Highway fund gets another short-term fix(1)

The US is in for another episode of “the Highway Trust Fund (HTF) is set to expire,” a scenario that’s been playing on a loop since the Moving Ahead for Progress in the 21st Century (MAP-21) Act was signed into law by President Barack Obama in July 2012. 

The House of Representatives and Senate were last week only able to pass a bill that reauthorises the HTF, the federal government’s primary funding mechanism for surface transportation projects, only through October 29.

While the Federal Highway Administration (FHWA) describes it as “the first long-term transport funding bill to survive the legislative process since 2005,” medium-term would be more accurate as the legislation expired in September 2014 and has been kept in place stumbling from one short-term fix to another.

As an increasing number of both Republican and Democratic lawmakers acknowledge that a long-term solution is needed, agreement on the specifics of that solution elude them.

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, also known as HR 22, keeps funding levels of surface transportation programmes at fiscal year 2014 levels, transfers $6.1 billion from the General Fund to HTF’s mass transit account and extends the HTF’s general expenditure through the end of October.

In addition to the three-month patch, the Senate, in a 65-34 vote last Thursday, also passed a $350 billion six-year bill, the Developing a Reliable and Innovative Vision for the Economy Act (DRIVE Act). It called on the House to stay in session to vote on the bill as well, but the House adjourned for a summer recess on July 29th, effectively buying some time to draft its own long-term bill when it re-convenes in the fall.

“The Senate’s work on their transportation bill is a positive step, but the House also needs to make its voice heard and put forth its own priorities for such a significant piece of legislation,” said Bill Shuster, House Transportation and Infrastructure Committee Chairman. “I believe this three-month extension represents the compromise that allows the House more time, and a confirmation of our commitment to produce a fiscally responsible long-term proposal.”

Members of the House have criticised the Senate’s long-term bill because although it re-authorises the HTF for six years, it only provides funding for three. What’s more, it uses a hodge-podge of sources to fund the first three years, including selling oil from the US Strategic Petroleum Reserve (SPR), the world's largest supply of emergency crude oil.

It was unclear whether that option, initially put forth by Senate Majority Leader Mitch McConnell, was included in the bill as well as what other sources of funding would be used.

Infrastructure Investor reached out to the Senate’s Environment and Public Works (EPW) Committee, which approved the bill before it was sent to the Senate for a vote, requesting clarification on funding mechanisms. However, the EPW referred us to Senator McConnell and Senator Jim Inhofe, EPW Chairman, neither of whom responded to requests for comment.

The office of Democratic Senator Barbara Boxer, one of the bill’s co-sponsors and a Ranking Member of the EPW Committee, referred us back to the EPW.

The House of Representatives, on the other hand, supports funding a multi-year surface transportation bill through international tax reform. Initially proposed by Democratic Congressman John Delaney, who has introduced at least three related bills in the past two years, the concept has gained the support of both parties and is also championed by President Barack Obama.

Both Delaney’s Infrastructure 2.0 bill, which has 80 co-sponsors equally split between both parties, and Obama’s proposal would require US companies to pay taxes on their foreign earnings now, as opposed to deferring payment indefinitely. Under current law, corporations do not have to pay taxes on revenues generated abroad until and unless they repatriate those funds.

The Infrastructure 2.0 Act would require US multinationals to pay a one-time 8.75 percent tax, replacing the deferral option and the current US corporate tax rate of 35 percent. A portion of the funds, worth $120 billion, generated through this one-time tax would go towards funding the Highway Trust Fund for six years.

President Obama included a similar measure in his draft 2016 budget proposal that would impose a 14-percent one-time tax on previously untaxed foreign income, the proceeds of which would go towards a long-term surface transportation reauthorisation.

“We need a new solution and a bipartisan deal using international tax reform is the breakthrough we need,” Delaney said, commenting on the three-month extension. “I’ve sat across the table with colleagues on both sides of the aisle pitching a big and bold repatriation and infrastructure deal and it is clear to me the support is there.”

In May, Paul Ryan, a Republican Congressman from Wisconsin who is also chairman of the House Ways and Means Committee, expressed his support for using repatriation as a means for funding transportation infrastructure.