March 30, 2016

Last week, the nonpartisan Congressional Budget Office issued its official budget baseline to be used in the fiscal year 2017 budget process. (The earlier baseline issued in January was a preliminary one.) CBO issued a brief summary document but the heart of the baseline, as always, comes in the form of thousands of pages of tables given to Congressional committees that show baseline spending levels for each individual budget account.

Unlike the Administration, which predicts that the Mass Transit Account of the Highway Trust Fund could run out of money before the expiration of the FAST Act in September 2020, CBO projects that the HTF will be just fine through the end of the authorization law, with the Highway Account ending FY 2020 with a positive balance of $17 billion and the Mass Transit Account winding up with a $3 billion balance before heading to default sometime in 2021.

The reason for CBO’s optimism regarding Trust Fund balances does not stem from a belief in booming tax receipts (the table below shows the CBO forecast for steadily diminishing gasoline tax receipts over the next decade which cannot be entirely offset by growth in trucking taxes and in diesel fuel tax receipts which are also primarily paid by truckers). Rather, CBO usually assumes programs will function less efficiently than does the Administration, and a less efficient program spends its available money more slowly than does a more efficient program.

Aviation excise taxes, by contrast, are more diverse. There are ad valorem taxes (a 7.5 percent tax on the price of an airfare, 6.25 percent of the cost of air cargo shipping) but some of it is also usage-based (per capita fees on flight segments and international arrivals and departures, and cent-per-gallon taxes on general aviation fuel). CBO projects steady Airport and Airway Trust Fund revenue growth of between 3 and 4 percent per year.

On the spending side, the CBO projections for the cash flow of the Highway Trust Fund are based on outlay assumptions, 99 percent of which are controlled by the obligation limitations on contract authority that are imposed in the annual appropriations acts. Those numbers are shown below, but it is important to remember that the obligation limitations in CBO’s baseline are not those recommended in sections 1102 and 3018 of the FAST Act. Instead, CBO is required to take the most recently enacted obligation limitations (FY 2016) and assume they will be increased by a standard inflation amount each year.

As a result, CBO’s assumptions for highway and mass transit obligation limitations are slightly lower than the ob limits proposed in the FAST Act (by about $2 billion over the FY 2017-2020 period), and this has a relatively small effect on outlays. The Appropriations Committees, however, have no motive to provide obligation limitations below the FAST Act levels (under the outlay-neutral Budget Control Act, if they underfunded HTF programs, they would not save any money that could then be used to support other accounts), so you can expect the higher FAST Act levels to be provided in the annual appropriations bills for the next four years.

The new CBO baseline for Highway Trust Fund contract authority is shown below, and the baseline for the highway program is broken down in detail to show how the $7.6 billion rescission of highway contract authority scheduled for summer 2020 by the FAST Act damages the baseline for the program moving forward.

However, baselines for mandatory spending programs like HTF contract authority are really only relevant when Congress is considering legislation to change those spending levels. And since Congress won’t consider legislation reopening the FAST Act until at least 2019, and since CBO will issue several more updated baselines between now and then, these numbers won’t be especially relevant. But the underlying problem of the next reauthorization having to fill a $7.6 billion per year hole on the spending side (plus whatever machinations will have to take place to address the revenue side) will not go away between now and then.

(Photo credit: AP News)