Transportation Secretary Calls for ‘Long-Term’ Solution to Transpo Funding

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Transportation Secretary Anthony Foxx called for Americans across the country to “get a little noisier” on the issue transportation funding Wednesday and asked them to pressure Congress to come up with a long-term solution to the issue.

Foxx approved of the $10.9 billion stopgap lawmakers enacted last week to keep the Highway Trust Fund (HTF) solvent through next May but wants Congress to pass a multi-year bill before the year’s end, Politico Pro reports (sub. req’d).  He said that Americans just need to be given the facts “as we know them.”

If that’s the case, Americans should know that “many individual states are trying to compensate for the lack of congressional action on long term funding by raising additional revenue of their own,” according to Ken Orski of Innovation NewsBriefs.  

Some states have increased local fuel taxes (MD, WY, MA, VT, NH). Others have introduced fuel taxes at the wholesale level (e.g. PA), floated toll revenue bonds (e.g. OH, MA) or raised highway tolls (e.g. DE). Still others have enacted dedicated sales taxes for transportation —as your host state did in November 2012. As  Sen. Roger Wicker (R-MS) observed, states have become veritable “laboratories for fiscal experimentation.” 

At the local level, things have not been standing still either. A growing number of local jurisdictions are approving bond issues and dedicated sales taxes to support local transportation improvements.

Collectively, these measures are generating billions of additional dollars for state and local transportation programs— and making up for the absence of increased federal funding.

The Associated Press reports that “in the past year and a half, one-fourth of the states have hiked taxes, fees or fines, and at least a dozen others are studying options.”

This activity at the state level mirrors the real debate happening in Congress about the degree of involvement the federal government should have in transportation decisions.

In the long term, Americans will be better off without having to continually bail out the Highway Trust Fund — a goal that can be accomplished by empowering to make their own transportation decisions.

WSJ on Highway Bill: Hold the GOP Accountable

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This morning’s WSJ editorial on yesterday’s highway and transit bailout (see the scorecard) is a must read.  After slamming the bill as “a tribute to budget gimmicks” that “does nothing to address the revenue-spending mismatch that is today’s highway fund,” the editorial offered up some serious GOP accountability:

Republicans over the years have proposed a number of innovative reforms to a federal highway program that bristles with waste and bureaucracy. These include devolving more power to the states to set priorities, slashing the billions thrown at money-losing urban mass-transit projects, streamlining environmental laws that add to construction costs, and potentially devoting some royalties from expanded federal oil and gas drilling to fund roads. Too bad they never seem to get around to implementing them.

House GOP leaders are claiming the temporary nature of this patch is designed to give them another run at reform next year, perhaps with the support of a Republican-led Senate. We’ll hold them to that. The trust fund problem has been begging for a fix for years. This latest stopgap is a dodge, not a victory.

How States Compensate for Less Federal Transportation Funding

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In Kenneth Orski’s latest Innovation Brief, Orski explains what the states have done to buffer themselves from the effects of less transportation funding from the federal government — and it’s not the dire picture being painted by big spenders in Washington: 

While transportation stakeholders and the Washington press corps are focusing on the impending Highway Trust Fund shortfall and the emerging House-Senate consensus to “patch” the Fund with $10.8 billion in short-term funding until May 2015, they are ignoring developments outside the Beltway that go a long way to compensate for the lack of an assurance of long-term federal funding.  For in fact, individual states, far from sitting idly by, are responding to the current fiscal uncertainties in Washington by stepping up and raising additional revenue to meet their transportation needs. 

Twenty-eight states have launched transportation-related revenue initiatives according to surveys by the American Road and Builders Association (ARTBA), the National Council of State Legislatures and the American Association of State Highway and Transportation Officials (AASHTO).

Collectively, these measures are generating billions of additional dollars for state and local transportation programs and providing a buffer against the possibility of delayed federal reimbursements and inadequate federal funding.

State officials we have talked to are quick to remind that “we cannot do it all” and that all levels of government, including the federal government, should share in the cost of maintaining and improving the nation’s highways.  But they concede that the recent revenue initiatives by various state legislatures are helping to relieve concerns about a slowdown in highway construction and cushion the impact of any eventual reduction in federal funding.   

 

Highway Trust Fund Q&A

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Highway Trust Fund: Questions and Answers

Background: In 1956, the federal highway program was created to build a coast-to-coast 42,000-mile network of interstate highways to connect all major cities in the country. To pay for this program the government instituted a “user fee” in the form of a federal gas tax. Once the network was completed in the mid-1980s, the highways and the fuel tax were to be handed over to the states to manage. Congress, however, grew accustomed to the influx of revenue and the spending it enabled. The program has since been periodically reauthorized through highway bills, expanding on each occasion, and today, the fuel taxes motorists, truckers, and bus drivers pay are spent on a variety of measures well beyond the scope of roads and bridges, very few of which address the actual problems facing motorists.

Status: The Highway Trust Fund has been depleted and lawmakers are now seeking $10 billion to bail it out to continue transportation spending at current unsustainable levels.

What is the Highway Trust Fund (HTF)?

The Highway Trust Fund is a federal transportation fund filled with revenue collected  from federal fuel taxes—18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel—and related fees. Congress draws from the HTF to fund a multitude of spending measures, from highways and bridges to a series of local “livability” programs to mass transit such as buses and subways.

Why is another highway bill coming up right now?

At the end of fiscal year 2014, the current federal highway bill will expire. In the meantime, however, spending out of the HTF is so disproportionate to what drivers contribute in fuel taxes that Congress is faced with having to ratchet back spending or bail out the fund at taxpayer expense. Congress is considering a $10 billion bailout that will refill the HTF temporarily and extend all transportation programs into 2015.

Why is the HTF out of money?

The current law governing the federal highway and transit programs, set in effect by the last highway bill, is called MAP-21: Moving Ahead for Progress in the 21st Century. MAP-21 authorizes annual spending well above the revenue the HTF will collect and funds a host of parochial projects that have no business being handled at the federal level. This practice has allowed HTF expenditures to far eclipse the amount of revenue collected from fuel taxes.

One example of a trust fund spending diversion is mass transit. Transit use, which is mainly concentrated in just six cities (the municipalities of Washington, D.C., New York, Boston, Chicago, Philadelphia, and San Francisco), received 17 percent of total federal user fees in 2010, even though its share of the nation’s surface travel amounted to roughly 1 percent and transit users pay nothing into the HTF. Other diversions included programs such as nature trails and landscaping, environmental study and mitigation efforts, community preservation, ferry boats, and bicycle paths.

The lack of spending prioritization, coupled with egregious federal intervention into local community projects, has drained the HTF to the point of insolvency. (Past transfers from the General Fund of the Treasury have totaled over $50 billion since 2008.)

What are the current proposals to refill the HTF? Will they work?

Senators Bob Corker (R–TN) and Chris Murphy (D–CT) have proposed hiking federal gas taxes by 12 cents per gallon. This would raise the gas tax to 30.4 cents per gallon of gasoline and 36.4 cents per gallon on diesel (on top of state fuel taxes).

In the House, Ways and Means Committee Chairman Dave Camp has unveiled a $10.9 billion plan to extend transportation funding through May, 2015 that would refill the HTF through a three-fold approach:

  • Raise $6.4 billion over the next decade through “pension smoothing”—allowing companies to cut back on their payments to employees’ pension funds, thereby subjecting more profits to taxation
  • Raise $3.5 billion in 2024 by extending customs and user fees by another year (a scorekeeping gimmick that was already used in the flawed Ryan-Murray budget agreement)
  • Raise $1 billion transferring it from a fund used to clean up leaking underground storage tanks to the HTF

Neither of these proposals would make any real reforms to the way tax dollars are allocated under the current federal highway program. The Corker-Murphy gas tax hike would perpetuate a broken system at greater expense to motorists. The Camp proposal would achieve the same effect to the detriment of taxpayers in general, employing routine Congressional budget gimmicks to offset irresponsible spending measures. Finding more money for bureaucrats to waste on our behalf is not a solution.

What happens if the HTF runs out of money? Won’t the U.S. face a transportation crisis?

Gas tax revenues will still flow into the HTF and be paid out for transportation projects. The U.S. Department of Transportation would simply have to slow down payments to the states.

Lawmakers are fond of sounding the alarm bells about what will happen to the national transportation infrastructure if states have to face a reduction in federal funding. Secretary of Transportation Anthony Foxx has said states will see on average a 28 percent cut in funding from the HTF. This figure is shockingly misleading, however, as the overwhelming majority of highway funding comes from state and local governments, not the federal government. The 28 percent figure is missing context. The “crisis” reduction Obama and many Congressmen are threatening about amounts to a 7 percent cut in overall transportation spending. This will not devastate the country’s surface transportation, and states will reserve autonomy to prioritize which projects are essential and which have been forced on them by the federal government.

If Congress does not act, will the federal interstate shut down?

No. The federal interstate will be open for travel, and construction will largely continue although plans for some additional projects may be scaled back.

President Obama says reauthorization is simple: “We’re just building roads and bridges like we’ve been doing for the last, I don’t know, 50, 100 years.” What is the problem with Washington helping states with transportation decisions?

Heritage Foundation Policy Analyst Emily Goff hits the nail on the head:

Spending priorities are determined more by politicians appeasing special interests than local needs or consumer choices. And the federal regulatory burden delays projects and smothers state and private-sector innovation.

When car and truck drivers pay the 18.4 cents per gallon federal gas tax (24.4 cents per gallon for diesel) at the pump, they expect better roads and less traffic congestion in return. Instead, Washington diverts more than 25% of that money to subways, streetcars, buses, bicycle and nature paths, and landscaping, at the expense of road and bridge projects.

This cycle of DC-centric policy choices is bad for the country’s infrastructure and abusive to the U.S. taxpayer.

Is there any opportunity for real reform?

Yes. To take away the need for periodic highway bills completely, Rep. Tom Graves (R-GA) and Sen. Mike Lee (R-UT) have introduced a new way forward in theTransportation Empowerment Act (H.R. 3486/S. 1702). This bill would return the highway program to local control, empower local and state governments to carry out projects that best serve their interests, and enhance the efficiency of how money is spent on the nation’s transportation.

The federal fuel tax would be reduced from 18.4 cents per gallon of gasoline to 3.7 cents, and from 24.4 cents per gallon of diesel to 5 cents, over a five-year period—limiting the user fee to fund only appropriate federal activities and forcing an end to governmental waste and ineptitude.

States and localities would be free to set whatever transportation policies they deem necessary and pay for projects in a way that works best for them without the costly and cumbersome hurdles imposed by the federal government.

Call to Action: Sentinels should encourage their members of Congress to resist the business-as-usual bailout of the Highway Trust Fund. This system has been broken for far too long and the nation’s motorists have suffered as a result. Conservatives should insist that the HTF live within its means in the near-term and that Congress pass theTransportation Empowerment Act to introduce real reforms to future transportation policy.

>> Update: see the bailout vote results on our scorecard.

Highway Funding: 700,000 Lost Jobs?

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“All told, nearly 700,000 jobs could be at risk next year.”

That was President Obama earlier this month, urging Congress to bail out the federal Highway Trust Fund (HTF).  He warned failure to act would be the equivalent of Congress laying off the “entire population of Denver, or Seattle, or Boston.”

Seriously?

A November 2013 paper by James Sherk, Senior Policy Analyst in Labor Economics at The Heritage Foundation, provides some different numbers:

“Across the U.S., just over 300,000 Americans work in highway, street, or bridge construction—less than the population of Wichita, Kansas.”

Obama’s math just doesn’t add up.

How can a 7-percent reduction in total highway spending destroy 700,000 jobs when only 300,000 Americans work in the industry?

According to Sherk, the White House “is getting these huge numbers by estimating a ‘multiplier’ effect from federal transportation spending.”  Yes, just like they used a multiplier to project Obama’s 2009 stimulus would “create or save” 3.5 million jobs.

President Obama should ditch the scare tactics.  And lawmakers should ignore the massive numbers concocted to scare them into raising taxes and increasing spending.  Living within the trust fund’s means is an important step toward real reforms.

Pennsylvania, Utah Can Deal with Transportation Cuts

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State and local lawmakers have been in crisis mode recently, as D.C. politicians try to figure out how to keep the Highway Trust Fund solvent.  But folks in Utah and Pennsylvania have a much less frenzied outlook than their counterparts in other states.  

In Utahfederal funds make up only 20 percent of their total transportation budget.  That’s why John Gleason, spokesman for the Utah Department of Transportation, says his state is better equipped than others to cope with cuts in federal funds.

In Pennsylvania, PennDOT spokesman Rich Kirkpatrick said, “We’re in a position where we don’t have to alter our plans; we can weather this immediate crisis.”  

Pennsylvania state lawmakers passed a bill in 2013 to generate an additional $2.3 billion annually for transportation within five years.  Of the $6 billion the state spends a year on transportation, $1.5 billion comes from the federal government. 

Still, CQ.com reports (sub. req’d), “A coalition of associations representing state governors, mayors and county leaders sent congressional leaders a letter urging lawmakers “to ensure the continued solvency of the Highway Trust Fund.”

They may be overreacting.  As we pointed out last week, a 7 percent reduction in total transportation spending by states is not a crisis.

Highway Funding: Is 7 Percent a Crisis?

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“It’s not socialism…We’re just building roads and bridges.”

That was President Obama’s argument today as he urged Congress to bail out the federal Highway Trust Fund (HTF).  In a letter sent to states yesterday, Obama’s transportation secretary Anthony Foxx “attempted to provides states with the most equitable, straightforward approach possible for managing this crisis.”

What exactly is the crisis?

In comments made earlier in the day, Foxx said states will, on average, see a 28 percent reduction in funding from the federal Highway Trust Fund.  This figure is shockingly misleading though because the overwhelming majority of highway funding comes from state and local governments, not the federal government.

The Congressional Budget Office (CBO) broke down the numbers earlier this year:

In 2013, governments at various levels spent $156 billion to build, operate, and maintain highways, and they spent $60 billion on mass transit systems. For both types of infrastructure, most of that spending was by state and local governments; about one-quarter of that total came from the federal government, mostly through the Highway Trust Fund.

The 28 percent reduction Foxx mentioned is of the federal share, which is about 25 percent. In other words, the “crisis” Obama is warning Americans about is a 7 percent reduction in total spending.

Bottom line: America is not facing “a transportation government shutdown” and lawmakers should stop trying to create an artificial crisis which they can use as an excuse to raise taxes or increase spending.

Bob Corker Proposes Massive Hike in Gas Tax

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What better way to distinguish ourselves from Democrats than to propose a 12-cent increase in the dreaded federal gasoline tax at a time when gas prices are skyrocketing?

One of the reasons Republicans always lose policy fights is because their starting point in crafting solutions is born out of a Democrat premise.  One illustrative example of Republicans playing follow-the-leader with Democrats is on surface transportation policy.

In recent years, Democrats have bemoaned the “antiquated” and “crumbling” infrastructure as they promote more taxes and spending at a federal level to build roads and bridges – something everyone agrees is a vital function of government.

But which government or governments should be responsible for the lion’s share of surface transportation in the future?  Should we continue raising taxes and pumping hundreds of billions more into the failed federal sinkhole?  Or should we allow the 50 states to retain most of the authority over a function that is uniquely local in nature?

Evidently, Senator Bob Corker (R-TN) thinks we should double down on the latter.  He is proposing a 12-cent increase in the federal gas tax (it is currently 18.4 cents per gallon) in order to raise $164 billion over 10 years.  His plan, which is sponsored by Democrat Senator Chris Murphy, will undoubtedly lead to more waste.  And we all know that in 10 years from now they will be proposing yet another gas tax increase.

Adding insult to injury, Corker plans to offset the broad-based regressive tax hike with targeted tax breaks for corporations!

“One big GOP selling point was that the tax increase would not violate the Americans for Tax Reform pledge if it is paired with a provision making some popular tax breaks that are typically part of the tax extenders package permanent.

According to Corker, the list of tax breaks includes: research and development tax credit; Section 179 expensing, a tax break encouraging small businesses to by business equipment; the deduction of state and local sale taxes; the deduction of up to $250 in classroom expenses that teachers paid for out of their own pocket; a subsidy for mass transit and benefits given for land donated for conservation purposes.

“If you just took those, we do them each year, but you make them permanent; I don’t think there is anybody that disputes making those permanent, by the way, that alone would generate $189 billion in savings over the next 10 years,” Corker said. “So if the Finance Committee chose to link this … with that … you would not be violating the pledge.”

Wow – that is a winning message for a party that wants to appeal to the middle class.

Instead of agreeing to the Democrat premise, why don’t Republicans show the American people how the entire federal transportation system is broken and inefficient?  Why hit the American people with a massive tax increase when we can devolve transportation to the states?

Just another day in the minds of those who lead the Stupid Party.

Madison Project Scores 11 Spending Amendments in Transportation-HUD Bill

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Amidst the political turmoil in the House last week, members of Congress voted on a number of spending amendments to the annual Transportation-HUD appropriations bill.  This is not exactly the most exciting topic in light of the political gamesmanship involved in running for leadership posts, but it is quite revealing when attempting to ascertain the commitment of some members to reducing the size of government.

The bill, HR 4745, appropriates roughly $52 billion for FY 2015.  Put simply, this bill encompasses more wasteful government that almost any other appropriations bill.  It spends almost $8 billion more than last year’s draft bill from the House and it contains a number of programs that should not be administered at a federal level, such as subsidies for mass transit and rural air service.   The bill also contains a number of programs that were instituted under the Obama stimulus bill in 2009.

Several members of the conference offered amendments to cut back wasteful spending, particularly among programs that subsidize housing, yet most of them were rebuffed by a coalition of Democrats and liberal Republicans.  We’ve created a scorecard of 11 amendments detailing how each member of the GOP conference voted.

Click here to view the scorecard

Please find the descriptions of these amendments from the Republican Study Committee pasted below:

1) Broun (R-GA) RC-273:  Reduces Amtrak Operating Grants by $34 million (a ten percent reduction).  The underlying bill provides Amtrak with $340 million for operating grants and $850 million for capital grants and debt service.  Amtrak is supposed to be self-sufficient, but is projected to run an operating loss of $333 million in FY15, requiring another infusion of funds from the taxpayers.  The rail service managed to lose $388 million on its food and beverage service from FY10-FY14.

The House Republican Budget recommended eliminating Amtrak operating subsidies.  The RSC Budget proposed eliminating these subsidies for Amtrak, stating “Amtrak has no incentive to improve its performance if it knows that it will be able to count on the taxpayers for a bailout each year.”

Failed- 154 to 248

2) Chabot (R-OH)  RC-274:  Reduces Public Housing programs by a total of $2.9 billion.  Of this, Tenant Based Rental Assistance (Section 8 Program) is reduced by about $1.936 billion and Project Based Rental Assistance is reduced by about $975 million.

In the underlying bill, Tenant-Based Rental Assistance, commonly known as the Section 8 Program, is appropriated $19.356 billion, a level that is $688 million below the President’s budget request, $179 million above the FY14 enacted level, and $746 million above the level proposed by the House Appropriations Committee for FY14.  The Section 8 program has not been authorized since 1994.  In the underlying bill, Project Based Rental Assistance is appropriated $9.746 billion, a level that is equal to the President’s budget request, $171 million below the FY14 enacted level, and $695 million above the level proposed by the House Appropriations Committee for FY14.

Failed- 127 to 279

3) Gohmert (R-TX) RC-276:  Reduces Public Housing Capital Fund by $7.1 Million and reduces the Public Housing Operating Fund by $17.6 million, for a $24.7 million total spending cut.  The underlying bill funds the Capital Fund at $1.775 billion and the Operating Fund at $4.4 billion.  Both funds subsidize local public housing projects and have not been authorized since 2003.  According to the amendment sponsor, 0.4 percent of public housing goes to illegal aliens, so he proposes to reduce these accounts by that same percentage.

Failed- 160 to 266

4) Broun (R-GA) RC-279:  Reduces funding for Community Development Block Grants (CDBG) by $20 million.  The underlying bill funds CDBG at $3.06 billion, a level that is 190 million above the President’s budget.CDBG has not been authorized since 1994.  The RSC Budget recommended reducing funding for CDBG, explaining that it had funded wasteful projects such as “doggie daycare, a local circus, and decorative sidewalks in an affluent suburb.”

Failed- 134 to 288

5) Broun (R-GA)  RC-280: Reduces Rental Housing Assistance by $7 million.  This program is funded at $28 million in the underlying bill, a level that is $7 million above the current FY14 level.

Failed- 143 to 283

6) Broun (R-GA)  RC-281:  Reduces funding for the Amtrak inspector General by $1 million dollars.

Failed- 130 to 295

7) Hartzler (R-MO) RC 282:  Prohibits funds for “highway beautification” under the Transportation Alternatives program (TA).  Under this program, the federal government spends federal taxpayer dollars on landscaping.  The RSC Budget proposed eliminating the TA program altogether, which also funds non-federal projects such as bike path, recreational trails, and scenic overlooks.

Failed- 188 to 237

8) Blackburn (R-TN) RC 289:  This amendment cuts  the funding amount for the entire bill by one percent.  The bill provides a net total of $52.029 billion in discretionary budget authority which is $7.929 billion above the level proposed by the House Appropriations Committee for FY 2014 and $1.173 billion above the enacted FY 2014 level but $7.823 billion below the President’s budget request.

Failed- 159 to 260

9) Gosar (R-AZ) RC-291:  This amendment reduces all sums available under the Department of Housing and Urban Development  Management and Administration-Administrative Support Offices by 4.2 percent.  According to Committee Report 113-464 “The Administrative Support Offices account funds the salaries and expenses of the Office of Administration, the Office of the Chief Human Capital Officer, the Office of the General Counsel, the Office of the Chief Financial Officer, the Office of the Chief Procurement Officer, the Office of Departmental Equal Employment Opportunity, the Office of Field Policy and Management, the Office of Strategic Planning and Management, and the Office of the Chief Information Officer.”

Failed- 190 to 232

10) Sessions (R-TX) RC 294:  Would prohibit Amtrak from operating its money-losing long-distance routes.  While Amtrak’s Northeast Corridor routes are actually profitable, in fiscal year 2015, the long-distance routes are projected to lose almost 700 million dollars

Amtrak is supposed to be self-sufficient, but is projected to run an operating loss of $333 million in FY15, requiring another infusion of funds from the taxpayers.  The House Republican Budget recommended eliminating Amtrak operating subsidies.  The RSC Budget proposed eliminating these subsidies for Amtrak, stating “Amtrak has no incentive to improve its performance if it knows that it will be able to count on the taxpayers for a bailout each year.”

Failed- 167 to 250

11) Gingrey (R-GA) RC 295:  Would prohibit Federal workers from using official paid time to promote or engage in union activities. The Office of Personnel Management said employees spent nearly 3 million hours on union activities during fiscal 2009 at a cost of more than $129 million.

Failed- 167 to 254

 

Another Highway Bailout and How Not to Finance It

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On May 30, 2014, House Republican Leaders announced a plan to bail out the federal Highway Trust Fund (HTF) to the tune of $15 billion, paying for it with savings generated by reforms to the U.S. Postal Service (USPS). This proposal is flawed on a number of levels and should be rejected by Congress.

Highway Bailout:

Under current law, drivers pay a tax of 18.4 cents per gallon on gasoline and 24.4 cents on diesel fuel, which gets deposited into the HTF. Excessive spending levels set by highway bills enacted in recent years, and many spending diversions to non-road, non-bridge activities, have left the HTF with too many bills to pay but not enough money on hand. An additional $5 billion is needed to keep spending on pace through the end of the fiscal year, and that figure jumps to $15 billion for a one-year extension at current spending levels. If Congress does not bail out the HTF by the end of July, the federal government will continue to collect federal gas tax revenues, but it would have to begin slowing down its reimbursements to state Departments of Transportation.

This would not just be an isolated instance of bad policy in the face of predictable overspending. Since 2008, more than $55 billion has been funneled from taxpayers into the Highway Trust Fund in the form of HTF bailouts—violating the user pays, user benefits principle. With each bailout, the link between highway spending and gas taxes is degraded, making it increasingly difficult to enact structural reforms that turn over the federal highway and transit programs to the states, so they can manage their transportation needs without Washington bureaucrats. Such reforms are found in Sen. Mike Lee (R-UT)Heritage ActionScorecardSen. Mike Lee100%Senate Republican AverageSee Full Scorecard100%‘s and Rep. Tom Graves (R-GA)Heritage ActionScorecardRep. Tom Graves87%House Republican AverageSee Full Scorecard87%‘s Transportation Empowerment Act (S. 1702/H.R. 3486). Yet too many in Washington are content with the status quo: continuing to spend gas tax dollars on projects such as streetcars, bicycle facilities, scenic overlook construction, community preservation, and environmental mitigation (local activities well beyond the scope of federal highway authority). Instead of maintaining its current spending pace, Congress should be using this opportunity to force the program to live within its means, setting spending levels in line with available revenue, while it works to return this responsibility to the states. The states know their transportation priorities better than Washington does.

Fake Postal Offset:

The HTF bailout is to be paid for using savings generated by allowing USPS to stop Saturday deliveries. This not a real offset for the following reasons:

1) Ratepayers Realize the Savings, Not Taxpayers: To be sure, “5-day delivery” and other reforms will generate crucial savings for USPS and its customers, but as an “off budget” quasi-private, self-financed entity, those savings will not be realized by taxpayers, nor should they be. The reforms do provide additional funds for USPS to meet their payments to taxpayers, but do not require them to be used for this purpose. They could be used to defer rate increases or dampen cost-cutting efforts. The reforms are important to help USPS control its costs, but any savings should not go to offset other federal spending, such as bailing out federal surface transportation programs.

2) Either Creating Money Out of Thin Air or Double Counting: According to the Leadership’s memo, the plan seems to count as “savings” the difference between a future hypothetical federal bailout to the USPS under its current policies versus one that assumes 5-day delivery. In other words, the GOP plan assumes a large taxpayer bailout of the USPS in the future, then claims credit for promising a smaller bailout. This cash cow simply does not exist. The only other explanation of Leadership’s plan is that its reforms would both free up cash for USPS to help make their current payments for its large unfunded liability with taxpayers (for their retirees’ health care) and to pay for the highway bailout. This would be a case of double counting, similar to Rep. Paul Ryan (R-WI)Heritage ActionScorecardRep. Paul Ryan63%House Republican AverageSee Full Scorecard63%‘s accurate 2011 analysis that Democrats could not claim that $400 billion in Medicare savings could both be used to shore up the Medicare Trust Fund and to offset the cost of Obamacare.

3) Potential Postal Service Bailout Itself: Depending on the version being considered, the proposal could itself amount to a bailout of the USPS. While legislative text or a Congressional Budget Office estimate have not yet been released, the House Leadership memo mentions the President’s proposal to allow 5-day delivery. But the President’s proposal also infuses USPS “with over $20 billion in cash relief, operational savings, and revenue through 2016″ by restructuring payments under current law to taxpayers for their unfunded liabilities (payments USPS is already in default on). In this sense, although the bill would not provide cash directly to USPS, by restructuring existing debt, the plan would be a bailout as it relieves USPS of its current debt obligations. While his proposal intends to amortize this money over 40 years, the recent history of “postal reform” legislation shows that these payments will be strenuously opposed by various stakeholders and never materialize. In other words, Congress would be using a postal bailout to pay for a highway bailout and hoping taxpayers won’t notice.

Congress should reform USPS to allow it to cut costs and maintain its payments to taxpayers, but these reforms should not be used as an offset to pay for another bailout of the HTF.