Perspectives



As Baseball Fans Have Said for Decades, “Wait ‘til Next Year”

This Perspective was written in October 2014. A December 2014 post-election postscript is provided following the October article.

When I last wrote for EFR it was early spring, and my observation was that the Washington Nationals baseball team was beginning its season with hopes for success and that similar hope existed that the Congress and the Obama Administration could work together to accomplish a surface transportation bill in their regular season. Well, it looks like the Nats had a better season than the Congress!

The Nationals finished in first place during the National League regular season (but their successes were short-lived as they were eliminated in the opening round of the post-season). Their outstanding regular season performance, particularly during the latter half of the regular season, was capped with a picture perfect last game — a Jordan Zimmermann no-hitter made possible by a spectacular outfield leaping catch by Steven Souza, Jr., a minor league star brought up for some end-of-season exposure.

Did surface transportation reauthorization progress match this performance? Not really. This regular season began with some promise—introduction of an Administration bill, the GROW AMERICA Act (Generating Renewal, Opportunity, and Work with Accelerated Mobility, Efficiency, and Rebuilding of Infrastructure and Communities throughout America), as described in the May report, discussion of prospects for legislative action by both Senate and House transportation leaders, a few indications of potential bipartisan and bicameral cooperation—but the process lost all momentum as spring turned into summer. As described in this Perspective, the main achievement of the year was enactment of a short-term “fix” to maintain solvency in the Highway Trust Fund, which was followed by a Congressional recess of several weeks in August and September. Upon return from that recess, the Congress enacted a Fiscal Year (FY) ‘15 Continuing Resolution (CR) to support governmental activities through December 11th, with a plan to return after the election to deal with unfinished business in a lame duck session.

Senate Highway Legislation

Highlighting the early months of the session, the Senate Environment and Public Works Committee (EPW) moved quickly to draft and report out a highway title that would become a key part of a MAP-21 reauthorization bill, to be joined later with provisions from other Senate committees dealing with transit, freight movement, safety, and financing. This Senate bill would ultimately be negotiated in conference with a similar House bill prepared by the House Transportation and Infrastructure Committee (T&I) and a tax bill reported by the House Ways & Means Committee (W&M). The Senate EPW bill was unanimously approved by the committee, a good sign for its future chances. It builds largely on the policy and program changes brought about in MAP-21 while proposing that the MAP-21 program be funded for a six-year period (FY ’15 to FY ’20). This would entail about $265 billion in highway and related programs over the bill’s six-year life, funding only existing authorization levels plus a small inflationary adjustment. Even so, more the $100 billion would be needed in new revenues to the Highway Trust Fund to sustain such a program level. In keeping with its jurisdiction, the EPW committee deferred to Senate Finance with respect to how such revenues might be found.

A few policy initiatives were included in the bill, including a new allocation of $6 billion over the last five years of the bill for a formula-based, largely highway focused freight program. Expectations are that this program would become part of a larger multimodal freight program to be designed by the Senate Commerce Committee and merged with a potential House program shaped along the lines of the unanimous report by the special T&I Committee freight task force. Senators on the EPW and Senate Commerce Committees have begun discussions about such a multimodal program. Another provision in the EPW bill included $400 million a year to fund Projects of National and Regional Significance, a program that had been reauthorized but not funded in MAP-21. Other new policy provisions included funding to assess new systems of highway financing, further attention to improvement of project delivery, including a small incentive grant program to states and MPOs who improve delivery performance, and continued support for innovative financing.

Of course, without action on funding or contributions by the other affected committees, the EPW bill remains in limbo, and will die at the end of this Congress. We will say more about those future prospects further into this Perspective.

Transportation Appropriations

The need for annual appropriations to keep general fund programs funded and generally see to the orderly progress of government should be a part of the normal legislative cycle, but clearly that system is not functioning properly. The planning for FY ‘15 started with the submission of the President’s Budget in the winter of 2014. Normally, there would be a Congressional Budget Resolution to establish macro-level spending and revenue targets and then a series of appropriations bills including the one that carries the Department of Transportation programs. However, none of this has happened to date and it is questionable that anything close to the normal legislative order will occur. Congress finessed the budget issue, on the grounds that the so-called Ryan-Murray compromise reached in 2013 to adjust budget ceilings was enacted for two years and eliminated the need for action on 2015 targets.

Moving to appropriations, both the House and Senate Appropriations Committees began work on a free-standing Transportation-Housing and Urban Development (THUD) bill as they would in a normal year. Each committee reported out a bill, and while there were small differences in the funding levels, they were fairly consistent with the amounts provided in the prior year appropriations. The House bill trimmed Amtrak, transit New Starts, and the popular TIGER program while the Senate funded these programs essentially at current levels. Such minor differences would normally be worked out by a conference committee, but the overall process stalled far short of that point. The House did bring its bill to the floor, passing it on a largely party-line vote of 229-192. The Senate attempted to move its appropriations bill as part of a three-bill “minibus”, but ran into a strong effort to add amendments aimed at gutting Administration environmental initiatives. As a result, the bill was taken off the agenda and no further progress was made.

During the short session between the summer recess and the campaign recess, Congress agreed to a non-controversial government–wide FY ’15 Continuing Resolution, assuring that all programs will be funded at FY ’14 levels until December 11th. Based on this bill and on the surface transportation extension bill described below, the Department of Transportation has begun the October 1 federal fiscal year in a funded state. Offices are open for business and apportionments of Federal Highway formula are being distributed. The Federal Transit Administration, on the other hand, interprets a Continuing Resolution differently, and is not likely to distribute either formula or discretionary funds until more of the annual program has been funded. What happens next in terms of appropriations is discussed in the following section in the context of the forthcoming lame duck session.

Trust Fund Extension

During the regular session this year, more effort went into the steps needed to extend highway and transit funding than into any other matter. Deadlines for these programs were real. First, the revenue projections for the Highway Trust Fund showed that balances would reach a critical point during August for highways and not far beyond for transit. Looking beyond that, the basic authorities for the two programs were scheduled to expire on September 30th. Over the course of June and July, the debate was over how the funding gap could be plugged and how long the programs should be extended. Because the legislation required was revenue related, the lead roles were played by the House Ways and Means Committee and the Senate Finance Committee. At that level, there was fundamental agreement that increasing taxes was not a viable course of action in an election year and that what was required was some configuration of “patches” to generate additional revenue (either real or imaginary) out of existing law.

While the actual deposits to refill the Trust Fund would in fact be a general fund transfer, budgetary limitations require that new revenues in amounts equal to the transfer would be required to make the bill revenue-neutral. Theoretically, this could also be accomplished through expenditure reduction, but the only such action considered was a very complicated maneuver by which the elimination of Saturday mail delivery would help close the Postal Service deficit but would also be counted as an offset. This plan disappeared shortly after its author, Majority Leader Eric Cantor (R-VA), lost his primary.

From that point, various “patches” were identified, all with the goal of generating new revenues during a 10-year period that would “pay for” the short-term trust fund deposit. Most prominent in this regard was a measure known as “pension smoothing”, under which corporations could lower their contributions to employee pension funds in hopes that future fund earnings would rise. This would increase short-term profits for the companies and generate some short-term increases in corporate taxes. Another measure involved adding an additional year of collections in certain customs fees or custom duties beyond the period for which they were currently authorized, claiming that this was “new revenue”. These were the chief measures in the enacted bill, together with a continued reallocation of the minor fuel tax levied for remediation of abandoned leaking underground storage tanks.

What was more controversial was the duration of any “fix” and therefore the amount of general fund money that would be required. The House position was that an extension to May of 2015 was the right way to go, requiring

approximately $11 billion in general fund transfers. Under this scenario, both the long-term program and the long-term funding solution would be sought in the early months of the next Congress in early 2015. The initial Senate position was similar, although their mix of “pay-fors” was somewhat different. In both houses, there was some interest in forcing an earlier decision on the long-term funding issue by having the extension period run out during 2014, thus forcing action during the postelection lame duck session. Proponents of this strategy believe that the conditions would be ripe for action on a fuel tax increase at that time, given the number of members who were retiring, defeated, or contemplating retirement. In the House, Representative Earl Blumenauer (D-OR), a member of the W&M committee, was the chief proponent, but his amendment to this effect failed on a largely party-line vote of 193-227. Proponents of the plan in the Senate, led by Senators Tom Carper (D-DE), Bob Corker (R-TN), and Chris Murphy (D-CT), offered a similar amendment on the Senate floor and it gained 66 votes, becoming part of the Senate short-term bill, which then passed 79-21.

This victory was, however, short-lived, when the House refused to accept the proposal (and pointed out that a technical error in the Senate bill had left it short of “pay-fors”). Faced with the prospect of imminent trust fund insolvency, the Senate agreed to the House position on the eve of the August recess, thus continuing authorizations to the end of May 2015 and trust fund payments for as long as the revenue transfer lasts.

Prospects Going Forward

With Congress now in recess until after Election Day, all of the issues are on hold. The outcome of those elections will have significant influence on what happens next. Unless something totally unexpected occurs, there will be Republican gains in November, as usually happens in a midterm election in a President’s second term. Continued Republican control of the House of Representatives is a virtual certainty, and the GOP is likely to add a few seats to their margin. There will be a substantial number of new members as a consequence of retirements, members running for other offices, and some number of members defeated in November. Some pundits have pointed out that this incoming class is not as likely to consist of “tea party” members, given the nature of the districts that are being contested. Many potential turnovers are in swing districts that could go either way or the Republican candidates in such districts tend to be more centrist. Notwithstanding that potential outcome, the House will continue to be fairly conservative and tax-averse, as it has been in recent years. There are rumors of a challenge against Speaker Boehner, but this may just be a show of concern by those members.

Across the Capitol, control of the Senate may well return to the Republicans. Three Democratic seats in “red” states will certainly go Republican. Several Democratic incumbents are running for re-election in equally “red” states and it will not take much for the Senate to tip. It may even be late in December before the outcome is known, given the possibility that the Louisiana race goes to a run-off on December 6, and the prospect that an Independent is elected in Kansas who will wait to see who is in control before declaring his membership in the Republican or Democratic caucus. It’s even possible that the Senate will come up 50-50, dependent on the Vice President to break any ties. But as a practical matter, the Senate rules will continue to demand 60 vote majorities for all significant legislation, leaving substantial power in the hands of the minority party.

What are the implications for transportation? There will be a few possible changes in the transportation leadership positions in the House. Chairman Shuster defeated a conservative challenger in the primary and is in good shape for the general election. On the Democratic side, though, Ranking member Nick Joe Rahall (D-WV) has a very competitive district with significant national campaign contributions going to his opponent. At the subcommittee level, Representative Tom Petri (R-WI) is retiring and will have to be replaced. Over in the Senate, a number of permutations are possible. The EPW chair could shift from Senator Barbara Boxer (D-CA) back to Senator James Inhofe (R-OK). Each of them has successfully managed an authorization bill in the past, and there is usually bipartisan agreement on these bills.

Both the Senate Banking Committee (which handles transit) and the Senate Commerce Committee (which has jurisdiction over rail, transportation policy, and safety) will have new leadership in any case. Banking Chair Tim Johnson (D-SD) and Commerce Chair Jay Rockefeller (D-WV) are each retiring. The Banking Committee would likely be led by either Senator Robert Menendez (D-NJ) or, as some other positions are shuffled, by Senator Richard Shelby (R-AL). Menendez would be a strong transit proponent. Shelby, while more conservative, has chaired the committee during past

reauthorizations. In the Commerce committee, it is likely that a Democratic Senate would put Senator Bill Nelson (D-FL) in the chair and if the Senate goes Republican, Senator John Thune (R-SD) would move up from the Ranking member slot. Nelson’s interests would lean more to the Science and Space portions of the Commerce jurisdiction while Thune has shown strong interest in rail and goods movement issues, particular as they affect farm product shippers.

Once the election returns are clear, the strategy for the lame duck session will evolve. Proponents of a fuel tax increase, including Representative Blumenauer and Senator Carper, will argue that the time is right to take that step, but with the real deadline for action not until May, they have a steeply uphill fight. A more likely outcome is that a short lame duck session will focus on getting full year appropriations completed so that the next Congress can move on to other matters. If the election outcome flips the Senate, Republicans will very likely want to defer most other actions to the new Congress. At the adjournment of the post-election session of the 113th Congress, all pending legislation, such as the EPW highway title, dies and must begin the process anew with the 114th Congress.

The prospect for enactment of a new surface transportation bill will fundamentally depend on the relationships between the two parties. It will take a real bipartisan effort to move a bill in the short window from January to May. Chairman Shuster has shown the ability to do that in his committee, based on the nearly unanimous enactment of a Water Resources Bill earlier this year and the recent unanimous committee agreement on a rail bill that would reauthorize Amtrak with modest reforms — an outcome that would have been highly unlikely in earlier years. If Shuster can shepherd a bill out of T&I, the next steps will be up to the House leadership. In the last round, the Republican leadership decision to fund highways at the expense of transit doomed the passage of a significant House bill. Speaker Boehner recently said that he could see potential agreement with the President and the Democrats on a few key issues like a highway bill and tax reform. It remains to be seen whether this can happen, but it would be an important breakthrough. It will depend as well on the frame of mind in the House W&M Committee, which may well be chaired next year by Representative and former Vice Presidential nominee Paul Ryan (R-WI).

If the House can manage to act, the road will be smoother, although not without risk, in the Senate. The EPW committee could re-introduce their unanimous bill, and the other committees would have to dust off the draft bills that they had readied this year. Then the Senate leadership would have to allocate a few weeks of floor time for the bill, but this could be possible in the early months of the year. In this scenario, a long-term funded bill could be in place by, or not too long after, the end of May. If that effort fails, the likely outcome would be one or more extensions, more efforts to find funding “patches”, and very likely a decision to mark time until after the 2016 Presidential election. This is something that no one wants to see, even those in the middle of the process, but it’s not hard to see how we could get there.

So, like the Nationals’ disappointingly short post-season run, it looks like the transportation hope is in a “wait ‘til next year” mode, and maybe even more delay is possible. By the time we report again next spring, we should have more of an idea about what’s happening on both fronts.

Postscript

Written December 5, 2014

As noted, the Perspective above was written in October 2014, just as the Congress was leaving for its election recess. Subsequently, the Nationals disappointed us in their brief post-season appearance, and now the Congress is doing the same in its lame duck session. In both cases, it’s been proven again that “Hope is not a strategy,” and the observation that “wait ‘til next year” is still the appropriate description of our situation. Let’s take a look at what’s happened since October.

The momentum of the election, which seemed in October to have mixed outcomes, substantially favored the Republican party, and Republicans have gained control of both Houses of Congress as of the beginning of the 114th Congress in January. While there are a few days left in the lame duck session and some things could happen, particularly in the appropriations process, all incomplete bills from the 113th Congress die and must be re-introduced and begin the process anew. Pending bills such as the MAP-21 extension that was approved by the Senate Committee will be revisited under new leadership. The changes in Senate Committee leadership positions are expected to be as noted above, while there are some questions about whom the Democrats will designate as ranking members. On the House side, the most significant change is the designation of Peter DeFazio (D-OR) as ranking member on the T&I committee, replacing Nick Rahall whose reelection bid in West Virginia failed.

With President Obama continuing in office for the next two years with a strongly Republican Congress, there is great risk of partisan divide, exacerbated by the President’s decision to go forward with immigration measures through executive order. While some hold out hope for bipartisan cooperation on such issues as transportation, this could be overtaken by the efforts of the tea party wing to simply go to war with the President on all fronts. One hopeful note was struck by Cathy McMorris Rodgers (R-WA), a member of the House Republican leadership who said that long-term investment in transportation infrastructure was an area where there could be agreement. McMorris Rodgers indicated in an interview that a long-term bill is being drafted. President Obama, on the other hand, while calling for infrastructure investment, essentially has ruled out a gas tax as politically infeasible and continues to tie infrastructure together with tax reform.

To no one’s surprise, the lame duck session is not looking at a gas tax increase, despite the sharp reduction of gas prices and the fact that the short term “patch” expires on May 31st. In the House, promised hearings on the gas tax did not occur, and the most significant lame duck event was a doubling of the sponsorship of a gas tax increase bill from one member (Earl Blumenauer, D-OR) to two members with retiring Congressman Tom Petri (R-WI) signing on. In the Senate, gas tax proponents accepted the lack of House action as a sign to drop the efforts that they had hoped to build. The President’s proposal to fill the funding gap with revenues from business tax reform has not been accepted, but incoming Ways and Means Chairman Paul Ryan (R-WI) indicated that such a strategy might be considered.

The timing of movement on surface legislation will depend on the calendar, and it’s generally accepted that passage of a long-term bill can’t be accomplished by the current drop-dead date of May 31, especially since such a bill will require new revenues. We may see the transportation committees moving on a different timetable, working first on the passenger rail bill that was initiated in the House this fall and beginning to deal with FAA reauthorization legislation, including a serious look at structural reform of FAA traffic control operations. Chairman Shuster continues to work towards bipartisan compromises, such as those he achieved earlier this year. Most recently he moved a bill to reauthorize the Coast Guard, which had been drafted by Republicans and Democrats in both the House and Senate and has now passed the House by a near unanimous vote.

Finally, the main reason for needing a lame duck session was the fact that the Congress did not pass appropriation bills for FY 2015 before adjourning in October. The government is now operating on a continuing resolution which expires on December 11th. Current discussions are pointed towards the adoption of a so-called omnibus bill which would include 13 out of the 14 appropriations bills normally moved out of the Appropriations Subcommittees. Left behind would be the bill covering Homeland Security, leaving that as a vehicle for possible action in the new Congress to overturn the President’s executive orders on immigration. Passage of the omnibus bill could require Speaker Boehner to find the necessary votes entirely on his side of the aisle, which may be difficult in light of unrest regarding the White House. This will play out over the next few days, and it is expected that transportation provisions in such an omnibus would provide for programs at relatively normal levels through the balance of FY 2015, with future year discussions beginning with the President’s submission of an FY 2016 Budget in February. The only known source of controversy for the omnibus is a largely symbolic provision prohibiting use of any federal funds to carry out the California High Speed Rail program.

So, just as was the case in October, the watch cry is “wait ‘til next year”—some new players, new managers in the Senate, same issues that were difficult to resolve this year and potentially may be impossible to resolve until after the Presidential election in 2016.

 

Notes:

Image Header Source: Lindsay Attaway (Creative Commons)