan cooperation as her Environment and Public Works Committee works on a Water Resources Development Act (WRDA) bill.  In partnership with a new Ranking Member, David Vitter (R-LA), that bill, which reauthorizes water resources programs under the U.S. Army Corps of Engineers and simplifies the environmental and planning requirements of these programs, was unanimously reported out of the Committee and passed the Senate by a vote of 83 to 14.  The new Chairman of the House Transportation and Infrastructure Committee, Representative Bill Shuster (R-PA) has indicated that passage of a WRDA bill is a top priority for his Committee.  In both House and Senate action, authorization is easier to achieve than actual appropriations, but does not require the passage of new taxes. The politics of a WRDA bill in an era of earmark reform is also problematic, since these bills have traditionally been shaped around a long list of individual projects, but it appears that there is a way forward to progress.  It’s also likely that a WRDA bill, if one can be enacted, will offer reforms to the Harbor Maintenance Trust Fund, assuring over time that more of the trade related revenues generated by the Harbor Maintenance Tax will be used for investments into the facilities needed to support commerce.

Another priority over the next few months is the enactment of rail legislation. A rail bill, the Passenger Rail Investment and Improvement Act (PRIIA), enacted in 2008 under the Bush Administration provided authorization and policies for rail safety and for rail passenger activities including Amtrak and intercity rail.  The latter areas were also provided substantial new funding under the American Recovery and Reinvestment Act, but those funds have now expired.  There will be substantial debate over the federal role both with respect to Amtrak and intercity passenger rail, but it is likely that legislative activity will at least begin this year.  House Chairman Shuster has indicated that a rail bill is on his agenda for this year and has begun hearings.  In the Senate, the rail jurisdiction lies in the Senate Committee on Commerce, Science, and Transportation, chaired by Senator Jay Rockefeller (D-WV), who has announced that he will retire at the end of his term in 2014.

The Commerce Committee had prepared a rail title last year for inclusion in MAP-21, but it was dropped over disputes with the Committee Republicans.  Senator Rockefeller has held an Amtrak hearing already this year and appears ready to reconsider this legislation, which might also include the freight related issues that had been in his bill last year.  He has also introduced a bill to create a National Infrastructure Bank to finance transportation and related projects.

We will see how much progress can be made this year, before Congress moves into election mode in 2014.  Much of its attention will be focused on issues like gun safety and immigration, as well as on the budget and “fiscal cliff” measures.  Timing of the “fiscal cliff” and especially the need for a debt ceiling increase is not clear, as an improving economy brings in increased revenues and the Treasury receives unexpected windfall payments from the housing finance agencies.  We can hope that among all these priorities the Congress can pay some attention to the transportation issues and lay the groundwork for the necessary MAP-21 reauthorization debate, whenever it occurs.

 

Image Header Source: Ron Cogswell (Creative Commons)