Hope for Highway Funding

By Katie Micik
DTN Markets Editor

CHICAGO (DTN) -- Congress has extended the current highway bill 34 times in the last six years, but transportation advocates think lawmakers could finally pass a new long-term bill before the end of the year.

"I do see some glimmer, underscore glimmer, that something will get done before the end of the calendar year," Mike Steenhoek, executive director of the Soybean Transportation Coalition, said on the sidelines of this week's Agricultural Transportation Summit.

"I think policymakers recognize that if they do wait until 2016, it really would be resigning to the fact that nothing would get done until after the election, and simply waiting until the year 2017 would have a punitive effect on our economy."

Last week the Senate passed a six-year surface transportation bill called the Developing a Reliable and Innovative Vision for the Economy Act, or the "DRIVE" Act. The DRIVE Act would authorize $337 billion in spending for highway construction and other projects. The bill would also set up goals for certain projects and shorten the timeline for environmental reviews, as well as provide more funding for rail projects.

The House of Representatives, however, only passed an extension, so the current legislation remains in place until the end of October. Observers speculate yet another extension will be in order before Congress finally completes work on a longer-term fix.

"We're likely going to see another two-month extension into the middle of December," said Jon Sampson, executive director of the American Trucking Association's Agricultural and Food Transporters Conference. "Congress has got the Iran deal that they're going to be debating in September. They've got Planned Parenthood that they're going to be debating in September, and that doesn't leave a lot of time for debate on highway transit projects."

Steenhoek and Sampson agree that financing the Highway Trust Fund, which faces an annual shortfall of about $15 billion, remains the biggest unsolved issue. The Senate bill includes $46 billion of funding, enough to cover three of the six years of spending authorized by the bill, cobbled together from funds and fees unrelated to transportation as well as some accounting maneuvers. Congress would need to find an additional $51 billion in 2018 to fully fund the bill.

The House is considering a range of one-time funding measures, the most popular being lowering the corporate tax rate on the $2 trillion of profits that U.S.-based companies have earned overseas, called repatriation.

"If you lower that rate from a 35% corporate rate to like a 14% or 6% -- there are a number of proposals out there -- it would really serve to bring some of that money back," Steenhoek said. And while some of the money would be used to fund infrastructure, "it'd be a one-time fix. It's not a sustainable approach."

Congress last raised the gasoline tax in 1993 to 18.4 cents per gallon, and the diesel tax also remains at 24.4 cents a gallon. The gas and diesel taxes aren't indexed to inflation, and Sampson said that's meant the tax has lost 40% of its purchasing power over the last 15 years.

But if Congress had taken the opportunity to index the tax to inflation back then, there'd be an additional $133 billion to fund road repairs, about enough to cover the annual shortfall, Steenhoek said.

"We all know that the cost of building and maintaining roads goes up over time, yet we have a fixed source of revenue trying to meet the needs of an escalating cost," Steenhoek said. "We think it makes a lot of sense to index the fuel tax to inflation to create some sustainability to (funding)."

Even that is a fix in the near-term. Improving fuel efficiency means more cars are traveling on fewer gallons of gas and fewer taxes are collect. Sampson said that while the American Trucking Association favors raising the fuel tax, it acknowledges there's very little support in the House.

"ATA is looking more outside the box, looking at indexing it without an increase (in taxes), looking at a per barrel oil tax ... or an annual highway access fee or registration fee," he said. "To me this makes the most sense, but still hasn't gotten much traction. ... We want something that is dedicated, but at this point in time, we'll take anything."

Steenhoek thinks that once Congress figures out a funding compromise, the bill will be on an expedited track. For the bill to be successful, states need predictable funding levels to go forward with expensive, multi-year projects.

"A lot of people get focused on volume of money, but we also need to talk about predictability of that funding," Steenhoek said. "I would rather the federal government be predictably good than sporadically great."

Katie Micik can be reached at Katie.Micik@dtn.com

Follow her on Twitter @KatieMDTN

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