Issue 430 September 22, 2003

Congress at Work on TEA-2½

With lawmakers and the White House still unable to reach a compromise on TEA-21 reauthorization, and less than two weeks to go before TEA-21 expires on September 30th, Congress is working around the clock to pass an extension bill granting authority for expenditures from the U.S. Highway Trust Fund. Without an extension bill, FHWA and FTA would essentially close shop and state and local agencies would be unable to expend funds recently passed in the 2004 appropriations bill.

Though lawmakers say the extension will be "clean" — with no substantive policy changes — there is still plenty to fight about. House Transportation and Infrastructure (T&I) Committee Chairman Don Young’s initial proposal for a six-month extension bill stirred the ire of House GOP leadership because its timing would push the reauthorization debate up against a pending March debate on the FY 2005 budget resolution. This would give Congressman Young a prime opportunity to use the budget as leverage for his reauthorization proposal.

After a week of wrangling with House leaders, Young introduced both five-month and six-month extensions on Sept. 16. Meanwhile the Senate Finance Committee reported a five-month bill the next day. That measure will be combined with bills proposed by the Environment and Public Works (authorizing highway funding) and Banking committees (the transit title) during markup this week.

The Finance Committee’s bill includes a proposal by Chairman Charles Grassley and Senator Baucus to restructure lower taxes currently levied on ethanol fuel. Under the plan, ethanol-blended fuel, commonly known as gasohol, would be taxed at the 18.4-cent gasoline rate (gasohol is now taxed at about 13.2 cents per gallon). To mute their opposition, gasohol producers would receive a 5.2-cent tax credit, reducing General Fund revenue. All together, the Grassley proposal is expected to increase Highway Trust Fund revenue by $2 billion annually.

The Grassley proposal has caused some anxiety among transportation reformers who worry it will boost highway spending without helping transit. While this is worth keeping an eye on, the overall amount of additional revenue is small in national terms. A bigger concern is that both the Senate and House extension bills give states the right to transfer funds among the various FHWA programs (CMAQ, Surface Transportation, NHS, Bridge, etc.), making federal highway aid essentially a large transportation block grant. The problem here is that state DOTs will have more leeway to push highway projects to the exclusion of other types of investments, and the "sub-allocations" that helped guarantee proportionate levels of investment in metropolitan areas will not be in effect.

The bill does require a "reconciliation" of spending among the various accounts required once a full reauthorization bill is passed, meaning that spending would have to catch up in shortchanged programs. However, observers do not believe this reconciliation was enforced by federal agencies following the extension bill that filled the gap between ISTEA and TEA-21 in 1997-1998. In a recent letter, Congressman Earl Blumenauer of Oregon noted that spending in some programs fell dramatically during the interim period: "Overall, obligated funds to CMAQ fell by 13 percent, obligated funds to Enhancements fell by 16 percent, and obligated funds to STP’s suballocated program fell by more than one-half."

Most observers doubt Congress will be able to hammer out a full reauthorization in the 5 months this extension will buy them. Instead, it is likely that at least one more extension will be required, and its timing will be immensely complicated by the looming 2004 national election. While states are unlikely to lose any money during the process, they are also unlikely to get more aid. Big projects that may need special earmarks to get started or move ahead may particularly suffer, which is bad news for our region. 


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