Highway Trust Fund Rescue Effort

WASHINGTON — The incoming chairman of the House Transportation Committee opposes the Republican leadership's proposal for a change in House rules that could hurt the funding of transportation programs.

Rep. John Mica, R-Fla., "is working with other members and leadership to find a solution that will protect the [Highway Trust] Fund and states' ability to plan projects," a spokesman said Thursday.

Mica's efforts come as 21 transportation and business groups sent a letter to House Republican leaders on Dec. 28, warning that the proposed rule change would hurt transportation funding and treat taxpayers unfairly. The groups include the American Association of State Highway and Transportation Officials and the U.S. Chamber of Commerce.

They urged House leaders to refrain from adopting changes to the rules that would remove provisions added in 1998 to ensure that transportation programs are funded from the Highway Trust Fund at the levels set forth in transportation authorization bills. The funding levels are based on the bills' estimates of the gas tax, diesel and other revenues to be put into the fund each year.

The new rules are slated to be put to a vote by House Republicans on Jan. 4 and by members of both parties on Jan. 5.

They would essentially repeal and replace existing provisions that were designed to prevent lawmakers from continuing a long-standing practice of failing to use all of the Highway Trust Fund revenues for transportation projects so that the fund would grow to contain huge surpluses, thereby freeing up other federal revenues to be spent for other kinds of projects.

"There were incentives built into the budget process to hold down highway and transit spending even though [those programs] were to be funded out of the Highway Trust Fund and paid for with user taxes," said Jack L. Schenendorf, of counsel at Covington & Burling LLP here. "It was kind of a shell game. … On an annual basis, you had a certain amount of tax revenue come in [to the Highway Trust Fund] and if you could hold [transportation] spending down below that tax revenue, then it looked like you had a surplus that you could spend elsewhere. You couldn't actually spend the highway tax revenues because they would go into the trust fund, but it would free up spending elsewhere."

Former Rep. Bud Shuster, R-Pa., who was chairman of the House Transportation Committee, worked to halt the practice. Initially, the House tried to take the Highway Trust Fund off budget. But the Senate opposed that idea. Ultimately, lawmakers in both chambers decided to change the House rules to effectively stop the practice.

The Transportation Equity Act for the Twenty-First Century, called TEA-21, added Clause 3 to House Rule 21, which stated that no bill, amendment, or conference report would be in order if it reduced the spending limits for the Highway Trust Fund below the levels set forth in the authorization bills.

The clause applied to TEA-21, as well as its successor, the multi-year Safe, Accountable, Flexible, Efficient, Transportation for Equity Act: A Legacy for Users, called SAFETEA-LU, which expired Sept. 30, 2009. Lawmakers have approved several stopgap measures since then and are still wrestling with developing draft multi-year reauthorization legislation.

Under Clause 3, any lawmaker could raise a point of order and stop a bill, amendment, or conference report that failed to fund transportation projects below the levels set forth in authorization legislation.

The idea behind the clause was that "the level of spending in the trust fund should be at least as great as the revenues coming in and it shouldn't be below that. … The revenues shouldn't be allowed to pile up in the trust fund unspent," Schenendorf said.

Transportation proponents see Clause 3 as a kind of enforcement mechanism or protection to ensure the gas tax and other revenues in the trust fund are fully used to fund transportation projects.

"It's a pretty powerful tool," said Jack Basso, AASHTO's director of program finance and management.

But many Republicans, especially those newly elected who will be coming into Congress next month and who made campaign promises to cut federal spending, are not happy with Clause 3, and view it as an obstacle to cutting spending.

The draft package of new House rules would essentially repeal Clause 3 and replace it with other language that transportation proponents say is ambiguous and contains significant loopholes.

In their Dec. 28 letter, the transportation and business groups told Republican leaders that the rule changes "would hurt investment in transportation infrastructure, reduce jobs, and break faith with the American taxpayer."

"The current House rule ensures that all of the revenues that taxpayers pay into the Highway Trust Fund are used for highway and transit improvements on an annual basis," the groups said. "Prior to the adoption of this rule in 1998, it was common for Congress to engage in a shell game by reducing Highway Trust Fund spending so that spending elsewhere could be increased. As a result of these abuses, the balances in the trust fund soared, while much-needed infrastructure was deferred."

"Transportation projects are frequently multi-year endeavors and are the product of a transportation planning process that must look years into the future. As such, federal highway and transit investments must be stable and predictable to allow sates to maximize efficiency and public benefits in delivering transportation improvements." the groups said. "The House-proposed rules package for the 112th Congress, unfortunately, would sever the user-financed basis of the Highway Trust Fund and make annual federal highway and transit investments subject to the whims of the appropriations process. In so doing, this proposal would inject further uncertainty into an already destabilized U.S. transportation construction marketplace."

Brendan Buck, a spokesman for the Republican transition team, could not be reached for comment. But he told the publication The Hill: "Creating jobs and bringing down our massive federal deficit will require us to set priorities and start living within our means. This proposal simply ensures we won't be required to spend more on transportation projects than we take in. At the same time, it protects the Highway Trust Fund by ensuring every penny of the gas tax is spent on highway and transit projects, rather than diverted to pay for other items that we simply cannot afford."

However, Schenendorf said the more appropriate place for lawmakers to make cuts in transportation spending is in the authorization bills for transportation programs.

"That's where the funding is located for highways and transit and any member of the House that wants to change that can offer an amendment when those bills come up," he said.

Repealing Clause 3 won't cut transportation spending, it will just allow the gas tax and other revenues being put into the trust fund to pile up without being spent, he said.

The new substitute language to Clause 3 proposed by Republican leaders states, in part, "it shall not be in order to consider a bill, joint resolution or conference report that provides spending authority derived from receipts in the Highway Trust Fund (excluding any transfers from the general fund of the Treasury; or reduces or otherwise limits the accruing balances of the Highway Trust fund, for any purpose other than for those activities authorized for the highway of mass transit categories."

That language appears similar to Clause 3, but Schenendorf said, "There's a lot of questions as to what the impact of the new language would be. … It's ambiguous. … It seems to have some loopholes."

The problem with the draft language, he said, is that it doesn't contain the word "amendment," so that a lawmaker could not bring a point of order against an amendment that seeks to limit the spending of Highway Trust Funds.

In addition, Schenendorf said it does not make sense that the draft language excludes transfers from the general fund of the Treasury because, technically, all of the money put into the Highway Trust Fund is transferred from the general fund.

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