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Congress Faces August Recess Deadline to Patch Highway Trust Fund
Upon returning from the July 4th recess, Congress faces a looming deadline to patch up the dwindling Highway Trust Fund (HTF) before the end of July. Without action, the U.S. Department of Transportation (DOT) will begin slowing payments to state transportation departments by August 1 for already underway federal-aid highway projects. The HTF is expected to reach a balance of $4 billion by July 25. Four billion dollars is the lowest level of funding the HTF can reach before it is unable to support multiple large scale construction projects at once. The Federal Highway Administration has stated the HTF cash balance will reach zero by the end of August. The Congressional Budget Office (CBO) says the trust fund would not be able to support any new highway or transit investment when FY 2015 beings October 1 and needs an additional $8.1 billion through December. The House Ways and Means Committee is working on a HTF patch, while a bipartisan plan from the Senate side is taking shape. Congress is expected to pass a short term measure before they adjourn for a month long recess beginning August 4.
The House Ways and Means Committee will mark up a proposal to shore up the HTF on Thursday, May 10. HR 5021, The Highway and Transportation Funding Act, would use extensions of customs user fees and alter pension fund rules to fund the HTF through next May. This proposal would generate $6.4 billion from changing pension accounting practices and $3.5 billion from extending customs fees through 2024. Additionally, HR 5021 would transfer $1 billion from the Leaking Underground Storage Tank Trust Fund (LUST) to the HTF. Altering pension accounting practices is not a new tactic. Congress previously employed the method to finance MAP-21 in 2012 and the December 2013 budget agreement. House leaders previously rejected a plan that would use savings from ending USPS Saturday delivery to fund the HTF.
On June 24, Senator Ron Wyden (D-OR), Chairman of the Finance Committee, released a proposal to patch the HTF by transferring $9 billion from the General Fund to the HTF. Wyden’s proposal pays for the transfer by increasing the Heavy Vehicle User Tax (HVUT), which has not been increased since 1984 and implementing some changes to the tax code. The tax code changes in the Wyden plan include: additional required information on mortgage interest tax returns; a six-year statute of limitations on overstated taxes; revocation or denial of passports for delinquent taxes; and a requirement that inherited IRA savings be distributed within five years. The proposal would generate the offsetting revenue over the next 10 years.
Republicans on the Finance Committee rejected the plan, saying it focuses solely on generating revenue and not on cutting costs. Ranking Finance Committee Member Senator Orin Hatch (R-UT) has proposed an amendment to the Wyden plan that will allow expanded oil and natural gas exploration in Alaska and the outer continental shelf to raise $3.2 billion over 10 years. It would also require that the Internal Revenue Service hire private contractors to collect outstanding taxes owed, a provision that Hatch thinks would generate $2.4 billion. The measure would repeal a tax credit for plug-in vehicles, saving $1.4 billion, and cut funding for the Advanced Technology Vehicle Manufacturing Loan Program, which would reduce outlays by $500 million.
Hatch’s proposal would also move payment for all functions that are not directly related to construction away from the trust fund and into the general fund. That is intended to ease the trust fund’s financial burden by $840 million and would have the added advantage of giving Congress more authority over transportation programs. Additionally, the proposal would transfer $1 billion from a trust fund intended to deal with leaking underground fuel tanks to the highway trust fund.
The Senate Finance Committee will markup a proposal once Senator Hatch and Senator Wyden come to an agreement. The final plan is likely to be a combination of revenue generating and cost cutting measures that will extend the HTF through December of this year and is expected to exclude the HVUT tax.
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