FY19 HTF Shutdown Fits In Well With Tradition of HTF Bill “Triggers”

July 22, 2015

The new version of the Senate DRIVE Act provides $343 billion in Highway Trust Fund contract authority over the six-year period of fiscal years 2016-2021. However, the bill only provides enough extra money for the HTF to support spending for about three years.

Section 80003 of the proposed bill now provides for a clean and complete shutoff of all new HTF obligations (except for administrative overhead, safety activities, and items exempt from obligation limitation) that is predicted to take effect on October 1, 2018. The idea is that this will force Congress to provide a huge tranche of new money for the HTF halfway through the bill while continuing to fund the policies and promises made by the bill.

Such “trigger” or “re-opener” provisions are not new to surface transportation legislations. Let’s take a walk down memory lane over the last 25 years…

1991 – ISTEA. The 1991 ISTEA law included a “re-opener” or “trigger” provision designed to give Congress an excuse to consider a “must-pass” highway bill halfway through the six-year life of the ISTEA law. Section 1006 of ISTEA established the new NHS formula program, created a process for DOT and Congress to work together on choosing the roads to be part of the NHS, and provided that no new funding could be apportioned for either the NHS program or the Interstate Maintenance program for FY 1996 or thereafter unless a law had been enacted designating the NHS.

This meant that $6.5 billion in formula money that was supposed to be apportioned to states on October 1, 1995 (about one-third of total highway funding) would be withheld indefinitely pending enactment of NHS legislation. This trigger actually worked, and almost on schedule – Congress enacted a NHS designation law on November 28, 1995, and the Federal Highway Administration released funds the following day.

1995 – NHS. Itself the result of a “trigger” included in ISTEA, the National Highway System Designation Act of 1995 did two nationally important things – it designated the NHS map, which was the whole point of the exercise, and it also gave more money to the earmarked projects from the ISTEA law that had had some of their out-year funding reduced pursuant to the spending limit in section 1003(c) of ISTEA.

In the House’s original version of the 1995 NHS bill, there were two triggers designed to reopen the bill the following year. Sections 102 and 103 of the bill provided for a delay of all non-safety highway apportionments and allocations and of all mass transit apportionments and allocations for FY 1997 from October 1, 1996 to August 1, 1997. House Transportation and Infrastructure chairman Bud Shuster (R-PA) called these provisions collectively “the trigger provision which will move up the reauthorization of ISTEA from 1997 to 1996” but agreed to drop them in the House Rules Committee in the interests of making the bill more agreeable to Democrats and to the Senate.

1998 – TEA21. As passed by the House in April 1998, the bill was then known as “BESTEA” had not one but two explicit triggers – one to bind future Congresses, the other to position the House bill for a conference with the Senate. And the final law also made a failing bet on the willingness of future Congresses to follow through with the painful promises made by the law.

Section 508 of the House bill required all new highway apportionments and non-safety allocated highway funding for fiscal year 2001 that was ordinarily supposed to be released on October 1, 2000 to be delayed eleven months, until August 1, 2001, “unless a law has been enacted making midcourse corrections to the Federal-aid highway and transit programs authorized by this Act” that would include, a minimum, a formula for high-cost Interstate reconstruction, a new performance bonus system for states, a new Appalachian highway cost estimate, a new CMAQ formula, and a new list of approved transit new starts.

The list of items that had to be in the midcourse correction bill in order to avert the 11-month funding delay pursuant to section 508 was so vague that the Congressional Budget Office refused to score the proposal (see page 6 of the cost estimate), and it was dropped in House-Senate conference.

The House BESTEA bill also contained section 1001, which said that the Secretary “shall not apportion, allocate, or obligate any funds provided by this Act unless it contains a section stating” that the bill has been budget-neutral as compared to the CBO March 2008 baseline through a combination of mandatory and discretionary spending cuts. (CBO did score this, though their cost estimate got the section number wrong.) This was part of a deal made with House leaders and the Budget Committee, and the final TEA21 law dropped the provision but made did make the additional above-baseline spending deficit-neutral through cuts to veterans benefits, a temporary adjustment in student loan interest rates, and a reduction in the block grant for social services – see subtitles, B, C and D of title VIII of the TEA21 law. (And the final law declared budget neutrality versus the OMB baseline, not the CBO baseline.)

There was something else in TEA21 – an assumption that future Congresses would be able to live with potential spending reductions. Section 1105 of the TEA21 law established a new procedure known as RABA that would tie new highway contract authority levels starting in FY 1999 to estimates of future HTF Highway Account tax receipts. (Title VIII of TEA21 contained provisions designed to force the Appropriations Committees to respect the RABA-adjusted highway spending levels.)

RABA was designed to be a two-way mechanism. As Chairman Shuster said on the House floor on the day the final bill passed the House, “Should there be more revenue going into the trust fund, that money will be available to be spent. Should there be less revenue going into the trust fund, then we will have to reduce the expenditures. It is fair, it is equitable, and it is keeping faith with the American people.”

In the first three years in which the RABA mechanism was activated (FY 2000-2002), RABA added a total of $9.1 billion in highway program spending above the levels written into TEA21. In 2002, RABA boosted the highway obligation limitation from $27.4 billion to $31.8 billion. But a one-time spike in truck tax receipts in FY 1999 and 2000 (caused by the EPA requiring the purchase of trucks with new engines that could use ultra-low-sulfur diesel fuel) proved temporary, and so the President’s FY 2003 budget (submitted in February 2002) contained a “negative RABA” calculation that was supposed to cancel out the prior year’s overspending and reduce new spending to a level in line with the new tax receipt projection.

This would have cut the FY 2003 highway obligation limitation from the 2002 enacted level of $31.8 billion, down below the 2003 TEA21 pre-RABA level of $27.7 billion, all the way down to $23.4 billion. State governments and the construction industry went straight into crisis mode and lobbied Congress all year to pass legislation suspending the RABA process for 2003. Eventually, the decision was left up to the Appropriations Committees, who first canceled the RABA calculation and brought funding back up to $27.7 billion (in section 1402 of the August 2002 supplemental appropriations law) and who then decided in the FY 2003 omnibus appropriations law to fund highways not just at the pre-RABA $27.8 billion level but at the prior year’s level of $31.8 billion (reduced to $31.6 billion by a government-wide “haircut” rescission). So the 107th and 108th Congresses under President Bush were unwilling to fulfill the promises made by the 105th Congress and President Clinton when it came to aligning highway spending with tax receipts.

(Ed. Note: It is important to remember the FY 2003 RABA experience, because that’s how the whole cavalcade of shortsightedness on HTF spending levels and revenues really got started – setting a new baseline highway program spending level that was $4 billion above comparable Highway Account tax receipts.)722tablesd

2005 – SAFETEA-LU. The drafting of the 2005 SAFETEA-LU law was constrained by a White House that refused to increase HTF excise taxes but also refused to allow the net total spending in the bill to exceed a certain amount (and was further constrained by Congressional GOP leaders who would not countenance a situation where their Congress would try to override a Republican president’s veto).

Accordingly, SAFETEA-LU contained two triggers designed to deal with this situation – one explicit, one implicit. The explicit trigger was section 10212 of the SAFETEA-LU law, which provided that on the last day of the law’s authorization period (September 30, 2009), $8.5 billion in contract authority previously apportioned to states by the bill would be canceled. The $8.5 billion cut was necessary to fit the six-year total spending level provided by the bill under the ceiling demanded by the White House in its veto threat – the White House even suggested that “an offsetting rescission should be included in the legislation as well” if the gross total exceeded what the White House would accept.

The assumption within Congress, of course, was the future Congress would never allow the rescission to take place and would surely pass legislation before September 30, 2009 calling it off.

Fast forward to September 30, 2009, when Senate Republicans refused to grant unanimous consent to consider legislation drafted by Senators Boxer and Inhofe to cancel the rescission unless the cost of the cancelation was offset by a cut in ARRA stimulus funding. Consent could not be achieved, and the rescission took place as scheduled (although the House was also blocking any move to cancel the rescission because then-chairman Oberstar wanted all the leverage he could get to force action on his gigantic, gas-tax-increase-requiring, reauthorization bill that was never allowed out of committee). The rescission was eventually restored in March 2010 by the HIRE Act (which also contained the last general fund bailout of the Highway Trust Fund that was not paid for to some degree).

The implicit trigger was the decision by the authors of the SAFETEA-LU legislation to “spend down” Highway Trust Fund balances at such a rate that the HTF was projected to run out of money sometime in fiscal 2010, the year after the expiration of the SAFETEA-LU law. SAFETEA-LU took the long-term-unsustainable highway spending levels set by the Appropriations Committees in FY 2003 (see above) and then provided generous increases – but the law did not increase the rates of the user taxes deposited in the HTF.

By placing the HTF on a five-year fast track to insolvency, the authors of the legislation hoped that they could force a future Congress under a future President to do what the 109th Congress under George W. Bush could not do – raise gasoline and diesel taxes to support an ever-growing federal surface transportation program in the next reauthorization bill.

When the HTF ran out of money for the first time, in September 2008, Democrats had taken over the House and Senate. And the first budget cycle after the HTF ran dry featured a new occupant of 1600 Pennsylvania Avenue, who was devoted to reversing many Bush II policies. But, to the bitter disappointment of the authors of SAFETEA-LU, the new 2009 political alignment proved no more willing to increase gasoline and diesel taxes than had the old crew back in 2005.

The SAFETEA-LU experience shows that just because you intentionally plan a crisis that your successors will have to avert does not mean that they will avert it (at least not in the way that you had hoped). If the new Senate bill is enacted into law, it well may be that a new Congress and new President in 2018 or 2019 decide to add plenty of new money to the HTF to allow the DRIVE Act to go on functioning. Or it is possible that, after a long shutdown of new HTF projects and grants, a new Congress and new President could use the shortfall as an excuse to reopen the bill and drastically alter the funding levels and policies contained in the DRIVE Act.

As the saying goes, “the future is not set.”

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