Perspectives



After the Long and Twisting Road, is the End in Sight?

After five years of following the twists and turns of surface transportation reauthorization for the Economic Forecasting Review, it just may be that there is an end in sight! Not the end that we hoped for as the expiration of SAFETEA-LU neared, nor what was recommended by two blue-ribbon commissions, but at least a possible end to the interminable string of temporary extensions and a solid starting point for the longer-term direction of our highway, transit, and rail programs. By the time this piece appears in print, Congress may have acted to pass a substantive piece of legislation—or on the other hand, they may have put the process back into another round of “wait and see.”

Just where are we now? Recall that the multi-year reauthorization bill known as SAFETEA-LU expired on September 30, 2009, shortly after the Obama Administration had taken office, and just as the economic downturn was reaching its lowest point. Neither the Administration nor the Congress was prepared to proceed seriously with a reauthorization bill—particularly if such a bill were to involve the new taxes or other revenues needed to reach the investment levels recommended by the two SAFETEA-LU Commissions. These ideas were generally embodied in a 2010 draft Democratic bill that began but also ended in a House Transportation and Infrastructure Subcommittee on Highways and Transit. The bumpy road since then has led to nine temporary extensions of varying durations, the transfer of billions of general fund dollars to sustain the depleted Highway Trust Fund, and continuing efforts by interest groups to set the process in directions suiting their policy purposes.

Along the way, the political landscape changed as a result of the 2010 Congressional elections, turning the House of Representatives back to Republican control and narrowing the Democratic majority in the Senate to a point where the majority cannot effectively act without some measure of bipartisan support. An influx of new House members, particularly those Republicans elected with “Tea Party” support, has changed the dynamics of the debate, putting much more emphasis on deficit reduction than on programmatic investments. And the time-honored tactic of lubricating the legislative process through the use of project-specific “earmarks” is now viewed with great disfavor. Navigating through this changing landscape has required new directions and new tactics.

Typically, the beginning of a reauthorization fight would entail the development and submission of a draft bill from the Administration, as has been the case for at least the last four or five decades. While the Congress never fully accepts Administration ideas, and sometimes rejects them rather forcefully, an Administration draft bill can provide a catalyst for policy debate and broad direction. The Obama Administration, however, chose not to follow that precedent, even after they asked Congress for an 18-month delay in consideration of a reauthorization bill as they focused more on the passage and implementation of the Economic Recovery Act, with its substantial new and enhanced programs such as high speed rail and TIGER1 grants. As it became clear that the 112th Congress, which began its term in January of 2011, would begin to act, the Administration did prepare a comprehensive bill. However, they only made it available under the umbrella of “drafting service,” a process under which they submit language that is technically written as a viable substitute for current law, but without any official endorsement or status.

The Senate, initially through its Environment and Public Works (EPW) Committee, began the process of drafting a long-term bill. Under the leadership of Committee Chair Barbara Boxer (D-CA) and Ranking Minority Member James Inhofe (R-OK), the EPW Committee set out to find common ground as a basis to move legislation that could pass the Senate and ultimately become law. After a long process of negotiation, Senators Boxer and Inhofe concluded that, despite their ideological differences on most issues, there could be common ground on transportation issues. The EPW committee jurisdiction includes only highways and environmental issues, with other Senate Committees adding material covering their assigned jurisdictions. As described in the following discussion of the bill’s substance, the EPW bill reflected true compromise between Senators Boxer and Inhofe. The Democrats did not get all they wanted in terms of program structure, policy, or funding, and the Republicans did not get all their desired changes in the environmental process. But with accommodations from both sides it was possible to get a unanimous vote in February 2012 to report a bill to the floor. Subsequent and similarly bipartisan action brought the public transportation component of the bill out of the Banking Committee.

The Senate Commerce Committee was somewhat more divided, with partisan dispute over the scope of future national freight investments. Most critically, the Senate Finance Committee, chaired by Senator Max Baucus (D-MT), was able to scrape up necessary revenues to allow for a two-year bill, encompassing the period from October 1, 2011 to September 30, 2013 (Fiscal Years 2012 and 2013) to be funded at levels roughly equal to those provided in Fiscal Year 2011. The Senate took up the EPW bill (S. 1813) with the other Committee products added, spending nearly a month of floor debate before final passage. As a bill likely to become law, the measure attracted countless proposed amendments— some relevant to transportation, some as far afield as policies on contraception, energy and environmental policy, and foreign aid to Egypt. Through a long process of attrition, the bill’s managers fended off most amendments, accepted or modified others, and brought the bill to a final vote with strong bipartisan support. All Democrats present and voting supported the bill, while Republicans were divided 22-22, for a final tally of 74-22. The Senate bill provided $109 billion in spending over its two year life.

As the Senate was acting on their bill, attention turned to the House, which had been seeking a viable policy direction since the summer of 2011. Initially, the House had indicated that any legislation would have to live within the constraints of the FY2012 budget resolution drafted by House Budget Committee Chair Paul Ryan (R-WI). Operating under the constraints that spending had to be matched to existing Highway Trust Fund revenues and that no new taxes could be provided, this principle would have meant an overall reduction of some 30-35 percent in transportation spending, a challenge for the new Transportation and Infrastructure (T&I) Committee chair, John Mica (R-FL). Mica had been a cosponsor of the bill offered in the prior Congress by then-Chairman Jim Oberstar (D-MI), which would have doubled transportation investment.

After testing the waters on the fiscally constrained bill and finding serious opposition across the country, the Republican leaders took a new tack as the Congressional session opened in 2012. Chairman Mica was given the latitude to propose a bill generally at current funding levels, with the understanding that revenues would be found to permit it to pass without impacting the deficit. House leaders, notably Speaker John Boehner (R-OH), indicated that the transportation bill would be married with other measures involving energy policy, such as construction of the Keystone XL Pipeline connecting to Canadian “tar-sands” petroleum production and the opening of public lands, such as the Alaska National Wildlife Refuge to oil drilling. Such measures have been strongly opposed by Democrats in the past, but their Republican supporters saw a potential to reach a majority vote that met their policy objectives and could gain passage without significant support from across the aisle. The political divide in the House—a new departure for what had traditionally been a bipartisan bill out of the T&I Committee—was evident in the Committee’s drafting session. A marathon, 18-hour markup session included numerous proposed amendments, almost all of which failed on a partisan roll call.

Ultimately, the bill, including a $265 billion five-year authorization for transportation investment adding Fiscal Years 2013 through 2016 to what had already been voted for Fiscal Year 2012, was reported out of the Committee by a 29-24 vote. The House bill (H.R.7) as reported by the T&I committee, covered almost the same transportation ground as the full Senate bill, since the T&I jurisdiction is broader than any Senate Committee. It did include language from the House Energy Committee relating to certain energy matters and from the House Science Committee relating to research, development and University Centers. But, as in the Senate, how to pay for the new investments in light of diminished Highway Trust Fund revenues proved to be the most contentious issue.

As the bill was about to go to the House floor for consideration, which involved passage of a special rule providing for its consideration, it became clear that the Ways and Means Committee “pay-for” in this bill involved taking away the current gas tax revenues dedicated to transit, offset by a special one-time allocation of general fund dollars to sustain transit, but only through 2016. Any new revenues created by energy programs were to go to highways, and the total spending under the bill was balanced through a proposed increase in pension fund contributions by federal employees.

This package turned out to have enough poison pills in it that the House leadership could not find a majority in support of it. Conservative “Tea Party” Republicans, especially the freshmen, felt that the bill probably spent too much. Suburban and urban Republicans, while few in number, were unhappy with the reallocation of gas taxes away from transit. And most Democrats could not support the environmental and federal pension measures. As a result, the Republican leadership could not find a viable coalition that could pass a bill and was forced to pull the legislation from the agenda and look for a fallback strategy.

The fallback strategy emerged after the House took action to approve another short-term extension, this time to June 30, 2012. This was followed by a two-track process with the House proposing yet another extension through September 30, 2012, coupled with an offer to go to a House-Senate conference on a longer bill. Technically, that conference, which is now underway, is between the Senate-passed two-year bill (S. 1813) and a new short-term House bill (H.R. 4348). That short term bill covers the three interim months as well as a few policy issues such as a mandate to approve the Keystone XL Pipeline, a requirement for EPA to suspend its rulemaking to designate coal ash as a hazardous material, and a number of environmental streamlining measures paralleling those in the reported, but not passed House bill (H.R. 7). This mixture of short vs. long term creates some leverage for the Senate conferees, given that they have documented support for a Senate passed bill as compared to the House’s withdrawn legislation. The conference can, but is not obliged to, consider other things that were in the original House bill (H.R. 7), subject to some procedural issues with respect to floor consideration of the conference report.

As noted, the conference is now underway. Through the process of rotation, it is chaired by Senator Boxer. Senate conferees are drawn from each of the relevant committees plus some conferees representing party leadership and operate as a single body. The House has appointed a very large number of conferees, divided into groups according to committee jurisdiction. Contrary to past practice, where conferees were drawn from the senior-most members, the delegation from the House T&I Committee has freshman as a majority of its Republican members, emphasizing the importance of gaining their support for any viable product. Also, by virtue of the committee-restricted membership, the three House conferees (two Republican, one Democrat) from the Ways and Means Committee have an effective veto over the bill, since the revenue title essential to its passage falls entirely in their hands.

What are the issues in conference? While there remains a strong partisan flavor to the debate, there is reasonable similarity when the basic transportation issues are considered. Conference Chair Boxer has stated that 80 percent of the provisions in the bill are basically noncontroversial. Of course, there still is much work to be done to conform the hundreds of pages that constitute the 80 percent, while seeking some resolution regarding many issues in the 20 percent, any one of which could derail the entire agreement.

The Administration has weighed in with a statement of their concerns that could perhaps result in a Presidential veto, but has also indicated their strong support for an acceptable and timely bill. The conferees have begun a process of exchanging offers, unfortunately coupled with accusations of bargaining in bad faith. Without getting into great detail, the broad outlines of potential agreement and disagreement are as follows.

Program Consolidation

Both the House and Senate bills seek to reduce the number of categories that have become “silos,” giving more latitude for state and local governments to exercise judgment on best uses of funds.2 Of course there will still be disputes—most freshmen House Republicans, for example, would prefer to eliminate so-called Transportation Enhancements, while the Senate Republicans have accepted a compromise allowing eligibility for funding such projects as a matter of local choice.3 Both the bills lean more heavily than in the past to formula-based programs rather than discretion, and of course neither has any earmarks.

Environmental Streamlining

While both bodies are committed to reform in this area, the House provisions are far more drastic, taking many areas out of environmental review, and setting firm deadlines for agencies that delay approval. The Senate will be supporting their provisions that do go beyond current law but again represent bipartisan compromise.

Performance Management

Both bills support the concept that transportation investments should be made on a data-driven basis against specified performance measures introduced in the planning process. Making a reality of this concept may prove difficult, especially in a climate where the House has defunded programs essential to generating basic data to support planning.

Credit Supports and Public-Private Partnerships

Both bills include a significant expansion of the current TIFIA4 program, entailing a major increase in credit support funding along with a stepped-up federal share for TIFIA projects. While the decrease in leverage caused by the higher federal share partially offsets the program increase, the net result will be a significant growth in financed projects. Under today’s TIFIA rules, USDOT can support program value (TIFIA and other funds) in the range of $3 to $4 billion. Under the proposed bill, this amount could be as much as $20 billion. The withdrawn House bill (H.R. 7) also included expanded funding for State Infrastructure Banks, but not the creation of a National Infrastructure Bank as proposed several times by the Administration. Neither bill does much to increase the states’ ability to use toll financing, partly as a result of having to resolve two dueling Senate amendments that would have either increased or deterred tolling of currently free roads. Faced with these two amendments, the Senate opted to simply continue existing law.

Transit

Few changes are proposed in the current transit programs, other than consolidating the many social service programs. Smaller issues on eligibility for various funding programs are within range of compromise, while there still is an issue between House and Senate over the scope of federal responsibility for transit safety. In the financing title of the Senate bill, there is also language that would restore parity between the employee tax benefits for parking and transit.

Freight

During the development of these bills, there has been much attention to the freight issue, recognizing the importance of goods movement to the national economy. Specific measures remain to be worked out. The House has freight planning provisions but no funding. The Senate has a formula-based freight program plus a discretionary program for Projects of National and Regional Significance (PNRS) modeled on a combination of the SAFETEA-LU PNRS program and the Recovery Act TIGER program under which freight projects would be eligible. The Senate Commerce Committee’s plans for a separate freight funding program ran into partisan disagreement, but the Committee’s language for development of freight policies and plans is included in the Senate package. Published reports indicate House resistance to the freight programs.

Other Issues

The final bill will need to codify language in technical areas such as hazardous material and pipeline safety, vehicle standards and safe driving programs, research and development, and transportation planning, including the future of Metropolitan Planning Organizations as they now operate in smaller metro areas. These issues are amenable to compromise. Where there will still be concerns are such politically-charged issues as the Keystone XL Pipeline. How these issues are resolved or finessed will mean the difference between success and failure this year.

Finance

Finally, no bill can effectively become law without the revenues to make the Highway Trust Fund whole. The mixed bag of transportation-related taxes and general taxes to offset general fund transfers that came out of the Senate was generally regarded as a place-holder, to be revisited in the conference. Senator Boxer has expressed hopes that enough additional revenue can be found to add at least another year to the Senate bill. Whether agreement can be reached on that or only the reduced target of a bill expiring in 2013, and how much time elapses between announcement of a deal and enactment of the final measure, are two other unknown factors in getting to a final conference agreement. As previously noted, any agreement is in the hands of the two Republican conferees from the Ways and Means Committee. Without at least one of their signatures on the final conference report, there is no bill.

Final Thoughts

So, what are the prospects? There are three basic scenarios:

  • In a perfect world (and the last three years tell us this is not the one we live in), conferees would reach agreement in early June, draft the extensive bill language and conference report to go to the floor, build the necessary political consensus and get the bill passed before the current extension expires on June 30th. With the current deadlock, time may run out. Many observers believe that there will need to be a short extension up to the eve of the August Congressional recess to create time for agreement and to produce the actual bill language.

  • If there is not general agreement on a way forward, then there will need to be another longer extension. The choices, neither of which is attractive, are to extend to the end of calendar 2012 or into some time in 2013. The first option tosses transportation legislation into the expected “lame duck” session after the November election, a session already burdened with consideration of extending the Bush-era tax cuts, continuing the Obama payroll tax holiday, dealing with planned automatic “sequestration” of domestic and military spending,5 necessary actions to enact or continue appropriations for fiscal year 2013, and other likely issues. The outcome of the fall elections would have a definite, if uncertain, impact on the dynamics of a post-election lame duck session. Even more uncertain would be an extension into 2013, with no knowledge as to who will be in the White House and what the makeup will be in the 113th Congress. Starting fresh on legislation will not be easy, especially if there is any change in political control in either branch.

  • Finally, the option that would be even worse, but cannot be ruled out, is that something becomes irresolvable in the current negotiations and that there is a period of lapse such as we saw with the Federal Aviation programs in 2011. The impacts of such a failure with respect to the transportation programs and the general economy are dire indeed.


While there are a few paths that can lead to a positive resolution, there are far more paths that could lead to deadlock. Hopefully the parties involved in the negotiations will be able to transcend partisan differences in the interest of sustained investment and economic progress. The practicalities of the conference will tend toward an outcome based more heavily on the Senate bill, given its bipartisan nature. Getting a degree of program reform and stability, even if only through the end of 2013, will provide another opportunity to think through long-term policies in a post-election environment. And, if there is a “grand bargain” over taxes and spending in that environment, perhaps the lessons of 1991 and 1993—when both Presidents George H.W. Bush and Bill Clinton were able to weave long-term support for investment into a budget reconciliation agreement—can be relearned. Stay tuned—the next debate will begin again before the ink is even dry on this measure.

 

 Notes:

  1. The Administration developed the Transportation Investment Generating Economic Recovery (TIGER) grant program as part of its 2009 Recovery Act programs to fund major transportation infrastructure projects that could provide short-term construction jobs while also supporting long-term economic growth.
  2. A common criticism of federal transportation policy over the decades has been that money is provided to states with categorical restrictions (e.g., highway-only, transit-only, capital-only, operating-only, etc.). More-recent federal legislation has attempted to provide more “flexible funding” options, although many restrictions remain.
  3. Currently 10 percent of one of the major federal transportation funding categories must go to Transportation Enhancements such as bicycle lanes, pedestrian paths, and aesthetic enhancements to transportation facilities.
  4. Transportation Infrastructure Finance and Innovation Act (TIFIA) provides credit assistance for surface transportation infrastructure paid for with user charges or dedicated tax revenues (e.g., toll roads, transit).
  5. To ensure that spending limits are not exceeded, both houses of the US Congress agreed to across-the-board cuts of specified domestic and military budgets if a budget agreement cannot be reached by traditional means.

 

Image Header Source: Allie Caulfield (Creative Commons)