March 18, 2005 - Senate Panel Makes Quick Work of Highways Bill; Equity Bonus Targets Higher Rate-of-Return on Gas Taxes, But Constraints Would Slow Changes; Formula Shift Would Trim California CMAQ Funding

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Senate EPW Committee Version of SAFETEA 2005 Bill - March 2005
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The source for much of this information is the "Federal Formula Grants and California" project, a joint venture between the California Institute for Federal Policy Research and the Public Policy Institute of California (PPIC)

Senate Panel Makes Quick Work of Highways Bill; Equity Bonus Targets Higher Rate-of-Return on Gas Taxes, But Constraints Would Slow Changes; Formula Shift Would Trim California CMAQ Funding

On March 16 and 17, 2005, Senate transportation authorization committees favorably reported major portions of a $284 billion surface transportation measure with overwhelming bipartisan support, although many members expressed disappointment at overall funding levels. Bills that closely resembled last year's Senate legislation (except for the funding levels) were approved by both the Senate Environment and Public Works (EPW) Committee, which has jurisdiction over highways and planning programs, and the Senate Banking, Housing and Urban Affairs Committee, which oversees transit programs. The bills pared down funding authorizations, with the EPW bill providing $227.4 billion for highway program expenses and the Banking Committee bill approving $51.6 billion for transit.

EPW Chair James Inhofe (OK), author of the Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2005 (SAFETEA), noted that although he backed the higher, $318 billion funding level of last year's Senate SAFETEA bill (S.1072), the new SAFETEA 2005 had been scaled back to reflect a funding figure that would be acceptable to the White House and to Senate Majority Leader Bill Frist (TN). He correctly anticipated discontent among committee members over funding figures, and in his opening remarks, urged members not to attempt to drive up the funding levels during the mark up, "if the final product is higher than $283.9 billion over six years," Sen. Inhofe warned, "the bill will not be considered by the Senate." The Bush Administration has threatened to veto any legislation that spends more than that amount.

Ever since the 2003 expiration of the previous transportation law, the Transportation Equity Act for the 21st Century (TEA-21), Congress has struggled to send a successor to the President's desk. Last year, the Senate, House, and White House failed to reach a consensus on overall funding levels, scuttling the 108^th Congress' renewal efforts at the conference negotiation stage. Temporary extensions have maintained TEA-21 authority at 2003 levels throughout the period, but industry advocates and state and local authorities have pushed Congress to complete work on a multi-year bill before the most recent extension runs out at the end of May.

Sen. Barbara Boxer, a member of both the EPW and Banking Committees, charged that the measure's funding levels were inappropriate, although she expressed hope that the Senate Finance Committee could find additional resources before the bill is sent to the Senate Floor. EPW member Sen. Max Baucus, who is also Ranking Democrat on the Finance Committee pledged to help fill the financing gap, saying, "We will find additional funding."

An Equity Bonus provision in the bill would provide each state with a higher minimum rate of return than the current Minimum Guarantee (MG) level. Highway donor states -- those that send more revenues to the Highway Trust Fund (HTF) than they receive back in federal highway spending -- have led an effort to increase the minimum guarantee from 90.5 percent in current law to 95 percent. Proponents of last year's $318 billion Senate legislation purported that it would have achieved that 95 percent target, largely because of the larger amount of funding available for distribution. With its lower funding total, the 2005 version of SAFETEA attempts to provide a 92 percent guaranteed rate of return in its Equity Bonus (EB). However, increases above the 90.5 percent level would only be achieved withing narrow constraints.

In a number of ways, the Senate EB differs functionally from the MG in current law. The MG guarantees states receive back no less than a set percentage (now 90.5 percent) of its gas tax revenues for several major highway programs. The Senate bill would leave out earmarked High Priority Projects (HPPs) from the "scope" of programs examined to determine equity, whereas the House-passed TEA LU bill would give each state the greater portion of its 90.5 percent MG return measured with or without HPPs counted.

In addition, the Senate EB would set a maximum funding growth "ceiling" and a minimum growth "floor." Although the old 90.5 percent return would continue to hold, the EB growth ceiling would cap any state's percentage funding growth above its TEA-21 average share of total funds to 19 percent (for 2005), 22 percent (for 2006), 23 percent (for 2007), and 28 percent (for 2008). The ceiling would be lifted in 2009.

A minimum growth "floor" in the Senate's EB would ensure that no state receives less than a 10 percent increase in highway program receipts compared to the amount it received under TEA-21. The panel rejected, 5 to 13, Sen. Hillary Clinton's (NY) proposal to amend the bill to increase the state's 10 percent minimum growth floor. The proposal would have benefitted highway donee states such as Connecticut and New York at the expense of donor states, according to senior panelist and amendment opponent Sen. Kit Bond (MO). "Nothing happens in a vacuum," said Sen. Inhofe who voted against the amendment.

The EB includes two hold harmless provisions. One simply says no state may lose actual dollars from one year to the next. However, a second hold harmless would ensure that the percentage of total funds enjoyed certain states would not decline below their TEA-21 averages. The special EB treatment would apply for only states that are either (1) sparsely-populated, (2) low in population, (3) very low-income, or (4) high in traffic fatalities on interstate highways.

The bill also retains last year's S.1072 language that eliminates differential weighting in the calculation of Congestion Mitigation and Air Quality Improvement (CMAQ) program grants to states. CMAQ is the only core highway formula program that offers grants to states with air quality districts not in EPA compliance, for projects intended to reduce congestion and pollutant emissions. Because of the range of air quality challenges in California (particularly ozone and carbon dioxide pollution), the CMAQ formula currently awards the state with 22 percent of CMAQ distributions. The formula apportions funds to states based on the severity of ozone and carbon monoxide pollution, however, the Senate bill proposes to use a single weighting multiplier framework to determine CMAQ awards to areas with ozone pollution, regardless of the severity of that pollution. California's share of CMAQ awards would also be diluted by the introduction of fine particulate matter (PM 2.5) to formula calculations. A number of new areas not currently receiving grants would become eligible under the Senate plan so long as they do not meet PM 2.5 air quality standards. The Los Angeles Metropolitan Transit Authority (LAMTA) estimates that the "one-size fits all"approach and the PM 2.5 adjustments to the formula could cost California as much as $160 million in CMAQ grants over four years.

The Senate bill did not propose earmarks for highway or transit programs, unlike the House TEA LU bill, which earmarked $10.7 billion in more than 3,600 High Priority Project programs.

The bill was reported out of EPW by a 17 to 1 vote, with Sen. Joseph Lieberman (CT) submitting the only dissenting vote. For more information on the SAFETEA highways mark up, visit the Senate Environment and Public Works Committee at: http://epw.senate.gov/ .

More information regarding transportation reauthorization and its potential effect on California, visit the California Institute's transportation page, at http://www.calinst.org/transpo.htm . The information and analysis are made available thanks to capabilities developed under the Federal Formula Grants and California project, a joint venture between the California Institute for Federal Policy Research and the Public Policy Institute of California (PPIC). For all products in the study series, visit http://www.ppic.org/main/series.asp?i=22 . The project includes two major transportation reports. A paper on California's relationship with federal highway programs is available at http://www.ppic.org/main/publication.asp?i=467 , and a September 2004 report on federal transit programs is available at http://www.ppic.org/main/publication.asp?i=550 .

Senate Banking Committee Marks Up Transit Reauthorization Bill

On Thursday, May 17, 2005, the day after the EPW Committee marked up provisions to reauthorize federal highway programs, the Senate Banking Committee met to mark up the transit component of transportation renewal. Like the EPW session, the transit mark up also featured bipartisan grumbling over inadequate financing and support for speedy completion of a bill before the May 31st deadline. In the end, the bill was reported favorably out of committee unanimously.

Some Democrats on the committee objected to the disproportionate cut in transit spending in the committee bill, noting that the Senate-approved 2004 bill had apportioned 18.8 percent of that total to transit spending whereas the 2005 bill, cuts the transit share to 18.1 percent, a disparity of $1.7 billion. Opting to not offer an amendment in committee, Ranking member Paul Sarbanes (MD) stated that he may propose a more balanced highways-transit split once the bill reaches the Senate Floor.

During the EPW mark up, Sen. Bond insisted that without additional funding drawn out of the transit budget, SAFETEA would not be able to guarantee the 10 percent growth floor in the reported bill.

Sen. Charles Schumer (NY) representing the state with the highest national share of transit receipts expressed support for the effort to boost transit funding to $53.3 billion, "We cannot let these ratios erode, " said Sen. Schumer, "Mass transit is the life blood of our economy." California receives the second largest share of transit grants, 14.8 percent of total spending throughout the course of TEA-21. Sen. Schumer also warned panelists of the dangers of underfunding transit in a time when transit popularity is growing at overwhelming levels. According to Sen. Schumer, transit ridership grew 28 percent nationally between 1992 and 2002, making it the fastest growing mode of transportation.

The bill's highway safety provisions have yet to be addressed before the bill may be debated on the floor. Transportation advocates predict that floor proceedings will commence on the week of April 18th to give members enough time to report a bill and move into conference negotiations.

For more information on the SAFETEA transit mark up, visit the Senate Banking, Housing and Urban Affairs website at: http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=143 .

More information regarding transportation reauthorization and its potential effect on California, visit http://www.calinst.org/transpo.htm , which presents analysis made developed under the Federal Formula Grants and California project, a joint venture between the California Institute for Federal Policy Research and the Public Policy Institute of California (PPIC), at http://www.ppic.org/main/series.asp?i=22 . A 2004 report on federal transit programs and California is available at http://www.ppic.org/main/publication.asp?i=550 .

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