Draft FY20 CR Fixes Transit Problems but Does Not Repeal 2020 Highway Rescission

A draft of a stopgap continuing appropriations measure for the opening days of fiscal year 2020 was circulated to some lawmakers earlier this week and obtained by CQ yesterday. The draft resolution does not repeal the July 1, 2020 rescission of $7.6 billion in highway contract authority (scheduled by section 1438 of the FAST Act), as some highway advocates had hoped. But it does delay across-the-board cuts in mass transit apportionments for 2020 and makes a key change in appropriations language for the mass transit Capital Investment Grants program.

Rescission. As one of the few “must-pass” pieces of legislation, the CR was a legislative vehicle that some in the highway stakeholder community wanted to use to repeal the $7.6 billion highway rescission scheduled for July 2020. But this bill – or any appropriation bill – was a bad choice, if only because appropriations bills are measured under a scoring system that only counts net budget authority (the amount of an appropriation or the amount of contract authority) – so calling off a $7.6 billion cut in budget authority scheduled by law is the same thing as creating $7.6 billion in new spending, which blows the overall budget ceiling.

If the rescission is canceled in a non-appropriations bill, like S. 1992 (reported by the Senate Public Works Committee on July 31), the bill be scored primarily on the PAYGO system which only counts outlays – and through a loophole in budget law, changes in contract authority that are subject to annual obligation limitations are scored as having zero effect on outlays. (See all the zeroes in the Congressional Budget Office score of S. 1992.)

S. 1992 would still violate the EPW Committee’s budget allocation, but the Senate can choose, on its own, to ignore that (unlike a PAYGO or discretionary budget cap violation, which requires a change in law to ignore).

Rostenkowski Test. Section 140 of the draft CR provides that “Section 9503(e)(4) of the Internal Revenue Code of 1986 shall not apply during the period covered by this joint resolution.” Section 9503 is the authorizing statute of the Highway Trust Fund, and (e)(4) is the “Rostenkowski Test” first created in the 1982 law creating the Mass Transit Account. It provides that new apportionments of mass transit contract authority must be reduced to a level where unobligated balances and unpaid obligations of prior-year contract authority, plus the new contract authority, is not greater than the projected end-of-year cash balance plus the estimated tax receipts for the next four years.

Starting with the April 2019 quarterly Treasury Bulletin, the Mass Transit Account failed this test, and the new September 2019 Bulletin (in Table TF-6A on page 63) confirms that the MTA is still failing – unfunded authorizations total $27 billion, and the 48-month revenue estimate is only $26 billion. (Treasury, very  unhelpfully, rounds this to the billion  – we were told in April by someone at DOT that the overage then was about $1.2 billion, which would have meant across-the-board cuts in FY 2020 transit apportionments of about 12 percent.)

The inclusion of section 140 in the CR will prevent Rostenkowski Test reductions from being implemented while the CR is in effect, and section 164(a) of the House-passed full-year 2020 transportation appropriations bill contains similar language, so when the CR ends and a full-year appropriations bill begins, that language will probably be in place there as well (assuming the Senate goes along).

Capital Investment Grants. Section 139 of the draft CR amends some conditions placed in the FY 2018 and 2019 DOT appropriations acts in response to the Trump Administration’s perceived slowdown of the mass transit Capital Investment Grant program. Here are the provisos in question:

  • FY 2018: “For necessary expenses to carry out fixed guideway capital investment grants under section 5309 of title 49, United States Code, $2,644,960,000 to remain available until September 30, 2021: Provided, That of the amounts made available under this heading, $2,252,508,586 shall be obligated by December 31, 2019:”
  • FY 2019: “For necessary expenses to carry out fixed guideway capital investment grants under section 5309 of title 49, United States Code, and section 3005(b) of the Fixing America’s Surface Transportation Act, $2,552,687,000, to remain available until September 30, 2022: Provided, That of the amounts made available under this heading, $2,169,783,950 shall be obligated by December 31, 2020:”

Section 139 of the draft CR amends those two provisions simply by striking the word “obligated” and replacing it with the word “allocated.” Allocation, in this context, is a term for the Federal Transit Administration internally assigning appropriated funds to a specific project. FTA is free to un-allocated money whenever it wants, unless that allocated money has since become obligated, which is a fundamental budget term meaning that the federal government has entered into a binding legal obligation to pay the money to someone else. Obligations can only be de-obligated with the consent of both parties, or with one party failing to live up to the terms of the funding agreement (which often winds up in a court of law).

The obvious intent of the provisions in the 2018 and 2019 bills was to force FTA to sign full funding grant agreements (FFGAs) with local transit agencies to obligate most of its appropriations by the end of the following calendar year. It’s too early in FY 2019 to judge how far along FTA is on this, but the FY 2018 allocation table is here and it shows that as of June 20, FTA had allocated $2.583 billion of its FY 2018 appropriations to various projects – $414 million more than the amount that the law requires to be obligated by December 31, 2019.

But $300 million of that is allocated to the San Francisco BART Transbay Project, which not only doesn’t have a grant agreement yet, but the November 2018 status report for that project on the FTA website said that project sponsors expected a FFGA in December 2019. Those timelines are often optimistic, and a flier on the BART website seems to indicate that the only reason they said they would be ready for a FFGA in December 2019 was because that was the deadline for obligating funding from the FY 2018 appropriations act. (Circular reasoning leads to bad policy.)

If BART truly won’t be able to get its paperwork together for a grant agreement on Transbay by December 31, then that, combined with a few small starts that aren’t yet ready for grant agreements, would put the FY 2018 CIG program in violation of the law. FTA might be forced to take that $300 million allocation away from BART and instead accelerate funding for projects that already have grant agreements. Hence the need for a change in the law.

(Did we mention that the Speaker of the House is from San Francisco?)

We can’t be sure that BART is the reason for the change in law offered in the pending CR, but BART is definitely the biggest variable in the FY 2018 CIG portfolio, by a large margin. But the change may also be an acknowledgement that in the last few month, FTA has been running the CIG program much more along the lines favored by the Appropriations Committees than FTA did in the first two years of the Trump Administration.

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