As the deadline draws nearer for passing a new surface transportation bill—or at least approving another extension—lawmakers are seeking ways to augment the shaky Highway Trust Fund.

Highway and transit programs have been operating under short-term measures for nearly 20 months because Congress has been unable to produce a new, multiyear authorization. The latest stopgap measure expires on Sept. 30.

Another deadline is looming sometime around fall 2012, when spending from the trust fund's highway account is projected to start exceeding its income. The Senate Finance Committee, which oversees the trust fund, “has already started to think creatively” about transportation finance, Chairman Max Baucus (D-Mont.) said at a May 17 hearing. He says the committee has been studying such things as public-private partnerships, infrastructure bonds and a national infrastructure authority.

Baucus said, “All options should be on the table.”

But one major alternative—raising the 18.4¢-per-gallon federal gasoline tax, which is the trust fund's main revenue source—is a non-starter, as the Obama administration and some key lawmakers have opposed the plan.

Given the opposition to a gas-tax hike, Congress is looking at other supplementary ways to fund highways and transit. Former Pennsylvania Gov. Edward Rendell (D), co-chairman of the infrastructure advocacy group Building America's Future, laid out his short list in testimony before the committee. His top priorities include broader authority for tolls on existing federally funded highways, tapping the private sector for investments; bonds; expanding federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loans; launching an infrastructure bank; and expediting projects by shortening the time for environmental reviews.

The Associated General Contractors of America released on May 23 a set of recommendations for funding and improving federal transportation and other infrastructure programs. Among the transportation financing proposals in AGC's plan are an infrastructure bank; expanding tolling authority; accelerating project reviews; reviving the expired Build American Bond program and instituting public-benefit bonds; and establishing a new transportation user-fee panel, like the Postal Regulatory Commission, to “depoliticize” the process of setting rates for federal gas taxes and other transportation fees.

Industry groups have endorsed some or all of those options. But looking at Rendell's list, Pam Whitted, National Stone, Sand and Gravel Association senior vice president for legislative and regulatory affairs, says, “All of these things are little bites, but none of them, except an increase in the user fee on gas, would really fill the [funding] gap. And even that would have to be around 10¢ to 15¢.”

The funding gap is large. In a 2008 report, the congressionally mandated National Surface Transportation Policy and Revenue Study Commission said that, together, all levels of government were spending less than 40% of the $225 billion per year needed to bring the existing transportation system to “a state of good repair” and expand it.

Brian Pallasch, American Society of Civil Engineers' managing director for government relations and infrastructure initiatives, says some of the financing alternatives the Senate Finance Committee is considering “are useful when you're looking at large projects.”

For example, TIFIA loans have been part of the funding packages for major highway and other projects around the country. However, Pallasch says, those alternatives are “not going to be the panacea for the larger problem, which is the chronic underinvestment that we have.”

David Bauer, American Road & Transportation Builders Association senior vice president for government relations, says, “The solution is 'all of the above,' ” Bauer adds, “We need a TIFIA program. We need tolling. We need an infrastructure bank, and we need growth in the core [surface-transportation] programs.”

He says, “I don't think that we're in an environment that allows for a silver-bullet solution here because the bullet would be huge. What we might be able to pull off is cobbling together a host of things that all move the ball … and the cumulative impact could potentially be very productive.”

Joseph Kile, the Congressional Budget Office's assistant director for microeconomic studies, told the Senate committee that the trust fund's highway account will show a shortfall toward the end of fiscal 2012—the last day of which is Sept. 30 of that year—or early in fiscal 2013.

Baucus recently floated the idea of producing a highway-transit bill that would last only two years. The Obama administration, House Transportation and Infrastructure Committee Chairman John Mica (R-Fla.) and many in industry prefer a six-year bill.

The Senate banking committee's top Republican, Richard Shelby of Alabama, said on May 19 he also prefers a six-year measure. The banking committee will write the transit title of the Senate transportation bill.

Baucus says the trust fund's current revenue could finance a two-year bill at $42 billion a year for highways. But if the fund's present revenue were spread over six years, the annual amount available would be slashed to $28 billion.

The trust fund has limped through the past couple of years only because of transfers from the general fund totaling about $34.5 billion since 2008.

ASCE's Pallasch says, “At some point, we can either find ways to raise revenue, or we can accept a transportation program that's going to be a third less than what it is today.” He adds, “I guess the decision has to be made: Do we want a robust surface-transportation program to address the nation's economic needs, or are we just going to continue to slide backward.”

Ways To Supplement the Highway Trust Fund
Expand tolling on existing highways Pilot program started in 1998 allows tolling on three existing interstates. DOT says toll revenue must finance work on the road to be tolled.
Expand TIFIA federal loans Launched in 1998. Popular way to help fund big projects. Key lawmakers want to expand the current $122-million direct funding that supports $1.2 billion in loans.
Infrastructure bank or fund Proposals from Obama administration and two pairs of Senators. There are concerns about the bank’s structure and degree of independence from the federal government.
Revive Build America Bonds Stimulus-act program expired on Dec. 31. Obama administration and the AGC support bringing it back. But federal interest-rate subsidy may be reduced.
New tax-credit bonds Sen. Ron Wyden (D-Ore.) proposed $50 billion over six years in bonds. Investors would get a tax credit.
Source: Senate Finance Committee, BuildING America’s Future, U.S. DOT, Sens. John Kerry and Jay Rockefeller, Treasury Dept., AASHTO, AGC