Congress Passes Major Transportation Bill, Preserving the Status Quo

» MAP-21 will provide federal funding for highways and transit over the next 27 months. Passing the bill was an accomplishment for a do-little Congress, but serious issues about how to pay for transportation in the future have yet to be resolved. Nonetheless, there are some interesting features in the bill for new transit capital projects.

On Friday, the U.S. House and Senate passed MAP-21*, the federal government’s latest ground transportation authorization bill, modeled closely on the bill that passed the Senate in March. The $105-billion piece of legislation will provide funding for essential highway and public transportation programs, most of which are in the form of formula-based allocations that direct money automatically to states and metropolitan areas. The bill will be in effect for 27 months, expiring in September 2014.

MAP-21 replaces SAFETEA-LU, the last long-term federal transportation bill, which expired in 2009; in the meantime, we have seen extension after extension of that law and a seemingly never-ending set of grueling disagreements about the future of mobility policy in the U.S. that revealed stark partisan differences about the role of the federal government in directing the construction and maintenance of the nation’s road and transit systems.

There have been points in this debate when the chances of a bill passing — any bill other than an extension — seemed close to nil. Democrats have demonstrated a sincere interest in expanding the amount spent on new transportation capital, especially in high-speed rail and transit, as illustrated by President Obama’s proposal in early 2011 for a $556 billion, six-year bill. Republicans, meanwhile, have argued for constraining the amount spent on highways to revenues collected from fuel taxes — and abandoning efforts to expand funding for sustainable mobility. But ultimately the two sides have similar goals: To maintain existing transportation funding without increasing taxes to pay for them; in other words, to preserve the status quo.

Indeed, that is the first point to make clear about this transportation bill: It is neither transformational nor a long-term problem-solver. It does not “fail America,” as some have suggested, by failing to make the major reforms that have been suggested by proponents for four years. It does reduce the complication of moving a major project through the federal grant process and it reduces the overall confusion of programs in the U.S. Department of Transportation, two important changes.

It is, however, a disappointment that the bill does not do more to equalize decision making between modes, of course: Why do there continue to be separate budgets for highways and for transit? Why can’t rail (which goes unfunded in this legislation) be compared to highway expansion when the latter is being considered? Meanwhile, why do transit expansion projects continue to be subjected to rigorous competitions for funding, while highways do not?

The bill continues the decades-long trend of declining investment in transportation at the national level. As the following chart shows, as a share of the federal budget, transportation spending has declined from about 3% in the 1960s to about 2.5% in the 1970s to about 1.5% today. At the national level (including local and state funding), transportation spending has declined from about 2% of U.S. GDP to less than 1.5% (though there was a stimulus-related jump in 2009). There has been a general decline in the perception of the importance of spending public dollars on transportation. That trend will continue under MAP-21, which provides about $50 billion per year in funding, equivalent to spending today adjusted for inflation.

It is worth questioning whether we need to significantly increase spending on transportation. The massive federal investments in new highways from 1956 to the mid-1980s encouraged the decentralization of our cities and a decline in our transit systems. Now that our cities are growing again, some might argue that they should simply find the tax revenues to pay for improvements themselves — but that suggestion has its real weak points, specifically because it diminishes the redistributive potential of the federal system. Moreover, as long as national funding continues to pump tens of billions into highways every year, I question how cities will be able to keep up.

Preserving the status quo doesn’t mean keeping spending in line with revenues from the fuel tax. Because neither party has demonstrated an interest in working for an increase in the gas tax or establishing a viable alternative, maintaining current spending levels means that funds must be identified from elsewhere.

As such, the law creates a number of new financing methods to pay for expenditures not covered by the Highway Trust Fund, into which fuel taxes flow. The biggest change involves altering the way pension interest rates are calculated. But most of the shortfall will be covered by the government transferring in $18.8 billion in general funds from income tax collections, $6.2 billion in FY 2013 and $12.6 billion in 2014. Because the U.S. operates with a deficit, that money is effectively debt-based. Got a problem with that? The vast majority of legislators from both sides of the aisle do not seem to be particularly concerned.

As far as I know this is the first time in a federal transportation authorization bill that federal spending on ground transportation will be funded from a source outside of user fees. The conclusion: Federal transportation funding is no longer really dependent on the collection of user fees, and that’s not necessarily a bad thing at all.

MAP-21 will expire in 2014, but as indicated by the transfers from the general fund that will be necessary to fund programs, it will carry on the legacy of a bankrupt Highway Trust Fund. The Congressional Budget Office estimates that — assuming a flat level of spending only adjusted to inflation — by FY 2015 there will be a $9 billion shortfall in the Fund; by FY 2022, it will have increased to $95 billion. That’s money that will have to be redirected from the general fund again beginning in 2014, when the bill’s replacement is being devised, unless by then a new user fee funding device has become sufficiently popular to members of the next Congress.

MAP-21, of course, is more than just a spending bill. Like its predecessor, the large majority of funding in the bill is dedicated to highway spending. As can be seen in the chart below, transit and rail have established a share of about a quarter of federal ground transportation spending, a ratio that is similar to that of spending by state and local governments. That split has been in place since the mid 1980s and is way down from the large percentage of federal ground transportation funds dedicated to transit and rail in the 1970s and early 1980s. MAP-21 maintains that politically motivated balance. (The bill does decrease funding for bicycling and pedestrian programs, obviously not good news, but I’ll leave that discussion to others.)

In terms of funding for mass transit, the bill offers $8.478 billion in FY 2013, rising to $8.595 billion in FY 2014, both on par with existing funding levels, adjusted for inflation. Programs designed to distribute funds by formula remain the largest percentage of the bill and grow similarly, accounting for about $6.5 billion in spending in both years, mostly to pay for the purchase of new buses and the reconstruction of facilities (such as through State of Good Repair grants). The capital investment program, however, has been cut by about $50 million and is stuck at $1.91 billion in both years. This funding provides for the Small Start and New Start programs, which provide the grant funding for new rail and bus corridors.

Despite the lack of increase in funding for those capital expansion programs, a close examination of the bill shows that it offers a number of interesting changes in the way this money is to be allocated to transit agencies:

• The New Starts program, in the past reserved to new rail or bus lines operating in dedicated rights-of-way in new corridors, will be expanded to include “Core Capacity Improvement Projects” that significantly improving existing infrastructure while increasing capacity on the existing line by 10% or more.
• Bus rapid transit projects will be classified and funded in the following two ways:
  • Corridor-Based BRT will lack a separate right of way. As the bill describes, however, these BRT programs will involve “a substantial investment in a defined corridor as demonstrated by features that emulate the services provided by rail… including defined stations; traffic signal priority for public transportation vehicles; short headway bidirectional services for a substantial part of weekdays and weekend days.”
  • Fixed Guideway BRT, on the other hand, means a bus-based project that includes all of the features of the Corridor-Based BRT, plus “the majority of the project operates in a separated right-of-way dedicated for public transportation use during peak periods.” The law includes the provision that the federal government will provide 80% funding for up to three such projects each fiscal year. This is an excellent opportunity for cities that want to invest in a big and serious BRT program to set their ideas into action, with limited local support needed. I hope they’re paying attention.
• The federal government will provide expedited review for fixed guideway projects under two circumstances: New Start projects whose budget is less than $100 million in total; and projects designed by transit agencies that have recently completed similar projects that have achieved or surpassed expected budget, cost, and ridership measures.
• The Secretary of Transportation will be able to increase the federal share for a capital expansion project if “the net capital project cost… is not more than 10 percent higher” and ridership estimates are “not less than 90 percent” of the estimates at the time the project was approved into the engineering phase of the review process.

The bill expands the TIFIA reduced cost loan program to $1 billion a year (from just over $100 million) and increases the maximum federal share from 33% to 49%, both important advances for cities that promise to dedicate future tax or toll revenues to pay for transportation improvement programs. Essentially, the federal government is increasing the ability of local governments to take advantage of lower federal borrowing costs. In Los Angeles, which has promoted the program heavily under the name “America Fast Forward,” TIFIA loans will allow for the completion of such projects as L.A.’s Westside Subway.

MAP-21 does allow small transit agencies — those with 100 buses used in the peak — to receive operating assistance (currently only capital expenditures are covered by federal transit funding). Though this provision isn’t the kind of large increase in operations support that might be beneficial to cash-starved agencies that are expanding their systems while firing bus drivers, it raises the question of whether large transit agencies could split themselves into smaller operating entities to receive federal operating support via a loophole in the law.

The bill does have one really unacceptable feature: It reestablishes the inequitable relationship between the tax benefits provided for people using transit and people who park. Before the passage of the stimulus in early 2009, people taking transit were able to deduct up to $120 a month from their taxes for doing so, whereas people who parked were allowed to deduct $230; with the stimulus, those figures were temporarily equalized at $230. Now, MAP-21 pulls transit users back down, to $125 in deductions a month, compared to $240 a month for parkers. That’s a disappointment.

* Moving Ahead for Progress in the 21st Century. The bill text. It still needs President Obama’s signature to become a law, though this is expected in the coming days.