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Outlook for Highway Reauthorization Unclear after Election

November 14, 2010

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The landslide Republican victory will change the transportation players on the House side, but there is no clear signal that even with this new leadership Congress has the political will to solve the key problem of funding the federal highway program.
The new Congress must wrestle with the fact that the fuel tax, which has not gone up since 1993, does not produce enough revenue to fund ongoing highway needs.
The new Congress must wrestle with the fact that the fuel tax, which has not gone up since 1993, does not produce enough revenue to fund ongoing highway needs.


Almost half of the Democrats on the House Transportation and Infrastructure Committee - 18 out of 45 - lost their elections, including Chairman Jim Oberstar, D-Minn. Oberstar, a 36-year veteran legislator with an encyclopedic knowledge of transportation issues who will leave a lasting imprint on national policy, was defeated by Republican Chip Cravaack.

Even had he won, however, he would have lost the chairmanship. That job probably will go to Rep. John Mica, R-Fla., the current ranking Republican on the committee. Rep. Nick Rahall, D-W.Va., has said he wants to be the ranking Democrat on the committee.

Leadership of the key Subcommittee on Highways and Transit probably will go to Rep. John Duncan, R-Tenn., who would replace Rep. Peter DeFazio, D-Ore.

The Republican caucus is scheduled to select committee leaders this week.

Mica Says Highway Program a Priority

In a statement after the election, Mica said one of his top priorities is to pass long-term reauthorization of the federal highway program, a bill that is now more than a year overdue. The current extension of the program expires Dec. 31.

Given the lack of agreement on the funding issue, and looming questions about other unresolved matters such as extension of the Bush era tax cuts, Congress is not likely to take on reauthorization during the lame-duck session.

At a minimum, though, legislators will have to extend the current authorization before it expires, said Norma Krayem, a senior policy advisor at the Washington, D.C., legal services firm, Patton Boggs. Krayem talked through this and other transportation issues at a recent webinar sponsored by the National Industrial Transportation League.

She underscored the challenge that has held up reauthorization for the past year: The fuel tax, which has not gone up since 1993, does not produce enough revenue to fund ongoing highway needs, and will generate declining amounts of revenue going forward as cars and trucks get more efficient. Since 2008, Congress has had to take $34.5 billion from general revenues in order to keep the Highway Trust Fund solvent, she said.

Oberstar tried over the past year and more to convince his colleagues to find funding for the $450 billion, six-year reauthorization proposal that he drafted last year, but the necessary tax increase was opposed by many in Congress as well as by the Obama administration.

Funding Ideas

One idea Mica is considering to get around the issue of raising the fuel tax is to abolish that levy and replace it with a percentage sales tax.

The initial rate on this tax would be set so that it is the same as the fuel tax, but then it would rise as fuel prices rise. If fuel prices go up as expected, the new levy would yield $43 billion over six years, Krayem said.

The other indexing idea on the table, suggested by DeFazio, is to link the fuel tax to the cost of highway construction inflation.

Mica said earlier this year that he thinks there is a chance to get a reauthorization bill passed in the first half of 2011, as long as it is funded by something other than a fuel tax increase.

The sales tax alternative would be a way to stabilize the revenue coming in, while Congress looks at ways to limit outlays by focusing highway spending on projects of federal interest. Part of his strategy may be to tailor a House bill to the revenue that is available, Krayem said.

Mica also supports leveraging federal spending through public-private partnerships, and has spoken in favor of creating an infrastructure bank along the lines of the $50 billion bank proposed by the Obama administration, but with a much bigger investment. "We need a $250 billion infrastructure bank," he said earlier this year.

Many of these ideas are included to some extent in the blueprint reauthorization bill drafted under Oberstar's leadership last year. One difference that may emerge from a Republican bill in the House is less emphasis on livability and sustainability, which the Obama administration has been pushing. But a Mica bill likely will include the freight mobility policies that are in the Oberstar draft, Krayem said.

Other Proposals

Meanwhile, there are calls elsewhere for addressing the funding issue by simply raising the fuel tax.

Business interests such as American Trucking Associations and the U.S. Chamber of Commerce have supported such a move, provided the money is dedicated to highway needs.

And there are a few legislators who have broken from the anti-tax herd.

Rep. Laura Richardson, D-Calif., introduced a bill that would create a Goods Movement Trust Fund funded in part by a 12-cent hike in the diesel tax paid by trucks. Rep. Earl Blumenauer, D-Ore., has proposed repealing the 12 percent excise tax on new truck and trailer sales, and replacing it with a 7.3-cent increase in the diesel fuel tax, in order to promote the sales of new trucks.

On the Senate side, Tom Carper, D-Del., and George Voinovich, R-Ohio, have proposed raising the fuel tax by 25 cents a gallon over the next three years. They would dedicate 15 cents of that to the Highway Trust Fund, which would raise $117 billion over five years, and the rest, amounting to $83 billion, would go to deficit reduction.

Also in the mix is a proposal by the co-chairmen of President Obama's National Commission on Fiscal Responsibility and Reform to gradually raise the fuel tax by 15 cents a gallon, starting in 2013, and dedicate that money to the Highway Trust Fund.

This proposal is one of a number of highly controversial ideas floated by co-chairs Erskine Bowles, chief of staff to President Clinton, and former Wyoming Senator Alan Simpson, a Republican. They offered the ideas as talking points for a comprehensive national debate on spending, revenues and tax reform. The 18-member bipartisan Commission is scheduled to vote on these ideas and post its recommendations by Dec. 1.

The Obama administration is expected to release its own detailed reauthorization proposal with its 2012 budget, Krayem said. A couple of policy stances are clear already, though: the administration is adamantly against raising the fuel tax and supports livability initiatives. Also, Transportation Secretary Ray LaHood has said that he likes many of the features in Oberstar's reauthorization blueprint, referencing that bill's focus on restructuring DOT's organization and speeding up the process of planning and implementing infrastructure projects.

In the Senate

The committee leadership in the Senate does not change. Sen. Barbara Boxer, D-Calif., remains chairman of the Environment and Public Works Committee, and Sen. James Inhofe, R-Okla., is the ranking member. Sen. Jay Rockefeller, D-W.Va., continues to chair the Commerce, Science and Transportation Committee, with Sen. Kay Bailey Hutchison of Texas as the ranking Republican. And Sen. Frank Lautenberg, D-N.J., chairs the Surface Transportation Subcommittee, with Sen. John Thune, R-S.D., as the ranking member.

The ultimate question of funding will be handled by the Senate Finance Committee, chaired by Sen. Max Baucus, D-Mont. It is expected that Sen. Orrin Hatch, R-Utah, will be the ranking member.

These Senate committees have been working on their versions of a reauthorization bill, but nothing more than concept papers have emerged from that process yet.

Getting to agreement over funding will continue to be exceptionally difficult, but Krayem pointed out that there is significant pressure to enact a bill.

There is a window for action before the 2012 presidential election, and everyone in Congress - new members and veterans - is under considerable pressure to ge

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