As the House version of a new transportation bill to reauthorize and reform the current federal transportation law, which expires at the end of September, remains in the House, the Senate has made two significant moves in the past week to postpone the debate for a new law.

When Rep. Jim Oberstar (D., Minn.), Chairman of the House Transportation and Infrastructure Committee, introduced the new legislation last June, U.S. Secretary of Transportation Ray LaHood proposed, as an alternative, an 18-month extension of the current law, which funds highways, roads and mass-transit nationally. Simply, the Obama Administration, as it works to manage the recent economic stimulus, which has struggled to have the effect that was intended, and overhaul the country’s healthcare system, sees a transportation reform bill — that would increase federal funding some 60 percent from the current law and potentially raise taxes during a recession in order to do so — as one cause too many.

Last week, the Senate Environment and Public Works Committee passed the Administration’s endorsed 18-month extension of the existing transportation law. On Monday, Senate Finance Committee Chairman Max Baucus (D., Mont.) introduced legislation to replenish the nation’s Highway Trust Fund — $26.8 Billion of, essentially, deficit spending. It would allot $22 billion for highways and $4.8 billion for mass-transit.

While the Highway Trust Fund, which is the revenue source for transportation and infrastructure projects, will become insolvent sometime in late August or early September, it is only an aspect of transportation law. But, teamed with the 18-month extension approved last week, it would solidify that legislation’s funding.

Still, the Senate Highway Trust Fund plan, also endorsed by Senate Commerce Committee Chairman Jay Rockefeller (D., W.V.) and Sen. Robert Menendez (D., N.J.), would reform how the fund functions by restoring its ability to keep the interest it earns.

In the late 1960s, backed by President Lyndon B. Johnson, the Highway Trust Fund was made available to the government’s unified budget, making the money not exclusive to transportation projects — it has even been used in the years since to balance the federal budget.

In 1998, then Transportation and Infrastructure Committee Chairman Bud Shuster (R., Penn.) pushed through legislation that closed off the Highway Trust Fund. Still, in order to do so, the interest accrued by money in the Fund had to be forgone for transportation projects — that money could still be used in the federal government’s general fund.

At the same time, Rep. Oberstar recently suggested that the U.S. Treasury owes the Highway Trust Fund $21 billion, including interest, as a result of that agreement in the late 1990s.

While the current Transportation and Infrastructure Chairman would be likely to endorse the provision to protect the Fund’s interest, the overall legislation is at odds with his transportation bill.

As President Barack Obama signed the stimulus bill in Denver on Tuesday, it released the biggest influx of federal dollars since the Great Society program of President Lyndon B. Johnson.

Unlike LBJ, President Obama – working with less of a Democratic majority – ultimately had to make significant concessions to Congressional moderates and Republicans to pass the bill. In the end, 246 House Democrats, 57 Senate Democrats and three Senate Republicans voted to pass this compromise version of the economic stimulus package.

In order to gain those three Senate Republican votes, reductions in spending were made in favor of tax cuts, including breaks to car and home buyers.

The initial House version was far more liberal in spending provisions compared to what the Senate later agreed upon.

Spending on mass transit went from $12 billion in the House to $8.4 billion in the Senate, and the President approved the latter. Total highway funding went from $30 billion in the House to $27 billion in the Senate, and, similarly, the President approved the latter.

One of the most significant reductions was a cut of $25 billion from a state fiscal stabilization fund. The House had proposed $79 billion; the Senate reduced it to $39 billion. The final agreement fell in between.

As a result, no matter how much is federally spent to improve infrastructure in the future, the impact will be little felt as most states across the country are experiencing substantial budget shortfalls.

Certainly, projects that are shovel ready – projects that have gone through the approval process and have already received state funding – only need the infusion of federal dollars to get going. However, necessary infrastructure projects down the road will have a difficult time getting off the ground as state dollars are first needed – and these deficits are long term problems. Moreover, some states are even facing drastic enough budget problems to discontinue infrastructure projects already underway.

In California, abandoned construction sites marked by piles of dirt line some highways as projects to decongest the state’s stressed transportation system have been suspended until a $41 billion state budget deficit is closed. In terms of mass transit, the state continues to reduce funding as a way to fill a few funding holes.

As the economic stimulus bill was signed, the President said he would not pretend “that today marks the end of our economic problems.” Another economic stimulus could be coming in the near-future as states will undoubtedly need more assistance – including funding for infrastructure – in order to foster the kind of job growth needed to effectively combat this recession.

Sources: The New York Times, The Wall Street Journal