OMB: Senate Seeking Too Much Highway Money to Fund Transportation Bill

These numbers, from the Office of Management and Budget, indicate that the Highway Account of the Highway Trust fund is in better fiscal shape than previously thought. So why are senators still chasing after $12 billion? Source: OMB

Sen. Max Baucus (D-MT) and his Finance Committee have been looking high and low for a $12 billion patch to fund the transportation reauthorization bill that passed the Senate EPW Committee a few weeks ago. According to Politico’s transportation reporters, the top Republican on the Finance Committee, Sen. Orrin Hatch, has already rejected several of Baucus’s ideas.

But the question is not only, “How will we get the money?” It’s also, “How much money do we need?” The dollar amount the Senate is seeking could lavish more money than necessary on roads while leaving transit out in the cold.

The EPW Committee wants to hold transportation spending at current levels (plus inflation), which they estimate at $109 billion over two years. Receipts into the Highway Trust Fund (from gas taxes and other vehicle fees) aren’t expected to be sufficient to pay that bill. The Congressional Budget Office told the committee that the HTF is $12 billion short of the amount needed to fully fund the bill. That amount is destined just for highways, based on projections that the Mass Transit Account will be solvent through the end of 2013 – in fact, ending that year with a $1.5 billion balance.

But last month, the two top members of the Senate Banking Committee, which has jurisdiction over transit, asked FTA Administrator Peter Rogoff for confirmation of those numbers [PDF]. Rogoff replied that he, in fact, found another set of numbers to be more accurate [PDF].

In August, the Office of Management and Budget completed a “Mid-Session Review” (MSR), using updated estimates. Rogoff explains the OMB’s findings:

Assuming baseline levels of FTA contract authority and obligation limitations, our latest MSR estimates are that the MTA will have a $2.4 billion cash balance (positive) at the end of fiscal year 2012, but a $1.9 billion cash shortfall (negative) at the end of fiscal year 2013. Larger cash shortfalls are also projected for fiscal years 2014 through 2017 assuming baseline funding levels…

The FTA recognizes that minimum levels of funding are needed in the MTA at any time of the year to avoid having insufficient funds to cover potential outlays. For the MTA this “prudent balance” level is $1 billion, so the MTA will need $2.9 billion ($1 billion prudent balance plus $1.9 billion cash shortfall) for fiscal year 2013 to maintain this level.

While it remains above this “prudent balance” level, it has sufficient cash to cover one month’s projected outlays. If the account balance were to drop below this level, the Department would begin its notification process to grantees because the account would be at risk of having insufficient funds to cover potential outlays.

The OMB also finds that the highway account will have a $3.9 billion shortfall at the end of 2013 [see above].

These numbers are a world away from the CBO estimates. The OMB shows more parity between highways’ needs and transit’s needs, while lowering the total funding hurdle by more than half.

I wondered if part of the enormous inflation of highway needs in the CBO report was the product of a larger need for a “prudent balance,” but an FHWA spokesperson told me they don’t have the discretion to control the balance the way FTA does. According to him, the FHWA doesn’t maintain a “prudent balance” at all.

So what’s the proper amount that the Senate needs to find to plug the hole in the bill? Neither estimate seeks to leave any money in the bank, but just to end the year 2013 at the break-even point. CBO says the magic number is $12 billion to end 2013 without bankrupting the HTF. OMB says it’s $1.9 billion for transit plus $3.9 billion for highways, equaling $5.8 billion, plus the $1 billion prudent balance the FTA wants to maintain, for a total of $6.8 billion.

But one Congressional aide told me the Banking Committee isn’t looking to lower the total, but rather add the $2.9 billion for transit on top of the $12 billion Finance is already looking for. After all, no one wants to appear to be taking anything away from highways.

That’s one way to do it. But using the most accurate set of numbers has to be the best policy, not to mention the one easiest for Finance to achieve — and for deficit hawks to approve.

The Highway Account has no divine right to $12 billion that may greatly exceed the actual deficit. There’s no need to overfund road-building at a time of extreme fiscal discipline. So why haven’t advocates of the Senate bill been trumpeting the results of the OMB report and its finding that the bill will cost far less than projected, giving the Finance Committee an easier job to do?

  • JD

    The problem is that a year-end balance of zero in either account does not actually mean that you have enough money to make it through the whole year.  In the first instance, DOT spends several hundred million dollars each business day drawn on the HTF, but the HTF only receives deposits of tax receipts from Treasury twice a month.  The Trust Fund has to maintain a rotating balance to make sure that they don’t have to shut down on a day-to-day basis while waiting for the tax payment at the end of the semimonthly period.  Second, the last tax payment from the Treasury to the Trust Fund takes place in mid-October and covers all of the tax payments made in late September.  This payment, one of the biggest made all year, is retroactively credited to the Trust Fund.  (So if you are projecting a year-end balance of zero, then your balance on September 30 is actually about negative $2-3 billion because you won’t get back up to zero until the double payment in mid-October.)  A year-end balance projection of zero would shut down FHWA for the first two weeks of October.  FHWA has estimated in the past that they need to shoot for a year-end projected Highway Account balance of $4 billion to make absolutely sure they don’t have a day-to-day program shutdown in August, September or early October.  DOT and CBO dispute how much the comparable cash cushion is for the Mass Transit Account to ensure that no temporary shutdowns occur – whether it is $1 billion or $2 billion.  CBO’s $12 billion number includes a $4 billion Highway Account cushion and a $2 billion Mass Transit Account cushion.  So OMB’s number is really $5.8 billion plus another $5 or$ 6 billion cushion, meaning $10.8 or $11.8 billion, making it roughly comparable to CBO’s projections, just distributed differently between highways and transit.  

  • TM

    OMB and CBO have always had different estimates — Congress uses CBO numbers because they are Congress’s budget agency, not OMB.

  • DD

    Why is there always a paranoid tone in your articles, as though someone is always out to screw transit?

  • Brody

    OMB is lame.  No vision for the future of America.  OMB reflects an approach to mediocrity and a nation sliding into the middle of the pack as far as quality of life.  What happened to the boldness of Kennedy and the take no for an answer of Reagan?  We’re being led today by a bunch of patsies. 

  • TM

    Brody, what does OMB have to do with this? They are just giving revenue and outlay estimates. There’s no policy in this table.

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