By Ben Husch
While President Obama's FY 2016 budget proposal would affect nearly every facet of American life, one area of particular focus the administration put forth was a six-year reauthorization of federal surface transportation programs that includes significant increases in funding for highway, bridge and transit programs.
Funding and authorization for federal transportation programs expires on May 31 and the biggest obstacle to passing a long-term reauthorization remains the issue of how to pay for it. With the declining reach of the federal gas tax, which has not been increased since 1993, the federal government transfers $14 billion per year from the general fund to the Highway Trust Fund to help it stay solvent.
The six-year proposal, included in the president’s budget, would combine the revenue from the current gas tax with $238 billion in additional revenue based on the enactment of a one-time transition charge of 14 percent on untaxed foreign earnings.
The combination of these two revenue sources allows the proposal to increase current funding levels of $50 billion per year to approximately $80 billion. Specifically, the proposal would increase funding for highways and bridges by 25 percent along with a nearly 70 percent increase for transit in the first year of the reauthorization. Additionally, it would increase grants to states for a number of highway safety programs as well as provide significant increases for DOT’s TIGER program, from $500 million in FY 2015 to $1.25 billion per year for all six years.
The proposed reauthorization also includes a number of new programs that could direct funds to states including the Multi-Modal Freight Program (MFIP) that would provide $18 billion over six years to improve goods movement.
Other programs include the Critical Immediate Safety Investments Program that would provide $29 billion focused on the reconstruction, restoration, rehabilitation, preservation or safety improvement of existing highway assets. Another program, Fixing and Accelerating Surface Transportation, would provide $3 billion over six years—$500 million per year—in competitive grants for state and local governments to improve strategic transportation investment decision.
In addition to these funding changes, the budget also makes three noticeable financing changes to bond programs that affect transportation projects.
States have been at the forefront of bringing private capital into the mix for transportation projects, better known as public private partnerships.
First, the cap on private activity bonds would be increased to $19 billion from $15 billion. Second, the budget proposes the creation of America Fast Forward bonds, which would be similar to the Build America Bonds included in the Recovery Act. The budget also proposes creating Qualified Public Infrastructure Bonds, which would be a tax-exempt form of municipal bonds modeled on existing Private Activity Bonds, without a cap on activity level.
While the administration’s transportation funding proposal is centered around the idea of reforming the corporate tax code, there are a number of other funding proposals that have been put forth by members of Congress.
Senators Barbara Boxer (D-Calif.) and Rand Paul (R-Ky.), have proposed allowing corporations to repatriate their untaxed earnings at 6.5 percent and devoting those proceeds to the Highway Trust Fund. Additionally, Representative John Delaney (D-Md.) has proposed a bill that would impose a tax of 8.75 percent on repatriated earnings.
There is also the expectation that a bill will be introduced in the coming weeks in both the House and Senate that would raise the federal gas tax gradually over the next few years, although a number of members of Congress have spoken out against such an increase.
Other possible funding methods that have received attention recently include moving away from a per-gallon fee and toward a tax on a barrel of oil as well as directing revenues gained from increased energy production toward transportation funding. With the May 31 deadline quickly approaching, uncertainty regarding future federal transportation funding to states may result in delayed or cancelled projects during the upcoming summer construction season.
Stay tuned to NCSL for the latest updates on the action around federal transportation funding as well as state legislative efforts to increase state revenues for transportation.
Ben Husch is Committee Director for the Natural Resources and Infrastructure Committee in the Washington, D.C. office.
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