July 21st, 2009
The Ride: In the Senate, $26.8 Billion Highway Trust Fund Rescue

Tom McNamara, Blueprint America

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.

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