The next looming funding shutdown: Highway programs

Transportation funding is running on empty, forcing Congress to scramble to meet its next major deadline before the tank runs dry on May 31.

Both parties say they want to avoid a repeat of last month’s tense standoff over funding for the Department of Homeland Security.  But the likelihood of an impasse increases with each day that passes without an infrastructure reauthorization bill, and transportation advocates warn that more brinkmanship would be disastrous.

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"With just 80 days remaining until a partial government shutdown of highway programs, it’s time for tax writers in the House and Senate to put their cards on the table," Association of Equipment Manufacturers spokesman Michael O’Brien said. "They would be well served to consider the many emerging proposals, which are proving to be both financially and politically viable."  

While all sides back passage of a long-term transportation funding measure this year, there is little consensus about how to pay for the new round of infrastructure spending.

The Equipment Manufacturers and other transportation groups have come out in favor of an increase in the 18.4 cents per gallon federal gas tax, but many in Congress oppose asking drivers to pay more at the pump to help pay for road projects.

The gas tax has been the traditional source for federal transportation funding since its inception in the 1930s — predating the Interstate State Highway System by about 20 years. But it has struggled to keep pace with construction costs, as cars become more fuel-efficient.

Transportation advocates have said that a gas tax hike would be more politically viable now than it has been ever been in a generation, given rock-bottom gas prices.

The American Road & Transportation Builders Association (ARTBA) issued a proposal Thursday to nearly double the gas tax. If lawmakers find that politically untenable Pete Ruane, the group’s president, offered a potential deal sweetener.

"If our national leaders think they need to use budget gimmicks or ‘one-offs’ again to pass the surface transportation investment program the states need and the business community has been pleading for, then use those devices to provide a $90 tax rebate to middle and lower income tax filers to offset the cost to them of a 15 cent per gallon increase in the federal gas tax,” he said.

The federal government typically spends approximately $50 billion per year on transportation projects, but the gas tax only brings in about $34 billion.

Lawmakers have turned to other areas of the federal budget in recent years to make up the difference, but the short-term solutions have resulted in Congress approving only a series of temporary infrastructure funding patches since a 2005 transportation bill expired in 2009, including an $11 billion 2014 measure that is now scheduled to expire on May 31.

The idea of increasing the gas tax to help pay for construction projects has been discussed but hasn’t found traction.

Additional proposals from the White House and lawmakers like Sens. Rand PaulRand PaulLawmaker seeks to investigate Obama's foreign tax compliance law Funding bill rejected as shutdown nears GOP senators hit FBI on early probe of NY bombing suspect MORE (R-Ky.) and Barbara BoxerBarbara BoxerDems gain upper hand on budget Overnight Finance: Senate rejects funding bill as shutdown looms | Labor Dept. to probe Wells Fargo | Fed to ease stress test rules for small banks Funding bill rejected as shutdown nears MORE (D-Calif.) rely instead on the idea of taxing overseas corporate revenue to pay for a new round of road projects.  

The proposal, which is known as "repatriation," has also been supported by the Obama administration, which included a $478 billion transportation bill he sent to Capitol Hill last month.

The Obama transportation bill has gone nowhere in the Republican-controlled chambers of Congress, however.

AEM's O'Brien said it was time for lawmakers to get in the game of figuring out a way to pay for a transportation funding extension.

"We’re now 80 days away from the Highway Trust Fund running out of both money and congressional authority," he said. "That’s why the proposal from our friends at ARTBA should prompt renewed — and urgent — discussion of how Congress can avoid another artificial disaster."

O'Brien said recent votes by Republican-led state legislatures to increase local gas taxes have shown it is safe for Republicans to support such an increase at the federal level now.

"Republicans can vote to increase the gas tax. We’ve seen that repeatedly this spring as GOP legislatures in Iowa, South Dakota, Utah and more have voted to do so," he said.

"Republicans in Georgia are getting religion, too," O'Brien continued. "Similar to ARTBA’s proposal, Gov. Nikki Haley has proposed offsetting a modest adjustment to South Carolina’s gas tax with an income tax cut. A majority of Palmetto Staters back the plan."

Conservative groups in Washington have made clear that they would consider an increase in the federal fuel levy a tax hike, however.

"Rather than raise the federal gas tax, a better policy would be to repeal the federal tax and let states pay for their own road projects," the Heritage Action group said in a blog post on its website. "Devolving transportation projects back to the states will ensure that gas tax money is used for the highest value-added projects.

The road builders' Ruane countered Thursday that increasing the gas tax would provide a more permanent solution to the transportation funding problem than any of the other ideas that have been floated thus far.

“Just using repatriation as a one-time, short-term patch for Highway Trust Fund investments does not address or resolve the trust fund’s underlying revenue stream problem,” he said. “After the repatriation ‘fix’ period is over, the trust fund’s cash flow problem not only returns, but will be worse than it is now, threatening another crash in the highway and transit investment program."