Logistics Quarterly Magazine - Volume 15, Issue 3, 2009 - Highway Bill Coming into Sharper Focus but Delay Likely - LQ Archives
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Highway Bill Coming into Sharper Focus but Delay Likely

There are strategic and political reasons for postponing action on a new highway bill. Few members of Congress are willing to vote for increases in highway fuel taxes while the U.S. is experiencing a recession and high unemployment/

By John Cutler

One of the key issues confronting members of Congress is the expiration on September 30, 2009 of SAFETEA-LU, the current highway bill.

Fortunately for logistics and supply chain professionals and for carriers, the need for renewed and increased funding over and above the $286 billion approved in SAFETEA-LU, is generally accepted. Not only is that amount now seen as falling short of what the U.S. needs to invest in highway maintenance and construction and transit, it is not even enough to stay on top of current expenses.

Photo of construction sign reading Limited Funding Ahead

In 2008, Congress had to transfer some $8 billion from other funds to the Highway Trust Fund (HTF). Another transfer is necessary now, before SAFETEA-LU expires, and the White House is proposing $78 billion in funding, with another $2 billion for transit. However, these amounts reflect the preference of the White House for postponing action on a successor to SAFETEA-LU into 2011, even though SAFETEA-LU expires this year.

Failing to enact new highway bills before old ones expire is nothing new. SAFETEA-LU itself was enacted in 2005, roughly two years after the expiration on September 30, 2003 of its predecessor, TEA-21. On numerous occasions between 2003 and 2005, Congress provided for extensions of funding to keep highway and transit projects moving.

Moreover, there are strategic and political reasons for postponing action on a new highway bill. Few members of Congress are willing to vote for increases in highway fuel taxes while the country is experiencing a recession and high unemployment. However, it is widely understood that fuel taxes are too low. They have not been increased since 1993, and the HTF has lost roughly one-third of its purchasing power as a result.

Two blue-ribbon commissions set up by Congress in SAFETEA-LU have called for increases in fuel taxes, followed by a transition to a vehicle miles traveled (VMT) tax, to reflect the fact that the increasing miles per gallon of modern cars, combined with reduced driving, compound the difficulty of relying on fuel taxes collected on a per-gallon basis.

There are other potential sources of funding, but tolls and user fees are also unpopular—Senator Kay Bailey Hutchison (R-TX) has introduced S. 1115, a bill intended to prohibit new tolls on existing federal highways. The Bush administration favored privatization, but the recession has led to reduced interest in highway investments by private capital.

In general, the thinking of proponents of delay seems to be that it will be easier for Congress to raise fuel taxes and find other sources of funding for highway construction and maintenance in future years than it is now.

There are dissenters, including the most important member of Congress dealing with these issues, representative James Oberstar (D-MN), chairman of the House Transportation & infrastructure Committee. He is joined by Rep. Peter DeFazio (D-OR), who chairs the House T&I Committee’s subcommittee on Highways and Transit. Chairmen Oberstar and DeFazio argue that raising taxes and providing for other funding will always be difficult, that public works bills are particularly important during recessions, and that failing to enact a new Hhighway bill now may jeopardize planning for new projects and projects now underway. The U.S. Chamber of Commerce is also calling for prompt action to create jobs, stimulate the economy and facilitate the shipment of goods.

Despite these and other arguments against delay, the Senate is considering legislation extending SAFETEA-LU for 18 more months. On July 15, the Senate Environment and Public Works committee voted to extend highway funding until March 2011. This would also push the need for action beyond the 2010 Congressional elections, when fiscal conservatives are likely to run against “tax-and-spend” incumbents.

The House T&I Committee has also produced a Committee Print of its new version of a highway bill, called the Surface Transportation Authority Act of 2009. Unfortunately, this document leaves a great many questions unanswered, making it hard to know for sure whether moving forward now is good or bad for stakeholders.

For example, all amounts in the bill are left blank, to be filled in later when financing issues are resolved. We therefore do not know whether total funding for the next highway bill would be $500 billion (the number frequently cited in media coverage), some higher amount or some lower amount.

We also don’t know how the total would be allocated between highways and transit, highway construction and highway maintenance, metropolitan and rural areas, one state versus another, and freight versus passenger infrastructure. These are critical questions for participants in the legislative effort.

Proponents argue that the bill is nevertheless intended to be transformative, replacing the pork-barrel spending (with thousands of earmarks) of old highway bills with a new, more comprehensive approach to national infrastructure priorities. New thinking along these lines was recommended in the Final Report of the National Surface transportation Policy and Revenue Study Commission, and there are commendable indications in the draft bill that improved approaches are being pursued.

For example, there is a focus on freight transportation in the draft bill that is welcome. The Secretary of Transportation would be charged with setting up a “freight improvement program,” with highway project funding eligibility based on the extent to which freight movement would be improved. Freight advisory committees would be set up in the states, and state freight plans would be developed.

On the other hand, the draft bill also seeks to promote intermodalism, reduce air pollution, reduce congestion, increase safety, improve transit, etc., etc. These are all worthwhile goals. However, the way the balance is struck among them will affect the extent to which shippers are able to choose freely among transportation modes in organizing their supply chains. NASSTRAC continues to be concerned about efforts to force freight off trucks and onto trains, and it is not clear whether proponents of such efforts are making progress.

There have been some expressions of support on Capitol Hill for increasing trucking industry productivity by allowing heavier and/or longer trucks. See H.R. 1799, allowing states to approve 97,000 lb. GVW trucks with an additional axle. However, the Committee’s draft bill is silent on this issue.

It is increasingly likely that SAFETEA-LU will be extended, and that new approaches to and funding for the U.S. highway infrastructure will be delayed. The delay may be beneficial if it results in an improved successor to SAFETEA-LU and a significant increase in highway infrastructure funding.

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