Squabbling over Discretionary Spending

The White House proposes changing the way transportation money is described, but Congress is balking at the idea

Today, funds for transportation come almost entirely from two sources: the highway trust fund and the aviation trust fund. The highway money comes from a 18.4¢ tax on every gallon of gasoline sold in the United States (as well as some money from other types of fuel); most of the dollars are distributed to states for roads, though some is sent to the Federal Transit Administration for transit and a small amount goes to transportation research. The Airport and Airway Trust Fund taxes airlines and other users of air space for the purposes of rebuilding airports and maintaining the air traffic control system.

Today, money distributed by these two funds is referred to as mandatory because the amount appropriated each year is set aside in the transportation bill that is reauthorized every five years; it isn’t defined anew in each budget. Other examples of mandatory spending are Social Security or Medicare. To make matters complicated, however, the outlays in the transportation bill are distributed each year in Congressional appropriations acts (such as the one currently being considered), are considered discretionary, meaning that the same funds are defined as both mandatory and discretionary, depending on when they’re discussed.

Other, much smaller amounts given to transportation – often in the form of earmarks – are defined as discretionary and come from general tax revenues.

This distinction between mandatory and discretionary is even less clear – last year, the highway trust fund ran short of money and the U.S. Congress “contributed” $8 billion to the mandatory outlays: road money that was supposed to come, guaranteed, from the trust fund actually came from general revenues. Confusing.

To make matters easier to understand, in his first budget, President Obama proposes changing the system so all funds dedicated to transportation would be considered discretionary. Here’s how the text puts it:

“Budget authority for highway, transit, highway safety, and aiport improvement programs usually has been defined as mandatory contract authority provided in authorizing legislation. However, the levels of contract authority have been, for the most part, constrolled by obligation limitations in the appropriations acts. Outlays from the obligation limitations have always been scored as discretionary. To more transparently display program resources, the Administration proposes changing the budgetary treatment of transportation programs to show both budget authority and outlays as discretionary… The change would not affect outlays or the deficit or surplus – just more transparently convey to the taxpayer the real costs of supporting the transportation infrastructure our Nation needs.”

The push to emphasize transparency in the budget fits with the Obama Administration’s approach as a whole, which is to reveal the “real” costs of things rather than hide them behind smoke and mirrors as was often done during the Bush years. It would also make the budget easier to understand.

But some members of Congress aren’t so happy about the plan. Fourteen senators and representatives signed a letter in protest of the President’s budgetary move, including the chairs (D) and ranking members (R) of the House Transportation and Infrastructure Committee, the Senate Environment and Public Works Committee, the Senate Commerce, Science, and Transportation Committee, and the Senate Banking, Housing, and Urban Affairs Committee. These members of Congress are concerned that the rule change actually represents a decrease in the level of transparency in the budget:

“While proponents of such a scorekeeping rule change argue that it would increase Trust Fund transparency, it would in fact do the opposite, by further merging Trust-Funded programs with non-Trust-Funded programs in the budget process. If any budget process reforms are to be made, they should serve to increase the separation of Trust-Funded programs from non-Trust-Funded programs.

“We have a longstanding commitment to ensuring that the user fees deposited into the Highway and Aviation Trust Funds are in fact used for their intended purposes – to rebuild our nation’s infrastructure. These Trust Funds represent a contract between the Federal Government and the user.”

The main concern these members of Congress are expressing is the fact that by combining discretionary and mandatory spending, the federal government could conceivably take highway or aviation trust fund money and move it to other non-transportation-related programs. The problem with that argument is that all evidence suggests that existing revenues from the highway trust fund account will decrease over time because of more fuel efficient vehicles consuming less gas, and the result will be a transportation program that is continuously being “subsidized” by general budget revenues, as it was last year. Even as our infrastructure needs increase, the dedicated fiscal source for transportation will become increasingly less prominent in the overall funding equation.

Members of Congress may also be concerned that money dedicated to highways by the trust fund, for instance, would be transferred to transit instead. But as long as Congress maintains its willingness to fund transportation – and even specific programs – the President cannot define this change. Congress, after all, must approve the budget every year. If Congress wants to ensure that highway trust money goes to highways, it can; on the other hand, this little twist of the language would make it easier to have a change in priorities, which is sometimes a good idea!

If anything, now is the time to change the system, since trust fund revenues aren’t paying for all the roads we’re building and all the transit systems we need to build. While Congress may be concerned that the change in the labeling of budget items will ultimately mean less funding on transportation, the fact remains that whether mandatory or discretionary, funds determined by Congress’ transportation bill will be distributed as planned. The honesty for which the Obama Administration is asking won’t reduce funding de facto – it will simply make the budget process easier to understand for the rest of us.

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