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From The Editor

The Future of the Reauthorization Measure Remains Clouded

As we go to press, the future of the reauthorization of the surface transportation legislation remains clouded. Even though the Senate has passed its version of the bill, the $318 billion measure faces a potential Presidential veto. Meanwhile, House transportation leaders are still struggling to devise a credible financing plan for their $375 billion proposal. With the Highway Trust Fund expected to generate only $228 billion in tax receipts over the six-year period of the reauthorization, House lawmakers face a daunting task of closing a $147 billion funding gap. By approving another four-month extension of the current law and extending the deadline to June 20, they hope to gain additional time in which to seek a politically acceptable solution. Most observers believe any such solution will require a substantial retreat from their initial funding target, possibly to as low as $290 billion. At the same time, Senate leaders may be expected to seek an accommodation with the President who is under pressure from his conservative base to rein in spending. The White House has threatened to veto anything as large as a $318 billion measure which is $62 billion over its own proposal. Most observers believe the threat is real and the veto would be upheld. One possible compromise hinted at by Senate Majority Leader Bill Frist, is to reduce contract authority in the bill to the level of obligation limitations, an approach used in the Administration bill. With the Senate bill's obligation level set at $297 billion, this would narrow the difference between the Senate measure and the Administration's proposal to a more negotiable difference of $41 billion or a little less than $7 billion/year.

For a while, House transportation leaders entertained the hope of an increase and indexing of the gasoline tax to provide the needed funds. This hope was dashed when Transportation Secretary Norman Y. Mineta and Treasury Secretary John Snow in a joint letter to congressional leaders warned that any attempt to rely on an increase in the gas tax runs the risk of a Presidential veto. Equally unacceptable, they said, would be the use of tax credit bonds "or other mechanisms that conceal the true cost to federal taxpayer. " Nor would the White House consent to the use of general revenues: "All spending for highways should be authorized and appropriated from the Trust Fund and derived from taxes imposed on highway use, thereby maintaining the link between Trust Fund revenues and highway spending," the Mineta-Snow letter stated.

After expressing "extreme disappointment" with the position taken by the Administration, House transportation leaders concluded they had no choice but to seek a further extension of the current law. "There are many issues remaining for this House to resolve," Rep. Don Young (R-Alaska), chairman of the House Transportation and Infrastructure Committee, explained during the floor debate on the extension. "Identifying the appropriate resources to support funding levels over the next six years is the primary challenge." The House approved the extension by a vote of 421 to 0 and sent the measure to the Senate where quick approval is expected. The new extension will expire on June 20, 2004. In the meantime, work on a possibly pared-down House bill continues, with a full committee markup scheduled for the end of February or early March.

The Senate Debate

The Senate focused its attention on its own version of the reauthorization measure, the "Safe, Accountable, Flexible and Efficient Transportation Equity Act" or SAFETEA (S.1072). The bill consolidated the recommendations of four Senate committees: the Environment and Public Works (EPW) Committee (responsible for authorizing the highway portion of the bill), the Banking, Housing and Urban Affairs Committee (responsible for authorizing the transit program), the Commerce, Science and Transportation Committee (responsible for authorizing safety-related programs and Amtrak), and the Finance Committee (responsible for developing a revenue plan). The combined bill totals $318 billion: $255 billion for highways, $56.5 billion for transit and 6 billion for safety. The measure also authorizes $2 billion/year for Amtrak (not counted in the SAFETEA totals)

The floor debate revealed considerable differences of opinion among the senators. Opposition to the bill came from fiscal conservatives and from members unhappy with the proposed revision to the current funding distribution formula. In a letter to Senate Majority Leader Bill Frist (R-TN), a group of conservative senators called the reauthorization measure "potentially the biggest budget-busting spending bill the Senate will consider this entire year." During the floor debate, several Senators attacked the measure as "the height of fiscal irresponsibility" and criticized the proposed offsets intended to make the measure deficit-neutral as "accounting gimmicks" and "smoke and mirrors." Other criticism centered on the fact that the $318 billion measure exceeds the limits of the budget resolution by $35.5 billion and "makes a mockery of the entire budget process" in the words of Sen. John McCain (R-AZ). The Senate took care of this objection by voting to waive the Budget Act, 72 to 24 (Ed. Note: For a detailed critique of the approach taken by the Senate Finance Committee, see "Road to Ruin," Senate Budget Committee, Budget Bulletin, February 10, 2004)

Other senatorial critics pointed out that, despite a $100 billion increase in funding over TEA-21, the proposed distribution formula creates three more donor states (31) than under the current legislation. They charged that the new "equity bonus" - an increase in the guaranteed minimum rate of return from 90.5 to 95 percent - is largely illusory since it will not benefit many states until FY 2009, the last year of the authorization.

Despite some impassioned pleas for fiscal restraint, it was clear from the very start of the floor debate that supporters of the bill far outnumbered opponents. Some Senators honestly felt that the deteriorating condition of the nation's highways and bridges justify the vastly increased spending, citing the findings of US DOT's Conditions and Performance Report. To others, the lure of "job creation" and pork barrel "special projects" proved to be irresistible in an election year. Regional inequities tended to be dismissed as a temporary condition that is necessary to maintain a sound national highway system. In the end, the bill was approved by a resounding vote of 76 to 21.

Little was said during the floor debate about the substance of the bill, which incorporates many innovative features first proposed in the Administration's SAFETEA bill (see, "The Administration's Reauthorization Proposal - A Critical Appraisal," Innovation Briefs Vol. 14, No. 4, Jul/Aug 2003). This includes elevating the importance of safety and freight programs, bringing some welcome improvements in the environmental review process, authorizing private activity bonds and facilitating highway tolling and variable road pricing.

The ultimate shape of the reauthorization bill - as indeed the outcome of the entire reauthorization process - is still hazy. Looming over the Senate bill is the threat of a Presidential veto. Many of the unresolved policy and funding issues in the Senate bill were shunted aside during the floor debate with a promise that they would be taken up when the bill goes to a House-Senate conference. As for the House measure, its future remains unclear as the House transportation leaders continue to struggle over the issue of overall funding levels. There are speculations that they might opt for a one- or two-year bill rather than compromise severely their original goal of a $375 billion program. Postponing a decision on a longer-term measure to a less politically charged post-election environment could increase the chances of enacting a gas tax increase and funding a more generous federal transportation program.


A Comparison of Funding Levels, FY 2004-2009
(Contract authority in billions of dollars)

  Total Highways Transit Safety Change from current law
TEA -21 (current law)
21 %
2004 Sen. Budget Res.
25 %
S. 1072
43 %
H. R 3550 (TEA LU)
72 %




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