    [Senate Hearing 114-276]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-276

                           DEAD END, NO TURN AROUND,
                            DANGER AHEAD: CHALLENGES
                        TO THE FUTURE OF HIGHWAY FUNDING

    =======================================================================

                                    HEARING

                                   before the

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 18, 2015

                                   __________

          [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Printed for the use of the Committee on Finance
                                     ______

                             U.S. GOVERNMENT PUBLISHING OFFICE

    20-336-PDF                     WASHINGTON : 2016
    -----------------------------------------------------------------------
      For sale by the Superintendent of Documents, U.S. Government Publishing
      Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
             DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
                              Washington, DC 20402-0001

                              COMMITTEE ON FINANCE

                         ORRIN G. HATCH, Utah, Chairman

    CHUCK GRASSLEY, Iowa                 RON WYDEN, Oregon
    MIKE CRAPO, Idaho                    CHARLES E. SCHUMER, New York
    PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
    MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
    JOHN CORNYN, Texas                   BILL NELSON, Florida
    JOHN THUNE, South Dakota             ROBERT MENENDEZ, New Jersey
    RICHARD BURR, North Carolina         THOMAS R. CARPER, Delaware
    JOHNNY ISAKSON, Georgia              BENJAMIN L. CARDIN, Maryland
    ROB PORTMAN, Ohio                    SHERROD BROWN, Ohio
    PATRICK J. TOOMEY, Pennsylvania      MICHAEL F. BENNET, Colorado
    DANIEL COATS, Indiana                ROBERT P. CASEY, Jr., Pennsylvania
    DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
    TIM SCOTT, South Carolina

                         Chris Campbell, Staff Director

                  Joshua Sheinkman, Democratic Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman,
      Committee on Finance...........................................     1
    Wyden, Hon. Ron, a U.S. Senator from Oregon......................     4

                                   WITNESSES

    Kile, Joseph, Ph.D., Assistant Director for Microeconomic
      Studies, Congressional Budget Office, Washington, DC...........     6
    LaHood, Hon. Ray, senior policy adviser, DLA Piper, Washington,
      DC.............................................................     7
    Moore, Stephen, visiting fellow in economics, The Heritage
      Foundation, Washington, DC.....................................     9

                   ALPHABETICAL LISTING AND APPENDIX MATERIAL

    Hatch, Hon. Orrin G.:
        Opening statement............................................     1
        Prepared statement...........................................    39
        Letter to Hon. Max Baucus from Senator Hatch et al., December
          2, 2011....................................................    41
        ``Democrats Steer Towards Highway Funding Cliff,'' by Burgess
          Everett and Heather Caygle, Politico, June 3, 2015.........    43
        ``The Road to Sustainable Highway Spending,'' Committee for a
          Responsible Federal Budget, May 13, 2015...................    45
    Kile, Joseph, Ph.D.:
        Testimony....................................................     6
        Prepared statement...........................................    53
        Response to a question from Senator Hatch....................    73
    LaHood, Hon. Ray:
        Testimony....................................................     7
        Prepared statement...........................................    74
        Responses to questions from committee members................    78
    Moore, Stephen:
        Testimony....................................................     9
        Prepared statement...........................................    79
    Wyden, Hon. Ron:
        Opening statement............................................     4
        Prepared statement...........................................    82

                                 Communications

    American Association of Port Authorities (AAPA)..................    85
    American Association of State Highway and Transportation
      Officials......................................................    94
    American Council of Engineering Companies (ACEC).................   102
    Associated General Contractors of America........................   103
    American Highway Users Alliance..................................   109
    American Public Transportation Association (APTA)................   110
    American Society of Civil Engineers (ASCE).......................   114
    California Transportation Commission.............................   118
    Concrete Reinforcing Steel Institute (CRSI)......................   120
    Fry, Dean........................................................   121
    Great Lakes Metro Chambers Coalition.............................   124
    Highway Materials Group..........................................   126
    Institute on Taxation and Economic Policy (ITEP).................   128
    Mileage-Based User Fee Alliance (MBUFA)..........................   131
    National Association of Manufacturers............................   132
    National Automobile Dealers Association..........................   133
    National Conference of State Legislatures........................   135
    Orski, Kenneth...................................................   137
    PeopleForBikes Business Network..................................   141
    The Real Estate Roundtable.......................................   142
    Tire Industry Association........................................   145
    Transportation Equity Caucus.....................................   147

                           DEAD END, NO TURN AROUND,
                           DANGER AHEAD: CHALLENGES
                        TO THE FUTURE OF HIGHWAY FUNDING

                                  ----------

                            THURSDAY, JUNE 18, 2015

                                           U.S. Senate,
                                          Committee on Finance,
                                                        Washington, DC.
        The hearing was convened, pursuant to notice, at 10:03
    a.m., in room SD-215, Dirksen Senate Office Building, Hon.
    Orrin G. Hatch (chairman of the committee) presiding.
        Present: Senators Grassley, Crapo, Enzi, Thune, Isakson,
    Toomey, Coats, Heller, Wyden, Schumer, Stabenow, Cantwell,
    Nelson, Menendez, Carper, Cardin, Brown, Bennet, Casey, and
    Warner.
        Also present: Republican Staff: Chris Campbell, Staff
    Director; Mark Prater, Deputy Staff Director and Chief Tax
    Counsel; and Nicholas Wyatt, Tax and Nominations Professional
    Staff Member. Democratic Staff: Ryan Abraham, Senior Tax
    Counsel; Robert Andres, Research Assistant; and Jocelyn Moore,
    Deputy Staff Director.

     OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
                  UTAH, CHAIRMAN, COMMITTEE ON FINANCE

        The Chairman. The committee will come to order. Before we
    begin the hearing, I just want to take a moment to express my
    sorrow for the horrific events that took place last night in
    Charleston, SC. I am sure that those sentiments are shared by
    everyone on the committee and everyone here. I have no words to
    express that would adequately address the senseless violence
    and loss of life. I simply ask that everyone join me in a
    moment of silence so that we can offer our thoughts and prayers
    to the victims and their loved ones.
        [Moment of silence.]
        The Chairman. Thank you.
        Well, good morning, everyone. Today we will be discussing
    the challenges Congress faces as we work to provide funding for
    the Federal Highway Trust Fund. Right now, when it comes to
    highways, we find ourselves caught in a familiar dilemma
    between raising taxes or cutting back on the highway program.
    As always, a long-term, bipartisan solution to this dilemma
    will be difficult to achieve, and, some days, it almost seems
    out of reach. However, in the past, this committee has
    consistently stepped up to the plate to find ways to keep the
    Highway Trust Fund solvent. I am confident that we can do so
    again.
        I want to make it clear at the outset that my goal as
    chairman of this committee is to find a way to fund a long-term
    infrastructure bill. Chairman Ryan over in the House said much
    the same thing in yesterday's Ways and Means Committee hearing.
    And, while some friends on the other side of the aisle have
    suggested that it would be politically advantageous to force
    votes on a series of very short-term extensions, virtually
    everyone in Congress agrees that we need to get to the point
    where we are no longer facing a highway cliff every few months.
        We have all heard that the gold standard for a long-term
    highway bill is 6 years. That is what everyone apparently wants
    to see happen. Of course, according to CBO, a 6-year highway
    bill that maintains the current spending baseline will cost
    roughly $92 to $94 billion. You do not find that kind of money
    by sifting through the cushions on your couch. It is going to
    take hard work and real policy changes to get us anywhere near
    that level of funding. And, once again, that is if we maintain
    current spending levels. I know that some of my colleagues
    believe we should raise the spending baseline at the same time,
    which would put even more pressure on highway funding and
    require us to find even more offsets to keep the trust fund
    solvent.
        Long story short, a 6-year highway bill is a great goal. I
    am committed to working to get us as close to that goal as
    possible.
        Earlier this week, some of the leaders in the Senate
    Democratic Caucus sent a letter to the Senate Majority Leader
    spelling out a list of demands for enacting a long-term surface
    transportation reauthorization bill. The letter purported to
    dictate to Senate Republicans precisely when hearings should
    occur in the various committees, when those committees should
    hold their markups, and when the final bill should come to the
    floor.
        Of course, any specific proposals or ideas on how to fund a
    long-term highway bill were noticeably absent from the letter.
    Instead, we were treated to a discourse on how previous
    Congresses had dealt with highway funding and how the current
    Senate leadership is, in the eyes of some of the Senate
    Democrats, falling short.
        I do not want to spend too much time deconstructing this
    letter, but I would like to point out a few simple facts. First
    of all, neither party should point fingers and try to lay blame
    when it comes to the now-common practice of passing short-term
    highway extensions. Between the 110th and 113th Congresses,
    when the Democrats controlled the Senate, we enacted 11 short-
    term highway extensions. That does not include the 2012 MAP-21
    legislation, which, according to the Senate Democrats' letter,
    was the paragon for how Congress should consider and pass a
    long-term extension of highway funding. Of course, MAP-21
    extended highway funding for only 2 years, far short of the
    goals that are being cited in Congress these days.
        As I recall, during that same period, when Republicans were
    in the minority, we did not turn the struggles over highway
    funding into a political football. In fact, we approached these
    negotiations in a spirit of cooperation as much as possible. We
    came to the table with specific and concrete proposals that
    included both revenue and spending options.
        Now, I ask unanimous consent that a letter dated December
    2, 2011, from Finance Committee Republicans to then-Chairman
    Baucus be inserted in the record, and I will do that.
        [The letter appears in the appendix on p. 41.]
        The Chairman. This letter did not dictate a path forward to
    Chairman Baucus. Instead, it spelled out in detail policy
    proposals that Republicans could support to address an imminent
    shortfall in highway funding. This was a constructive
    contribution to the debate over legislation that eventually
    became MAP-21, which was, once again, recently cited by our
    friends on the other side of the aisle as important. MAP-21 was
    the product of bipartisan work on the Finance Committee and was
    evenly split between taxpayer-friendly revenue raisers and
    spending reductions.
        For example, it was Republicans who first advanced the idea
    of transferring unobligated funds from the Leaking Underground
    Storage Tank Trust to help pay for highways. Now, whatever one
    may think of this particular pay-for, it has become a go-to
    revenue source in recent highway bills, including the last two
    highway bills enacted under the Democrat-controlled Senate.
    And, by contrast, one of the very few specific highway funding
    proposals I have seen from any of the signatories of this
    week's letter is the so-called repatriation holiday, which,
    according to the Joint Committee on Taxation, actually loses
    nearly $120 billion over 10 years. In other words, it is not a
    serious proposal to pay for a long-term highway bill.
        Put simply, the rhetoric we are hearing from many of my
    friends on the other side of the aisle--which was exemplified
    by the letter they sent earlier this week--is not really
    helpful. It is not constructive. It is, I suspect, intended to
    have a political impact, not to actually lead to good policy.
    Now, to this point, I will request that an article from the
    June 3, 2015, edition of Politico be entered into the record.
        [The article appears in the appendix on p. 43.]
        The Chairman. This article, titled ``Democrats Steer
    Towards Highway Funding Cliff,'' basically spells out the
    political strategy being employed here and even quotes members
    of the Senate Democratic leadership saying that they plan to
    force frequent votes on highway funding to make the process as
    politically difficult as possible.
        Now, if we are going to address these challenges, we need
    people to set aside the politics. We need people to do more
    than just talk about a long-term highway bill. We need people
    to bring actual ideas to the table and to come together to work
    toward a real, lasting solution. I hope that is what we can
    talk about during today's hearing. I hope we can have a
    productive conversation about what solutions are out there,
    which ones can work, and what ideas need to be put to bed. Once
    again, my hope is that we can focus on solutions that can
    actually work, that can actually be enacted into law to pay for
    highways.
        For example, while I know the idea has some support, I do
    not think a massive increase in the gas tax could be enacted
    into law. Of course, anyone who believes otherwise is free to
    publicly correct me and to try to make their case. That is the
    type of discussion I want to have here today--one that will
    actually lead to solutions. To facilitate this discussion, we
    have assembled a distinguished panel of witnesses who I think
    will all bring a unique perspective to these issues. I look
    forward to hearing from all of you at the table here on today's
    panel.*
    ---------------------------------------------------------------------------
        * For more information, see also, ``Overview of Selected Tax
    Provisions Relating to the Highway Trust Fund and Related Excise
    Taxes,'' Joint Committee on Taxation staff report, June 16, 2015 (JCX-
    93-15), https://www.jct.gov/publications.html?func=startdown&id=4791.
    ---------------------------------------------------------------------------
        With that, I will turn to Senator Wyden for his opening
    statement.
        [The prepared statement of Chairman Hatch appears in the
    appendix.]

                 OPENING STATEMENT OF HON. RON WYDEN,
                       A U.S. SENATOR FROM OREGON

        Senator Wyden. Thank you very much, Mr. Chairman.
        Mr. Chairman and colleagues, America's transportation
    arteries--our roads, our highways, our ports, our bridges, our
    railways--give life to America's economy. Now those arteries
    need major surgery, but instead the patient is bleeding out.
    And short-term funding Band-Aids will not help without a solid
    long-term plan in place to solve this challenge.
        My belief is, you cannot have Big League economic growth
    with Little League infrastructure. The way Congress has limped
    from one short-term funding patch to the next more than 30
    times unquestionably reflects a Little League strategy. The
    stop-and-go approach without a viable long-term funding source
    lowers America's sights in terms of what our transportation
    system can do. It forces States and Federal agencies into
    making little plans--barely keeping up with the potholes and
    falling far behind on new railways, ports, and highways.
        Oregonians are now driving across bridges that are
    structurally deficient or functionally obsolete. They are
    swerving around ruts on mountain passes that threaten to cause
    dangerous accidents. And Oregonians sit in traffic jams,
    burning through gas and wasting time, and these traffic jams,
    not just in my State but across the country, are being seen in
    places nobody could have even imagined a traffic jam even a few
    years ago.
        The infrastructure crisis hurts our businesses and
    discourages investments in Oregon and across America. China
    invests more than four times the amount our country does in
    infrastructure. Europe invests twice as much as we do. The fact
    is, the costs associated with transportation and infrastructure
    are always a part of the calculus when a company is deciding
    where to invest and who to hire.
        A recent report from the American Society of Civil
    Engineers said that the United States needs to invest $3.7
    trillion in infrastructure by 2020--and $1.7 trillion in
    transportation infrastructure alone--just to reach what they
    have termed ``good condition.'' Another series of short-term
    patches is not going to meet the bar. In the meantime, the same
    report found that Oregonians spend more than $650 million a
    year on auto repairs and other costs because our highways and
    roads are crumbling.
        It is my view that funding a transportation network is
    right up there with maintaining a fair judicial system and a
    strong national defense among the most basic and necessary
    functions of government. There is a bipartisan understanding
    that our transportation system needs major investments, and you
    hear this from members of both parties. So Congress and this
    committee have a responsibility to now find a pathway that
    leads to long-term funding sources, and I hope today's hearing
    reinforces the enormous need to accomplish this goal and help
    us move closer to a solution.
        Next week, the committee is going to continue its
    consideration of this crucial topic of how to get private-
    sector dollars off the sidelines and into funding American
    infrastructure. Several weeks ago, Senator Hoeven and I
    introduced a bipartisan proposal, the Move America Act, to
    kick-start the use of effective financing tools to solve this
    crisis. The Move America Act would unlock $200 billion of
    private-sector investment and could be a big part of getting
    America's infrastructure back up to the big leagues.
        So I say to our witnesses, our guests, and our colleagues,
    today we are going to focus on funding transportation. In a
    week, a week from today, we will focus on financing approaches
    to pay for infrastructure. Both of them are extremely
    important. I look forward to our witnesses. It is always good
    to see Ray LaHood here. He has distinguished himself by always
    trying to bring people together with particularly innovative
    thinking on transportation. So I welcome all of our guests, and
    I have had a chance to talk with several of them. I usually
    talk with Mr. Moore about something like tax reform, but we are
    happy to have all of you here today, and thank you, Mr.
    Chairman.
        The Chairman. Well, thank you, Senator.
        [The prepared statement of Senator Wyden appears in the
    appendix.]
        The Chairman. Today we have an excellent group of
    witnesses, people whom all of us respect.
        Our first witness will be Dr. Joseph Kile, Assistant
    Director of Microeconomic Studies at the Congressional Budget
    Office. Dr. Kile came to CBO in 2005 following 16 years at the
    Government Accountability Office. And while at GAO, Dr. Kile
    led the Center for Economics within the Applied Research and
    Methods team. Before that, he was a Senior Economist and
    Assistant Director within GAO's Office of the Chief Economist.
    His analyses focused in particular on the issues of
    transportation, energy, natural resources and the environment,
    and the pharmaceutical industry. He has both a master's degree
    and a doctorate from the University of Wisconsin, Madison, and
    a bachelor's degree from St. Olaf College.
        We are really happy to welcome you here today, Doctor, and
    we look forward to hearing your testimony.
        Our second witness is a man we all respect and have a great
    deal of love and respect for: Secretary Ray LaHood. He served
    as Secretary of Transportation for the Obama administration
    from 2009 to 2013. Before heading the U.S. Department of
    Transportation, Secretary LaHood served from 1995 to 2009 in
    the U.S. House of Representatives, representing the 18th
    Congressional District of Illinois. Today he is here as a co-
    chair of Building America's Future, a bipartisan coalition of
    elected officials working to advance infrastructure investment.
    Secretary LaHood has a bachelor's degree from Bradley
    University.
        And last, we are going to hear from the wonderful
    economist, Stephen Moore. From 2005 to 2014, Mr. Moore served
    as the senior economics writer for the Wall Street Journal
    editorial page and as a member of the Journal's editorial
    board, and he continues to be a regular contributor at the Wall
    Street Journal and other media outlets like Fox News, CNN, and
    CNBC. Before that, he served as founder and president of the
    Club for Growth and served as Grover M. Hermann Fellow in
    Budgetary Affairs at the Heritage Foundation. Mr. Moore has a
    bachelor's degree from the University of Illinois at Urbana-
    Champaign and a master's degree from George Mason University.
        I want to personally thank all three of you for making time
    in your busy schedules to be with us today, and we will have
    you proceed, Dr. Kile, and then go right down the line.

        STATEMENT OF JOSEPH KILE, Ph.D., ASSISTANT DIRECTOR FOR
    MICROECONOMIC STUDIES, CONGRESSIONAL BUDGET OFFICE, WASHINGTON,
                                   DC

        Dr. Kile. Thank you, Chairman Hatch, Senator Wyden, and
    members of the committee. I appreciate the very warm welcome
    and the opportunity to testify today about the status of the
    Highway Trust Fund and about options for paying for highways.
        Let me first turn to the trust fund. In 2014, the Federal
    Government and State and local governments spent about $165
    billion to build, operate, and maintain highways. Those same
    governments spent another $65 billion on mass transit systems.
    About three-quarters of that total came from State and local
    governments; the other one-quarter came from the Federal
    Government, and most of that was through the Highway Trust
    Fund.
        For decades, the trust fund's balances were stable or
    growing. However, more recently, the amount of money collected
    from taxes on gasoline, diesel fuel, and other transportation-
    related activities has been less than spending. To address that
    shortfall, lawmakers have transferred $65 billion from the
    general fund of the Treasury to the trust fund since 2008.
        The Highway Trust Fund's current sources of revenue cannot
    support spending at the current rate. By the end of this fiscal
    year, CBO estimates that the balance in the highway account
    will be about $2 billion, and the balance in the transit
    account will be about $1 billion. Because of those declining
    balances, the Department of Transportation would probably need
    to delay payments to States before the end of the current
    fiscal year, and, beyond that, the shortfall in the trust fund
    would steadily accumulate in the future.
        Turning to options to pay for highways and transit,
    lawmakers have three broad options. One option would be to
    reduce Federal spending on highways and transit projects. If
    lawmakers choose to eliminate the shortfall entirely by cutting
    spending, all of the money credited to the fund next year would
    be needed for obligations that were made this year and in
    previous years. Beyond that, the authority to make new
    obligations from the highway account would decrease by about
    one-third over the next decade, and the authority to make new
    obligations from the transit account would decline by about
    two-thirds compared with CBO's baseline.
        A second broad option would be to increase revenues
    credited to the trust fund, and that could be done in several
    ways. For instance, one way to increase revenue would be to
    raise existing taxes on gasoline and diesel fuel. JCT has
    estimated that a 1-cent increase in those taxes would raise
    about $1.7 billion next year, but that amount would decline to
    about $1.5 billion by 2025. Increasing those taxes by roughly
    10 cents per gallon would eliminate the projected shortfall
    over the next decade. Another way to increase revenues would be
    to impose new taxes on using the highway system, such as one
    based on vehicle miles traveled. Still another way to increase
    revenues would be to impose taxes on activities that are
    unrelated to transportation.
        A third broad option for addressing the shortfall would be
    to continue to transfer money from the general fund to the
    trust fund. Unless spending were cut or revenues were
    increased, that would require a transfer of about $3 billion
    before the end of this fiscal year. After that, the amounts
    needed each year would start at $11 billion next year and grow
    to $22 billion by 2025.
        In addition to those approaches to paying for highways, the
    shortfall in the trust fund has generated interest in borrowing
    by State and local governments and by private companies. The
    Federal Government encourages such borrowing through tax
    preferences, loans, and loan guarantees that provide a subsidy
    for financing highway projects. Through those channels, the
    Federal Government bears some of the costs of such financing.
        Despite prominent examples, the experience with private
    financing in the United States is fairly limited. In
    particular, highway projects that have used private financing
    have accounted for less than 1 percent of all spending for
    highways over the last 25 years. Some of those projects have
    failed financially because the revenues for the projects were
    overestimated. Perhaps because of that experience, projects
    that are now under construction rely less on tolls as a revenue
    source. More commonly, private partners are compensated from a
    State's general fund. That reduces the risk to the private
    partner that it will not be repaid, but as a result, the risk
    of lower-than-expected revenues remains with the public sector.
        Finally, borrowing is only a mechanism for making future
    tax revenues or user fees available to pay for transportation
    projects today. It is not a new source of revenues. In the
    future, money used to repay borrowed funds will be unavailable
    for new transportation projects or other government priorities.
        Again, Chairman Hatch, Senator Wyden, thank you for the
    invitation, and I would be delighted to answer any questions
    you might have.
        [The prepared statement of Dr. Kile appears in the
    appendix.]
        The Chairman. Thank you.
        Now, Mr. LaHood?

    STATEMENT OF HON. RAY LaHOOD, SENIOR POLICY ADVISER, DLA PIPER,
                             WASHINGTON, DC

        Mr. LaHood. Mr. Chairman, thank you, and thank you for your
    leadership in holding this hearing and inviting people like
    myself and others who have been speaking out on the crisis that
    we have in America, which every member of this committee and
    really every member of Congress knows about, because all of you
    come from States and cities that have crumbling roads and
    bridges that are in a very bad state of repair, the worst that
    we have seen ever in America. I have described our country as
    ``one big pothole.''
        I come from Illinois. We have had some brutal winters, and
    those of you who come from States that have had brutal winters
    know that our roads are crumbling and our bridges are in a
    very, very bad state of repair. Fifty-year-old transit systems
    need replacement of cars and infrastructure.
        The other part of the crisis is not just in infrastructure
    but in funding. How are we going to pay for all the things that
    America needs? And in coming up with proposals, I am certainly
    one who has been very open-minded about the idea that you need
    a variety of ways to pay for infrastructure, just like we have
    done for years in America. America used to be number one in
    infrastructure. We are the country that built the Golden Gate
    Bridge, the Hoover Dam, the Erie Canal, and the Interstate
    System.
        Those days are gone. When can any of you remember, except
    for maybe Senator Bennet, the last time we built an airport?
    The last time we built an airport in America was when the
    Denver airport was built. Now, there have been some
    modernizations but--and all of you have traveled around the
    world, and what has happened around the world? Every time you
    go to China, you see a new road, a new bridge, a new airport, a
    new high-speed rail. And what does that do? That attracts
    economic development. It attracts companies that need the
    infrastructure to be able to locate their businesses there.
        When you build infrastructure, you build economic
    opportunities for cities and States all along the corridors,
    whether it is a rail corridor, a roadway, a bridge. And we have
    come to a crisis in our country because we have run out of
    money. The Highway Trust Fund is broke. Our transportation
    system is broke. And America is looking to Congress for
    leadership, the same kind of leadership that they are finding
    in cities and in States. The cities are the incubators for
    innovative, creative approaches to transportation. The Mayors
    are the innovators. The States where you have Governors who are
    willing to go to their legislatures and ask for increases in
    revenues, particularly in the gas tax, are making huge amounts
    of opportunities to put friends and neighbors to work.
        Look, the revenue that comes in from the gas tax goes back
    to the States. It helps hire friends and neighbors. When people
    see the orange cones, what do they see? They see their friends
    and neighbors building roads and building economic
    opportunities. That money does not stay here in Washington. It
    goes back to Governors and State DOTs and Mayors.
        So what I am suggesting is, we should look for many
    options, but, if you want to create an opportunity to rebuild
    America, we need a big pot of money--the same big pot of money
    that built America over the last 50 years--and that is the
    Highway Trust Fund. We have to come to grips with the idea that
    we have to raise the gas tax. It has not been raised in 20
    years. None of you can think of anything that has not been
    raised in 20 years. Think of the cost of a stamp, the cost of
    an automobile, the cost of a gallon of milk, the cost of a
    dozen eggs. Everything has gone up--except the gas tax, except
    the pot of money that funds our infrastructure.
        So I am for tolling. We did a bunch of tolling projects,
    some in Virginia, some in other States, while I was DOT
    Secretary. I am for public-private partnerships. The Silver
    Line, which will connect downtown Washington with Dulles
    Airport, is a great example of a public-private partnership. We
    helped fund that, with the help of Senator Warner and others.
        The Tappan Zee Bridge in New York is a great public-private
    partnership, funded through the Transportation Infrastructure
    Finance and Innovation Act loan program. I am for all of that.
    But if you want to get back to rebuilding America, you have to
    have a big pot of money. And the Highway Trust Fund is broke.
    Come to grips with it. Fourteen States, including yours, Mr.
    Chairman, which--I do not need to tell you this--is a very
    conservative State, all Republican, Senator Enzi's State, a
    very conservative State, they raised the gas tax. They did it,
    with all Republicans in conservative States.
        Wyoming, Virginia, New Hampshire, Maryland, Pennsylvania,
    Vermont, Massachusetts, Rhode Island, Georgia, Iowa, Idaho,
    Nebraska, South Dakota, and Utah all have raised the gas tax.
    Why? Because they are getting no activity, no action here in
    Washington. And they need the money to fix up their
    infrastructure.
        So what I say to people in Washington--and I was an elected
    official. I served in the House for 14 years. Do not be afraid
    to raise the gas tax. Make it a part of the funding formula. Do
    not just discount it. It is the big pot of money that will get
    us back in the game again. It will get us back to being number
    one in infrastructure and being able to attract businesses to
    our communities.
        Thank you, Mr. Chairman. I am sorry to get a little
    overreactive here, but I just feel so strongly about this, and
    I look forward to your questions.
        The Chairman. Well, we allow for that. This is the
    committee where everybody gets overreactive from time to time,
    on both sides. So we are happy to have you here and happy to
    listen to you.
        [The prepared statement of Mr. LaHood appears in the
    appendix.]
        The Chairman. Mr. Moore, we are looking forward to your
    testimony too.

     STATEMENT OF STEPHEN MOORE, VISITING FELLOW IN ECONOMICS, THE
                  HERITAGE FOUNDATION, WASHINGTON, DC

        Mr. Moore. Thank you, Mr. Chairman. I was heartened by your
    comment about tax reform. I have believed for a long time that
    if we could just lock the two of you in a room for about 2 or 3
    hours, I mean, seriously, you could come up with a tax plan
    that would be so much more pro-growth and productive for our
    economy than what we have right now. And, by the way, that is
    relevant to this discussion. I believe if we had the right kind
    of tax system, we could add 1 percentage point of GDP.
        The Chairman. Well, you are absolutely right. We could do
    that. Too bad we have 98 others to deal with.
        Mr. Moore. So why is it not happening? It could be one of
    the great bipartisan reforms that we have seen in 30 years.
        I am pro-roads. I agree with you: we need more roads in
    this country. But I am firmly against raising the gas tax at
    the Federal level to pay for it. So ``yes'' to more
    infrastructure, but ``no'' to a Federal tax increase. And one
    of the reasons for that is simply that it is not fair to the
    middle class. If you look at who gets hit hardest by a gas tax
    increase, there is no question that the middle class is the
    group that gets hammered by this. So I did some statistics. For
    every 1-penny increase in the Federal gasoline tax, you are
    going to pull about $1.5 billion out of the hands and
    pocketbooks of middle-class workers, and everyone in this room
    knows that the middle class is financially strained right now.
    If you were to raise the gas tax by, say, 10 cents a gallon,
    you are talking about taking $15 billion out of the pockets of
    people who need that money. And I think it is an unfair way to
    finance this situation. By the way, it would be a negative
    stimulus to the economy to raise the Federal gas tax at this
    time.
        Now, Federal funding peaked, as the Congressman said, in
    the late 1980s, but there is a reason for that, and that is, we
    have built a 42,000-mile interstate highway system, one of the
    great Federal achievements of all time, but the Federal
    interstate highway system is built; it is done. It is like
    saying, you know, we should continue to spend money on the
    Apollo system to send someone to the Moon. We did it. No one
    talks about continuing to fund NASA for something that has
    happened.
        What I believe we ought to do as a strategy going forward
    is allow the States to do exactly what Mr. LaHood said. If they
    want to finance their local and State road projects and
    infrastructure projects, they ought to do it. And one of the
    ways you can facilitate that happening, by the way, is not only
    not raising the Federal gasoline tax but talking about
    judiciously lowering the Federal gas tax and allowing the
    States to fund these projects.
        Now, why is that a better system? Because we believe in
    federalism. Because we believe that the people in the State of
    Oregon and the people in the State of Utah can make much, much,
    much better decisions about what road projects and bridge
    projects should be funded in Oregon and Utah than people here
    in Washington, DC. It is that simple.
        By the way, there is a second reason for this. We believe,
    I think we all believe, that a fundamental principle of a good
    transportation project is that the user pays. The person who
    benefits from the project pays for it. And, when you make it
    more locally and State-financed, you move closer to that kind
    of funding system.
        Now, what could we do at the Federal level to make these
    dollars that come in through the Federal system--which is close
    to $40 billion a year--stretch further? And I would argue that
    a couple of things need to be done.
        One is, I believe that it is high time we stop stealing
    money from motorists, people who drive their car to work in the
    morning like I do, taking my Federal gasoline tax money and
    using it to fund transit projects that I do not use. People who
    use the highways should pay a gas tax for the roads. People who
    use transit systems should pay fares or other kinds of charges
    for that. Right now you are diverting, I think--I may not be
    exactly right about this--about 15 percent of Federal gasoline
    tax money for transit projects that people who use the roads do
    not use. And we have a great example of that here in the State
    of Virginia, where people like myself are going to have to pay
    for the Silver Line system, which, I am sorry, Congressman, I
    think is one of the biggest wastes of money in history, and I
    do use the toll road, and our tolls are going to go up, up, up,
    up, up to pay for a Silver Line system that very few people are
    going to use.
        Second of all, let us take a very serious look at repealing
    the Davis-Bacon law. This is a law that was passed 60 years ago
    specifically to keep minorities off of Federal road projects.
    It is discriminatory in effect, and it was discriminatory in
    its intention, and it is high time we repeal this law. And, if
    we do that, for every four bridges and roads that you build
    across the country, you get a fifth one for free. You get a
    fifth one for free. So, if we want to solve the infrastructure
    problem, let us do that.
        One other thing that I will bring up for you all to
    consider is that, you know, we have this whole discussion about
    how to finance roads, and no one is talking about efficiency
    and productivity gains, and how do we make sure we are getting
    the most roads and the most transportation projects for the
    money that is going to Washington? Now, the reason this is
    important is, my friend Art Laffer and I did a book that came
    out about a year ago where we looked at what States are
    spending on highway projects, and it is amazing. I just want to
    give you a statistic about the difference between two States--
    Texas and California.
        California spends about $250,000 per mile of road
    projects--$250,000. Texas spends $100,000 per mile of roads.
    What explains the difference there? The explanation is, Texas
    is much, much, much more efficient in the way it spends its
    money. There are ways we can rebuild our infrastructure in a
    much more efficient way and a much more productive way without
    sucking more money out of the pockets of taxpayers.
        Thank you.
        [The prepared statement of Mr. Moore appears in the
    appendix.]
        The Chairman. Thanks to all three of you. We appreciate
    your being here and appreciate listening to you.
        Secretary LaHood, the bipartisan deficit reduction think
    tank, the Committee for a Responsible Federal Budget, or CRFB,
    on May 13, 2015, issued a pamphlet entitled, ``The Road to
    Sustainable Highway Spending.'' Now, the pamphlet provides a
    menu of trust fund solvency options, big, medium, and small,
    drawing on revenue raisers and spending cuts. I ask unanimous
    consent to insert a copy of the pamphlet in the record, and I
    will.
        [The pamphlet appears in the appendix on p. 45.]
        The Chairman. I am assuming you are familiar with that
    particular pamphlet.
        Mr. LaHood. Yes, sir.
        The Chairman. Okay. Now, Mr. Secretary, it is clear from
    your testimony and that of Mr. Moore that the two of you do not
    agree on a gas tax increase. Your testimony is clear that you
    do not believe we should reduce current trust fund spending to
    line up with current trust fund receipts. I am going to ask you
    whether we should look to proposals that score as outlay
    reductions to offset the deficit impact of a general fund
    transfer.
        Now, here is one of the many examples from CRFB's report.
    The proposal is to ``allow for drilling in ANWR and the Outer
    Continental Shelf.'' Now that proposal, which is divisible
    between ANWR and OCS pieces, CRFB scores at $5 billion in
    savings--as $1.5 billion in savings from the OCS piece, and the
    ANWR piece scores at roughly $2.5 billion. Now, CRFB indicates
    adopting both pieces would mean 4 months of solvency.
        Now, Mr. Secretary, if it is not politically feasible to
    raise the gas tax, would you agree that policymakers should
    consider spending reduction proposals like the ones listed by
    the bipartisan think tank as part of an interim or long-term
    resolution of the Highway Trust Fund deficit?
        Mr. LaHood. Senator, I think that almost every member of
    this committee has a good deal of experience--or they would not
    be here--in terms of budgeting and finances. I think you have
    to look at all alternatives. I do not think anything should be
    off the table. I really do not. I am sorry, and I am
    disappointed that some people have taken raising the gas tax
    off the table. I do not think it should be taken off the table,
    just as I do not think this proposal should be. We have to find
    new ways, creative ways, to fund our roads and bridges. This is
    an example of it. I think it should be on the table.
        The Chairman. All right. I appreciate that.
        Now, Mr. Moore, as a gas tax opponent, I am going to ask
    you the flip side of the question I just asked Secretary
    LaHood. If Secretary LaHood's view that restricting current
    spending to current highway receipts is not politically
    possible is valid, would you agree that policymakers should
    consider compliance revenue-raising proposals like the ones
    listed by the bipartisan think tank as part of an interim or
    long-term resolution of the Highway Trust Fund deficit? And let
    me just provide one example from the bipartisan CRFB report.
        The proposal is to ``increase mortgage reporting.'' That--
    --
        Mr. Moore. I am sorry. Increase what?
        The Chairman. ``Increase mortgage reporting.'' That
    proposal would yield $2 billion, which would mean 2 months of
    trust fund solvency. What do you think?
        Mr. Moore. I cannot speak to that proposal. I have not
    really thought about it. But let me simply say this. On your
    question to Secretary LaHood, this is a huge pot of money that
    we are talking about, and it is not just drilling in ANWR, sir.
    We could be drilling all over this country, and we have been
    doing some analysis of this at Heritage. I mean, the Federal
    Government, if we drill everywhere, you know--and I am not
    talking about Yosemite and Yellowstone, but on Federal lands
    that are not environmentally sensitive--over the next 20 years
    we could raise somewhere in the neighborhood of $2 to $3
    trillion--$2 to $3 trillion--in Federal money that would come
    in through royalty payments and other fees that we could charge
    these energy companies. Now, my God, that is gigantic. I mean,
    we could use a huge percentage of that to reduce our national
    debt. We could use some of that money to build the kind of
    infrastructure that the Secretary is talking about. So we have
    a gigantic opportunity here.
        And I forgot to mention one other quick thing. You know, we
    keep hearing all of this talk in Washington about how we need
    infrastructure. We need infrastructure. We need to spend more
    on infrastructure. There is one area that we need
    infrastructure desperately on, even more than we need roads.
    What we need in this country is an interstate system of
    pipelines so we can get the natural gas resources and the oil
    resources that are so abundant in this country. I mean, the
    shale oil and gas revolution is big, and we are just hitting
    the beginning stages of it. We have to build pipelines all over
    this country so we can get it to the market and we can sell it
    abroad. And I bring that up because--I mean, we have an
    infrastructure project that would create 15,000 jobs, that
    would be free. It would not cost the Federal taxpayer one
    penny, and it would be good for our national security and our
    energy policy, and that is the Keystone Pipeline. And that is
    just one of these--you know, there are about 20 major pipelines
    that are being held up at the Federal level.
        Yes, we need more infrastructure. Let us start with the
    easy ones that do not cost taxpayers a penny. Let us start with
    Keystone.
        The Chairman. Thank you. My time is up. Senator Wyden?
        Senator Wyden. Thank you very much.
        Secretary LaHood, let me start with a proposal that has
    been advanced in the Senate and has elicited a fair amount of
    discussion in the transportation area called ``devolution.''
    This is a proposal, Secretary LaHood, that would not only
    eliminate the Federal highway program, but would also
    significantly reduce funds for the States. And I do not know
    how they would proceed, but I assume they would just raise
    their taxes. What do you think of this? It has been introduced
    in----
        Mr. LaHood. I think it is a very, very, very, very, very
    bad idea. We would--look, if devolution had been in existence,
    we would not have an interstate system, because if you look
    back on the history of the interstate system, there were some
    Governors, when President Eisenhower signed the interstate
    bill, who said, ``There will never be a road through my
    State.'' Fifty years later, we have an interstate system. Our
    country is connected with the best road system in the world,
    bar none. Devolution would never allow that to happen.
        And, if we want to fix up our interstates--every one of you
    has an interstate running through your State, and you all know
    what they look like. They are crumbling. They need some Federal
    resources to fix them up, and we owe it to the States, to the
    Governors, to the communities to do that. That is what a
    national program does. Devolution would destroy that kind of
    opportunity.
        Senator Wyden. Let me see if I can capture your philosophy,
    which I think is very attractive on this point. What you are
    saying is, this committee needs to get funding right. That is
    our first assignment.
        Mr. LaHood. Correct.
        Senator Wyden. But you are also saying that we ought to be
    looking at the whole toolbox, and finance ought to be part of
    it. And because I have you here and I respect your views, let
    me ask you: were you surprised that $188 billion worth of Build
    America bonds were sold in less than a year and a half?
        Mr. LaHood. Of course not. It is a great program, not just
    because you were one of the authors of the legislation, but
    because it worked. And that should be part of the solution. Put
    that in the highway bill. That ought to be a part of it, ought
    to be a part of the funding.
        Senator Wyden. Good. A question for you, Dr. Kile, if I
    might. On the question of budget issues, what I think people
    really are interested in is, as it relates to the budget--and
    this is in your bailiwick--what is your best analysis there
    about the economic effects of public investment in
    infrastructure? From the seat of my pants, I always say, if
    there is a town hall meeting, that investing in infrastructure
    is a big economic multiplier. You see it with people working.
    You see it with people buying equipment. You know, restaurants
    have to make sandwiches for the folks who are doing the work.
    There is clothing, cleaning. It is a big economic multiplier.
    But what is important is that we have really thoughtful
    analysis like you all do in terms of the economic effects of
    public investment in infrastructure, and I would just like to
    wrap up with your thoughts on that topic.
        Dr. Kile. Thank you, Senator. Yes, in the past we have
    analyzed the work of the Federal Highway Administration and
    concluded that, to maintain current levels of highway services,
    spending would need to be raised from the current level. Also,
    just yesterday, CBO issued its long-term budget outlook, and,
    in that outlook, we talked about the importance of
    infrastructure spending and how that contributes to economic
    growth and how that is included in our models.
        Senator Wyden. So, can you give us a little bit of the
    highlights?
        Dr. Kile. In the report that was issued yesterday, we
    talked about the returns to Federal investment in
    infrastructure spending being about half as productive as
    similar investment spending by the private sector. But, of
    course, there are things that the public sector will invest in
    that the private sector might not choose to.
        Senator Wyden. Okay. Thank you, Mr. Chairman.
        The Chairman. Senator Grassley?
        Senator Grassley. Mr. Chairman, instead of asking
    questions, I prefer to use my time just to make a short
    statement.
        The Chairman. Okay.
        Senator Grassley. Congress is once again faced with the
    task of reauthorizing our Nation's surface and transportation
    laws. The Finance Committee, as always, will play a vital role
    in this process, as we have to make the important decisions
    about the future of the Highway Trust Fund.
        Transportation is essential to the economy, trade, and
    vitality of all of our States. In Iowa, it is fundamental to
    moving our agricultural products, manufactured goods, and
    people. We do not have a lot of inner-city transportation
    otherwise. Iowa also has a large number of trucking companies,
    and truck traffic through our State is very high. Therefore,
    Congress must be in pursuit of sound, sustainable highway
    policies that provide certainty to businesses, States, and the
    transportation community.
        I am a former chairman of this committee, so I know how
    hard it is for Senator Hatch and Senator Wyden to find a
    consensus on both sides of the aisle and in both chambers on
    this issue. However, I urge all those involved in these
    negotiations to come to the table, including this Senator, to
    give and take, including all three aspects--and most often we
    talk about spending and the revenue side, but I follow along
    what our witness Mr. Moore says. We also have a regulation side
    of this that ought to be dealt with, and we ought to do the
    negotiations to have a timely solution.
        I am dedicated to continuing to work with the chairman and
    my colleagues on both sides of the aisle to get this done.
    However, it is also important that Congress hold up our end of
    current law and keep the Highway Trust Fund funded in the short
    term so that we can focus on the long-term policy and financing
    solutions.
        So, I would like to be very clear. Everyone wants to get a
    long-term reauthorization bill. However, there are serious
    discussions and negotiations that need to take place within
    this committee on how to raise at least $90 billion if we are
    to maintain current law. But, as I just indicated on
    regulations, some of that $90 billion can surely be made up by
    having less Federal Government dictation to the States on how
    that Federal dollar can be spent.
        Now, this $90 billion is not an insignificant amount of
    money. A short-term extension should not be used as a pawn in
    the political gamesmanship when States like Iowa are in the
    middle of a construction season. The unrest that multiple stop-
    gap measures create, as well as the uncertainty, causes havoc
    for State Departments of Transportation. It is imperative that
    there be some continuity throughout the rest of the year.
        So I thank all the witnesses--even though I do not have
    questions, that does not mean your testimony is not important--
    and the chairman for having this hearing to highlight and
    provide the facts of the current financing situation.
        Thanks to all my colleagues and the witnesses for
    listening.
        The Chairman. Well, thank you, Senator.
        Senator Thune is next.
        Senator Thune. Thank you, Mr. Chairman.
        I would like to just ask the panel what the impact is on
    the economy--we talk about economic impacts of these various
    alternatives that always get discussed. What is the impact on
    the economy of borrowing, of additional debt? We already have a
    very high debt-to-GDP ratio, whether you compute that using
    just publicly held debt or total debt--historically high
    levels. And, if you look at the 10-year outlook, according to
    the CBO, it gets increasingly worse over time.
        So if we were to, as you pointed out, Dr. Kile, borrow, as
    we have, $65 billion since 2008--I mean, it is a general fund
    transfer, but it is in effect debt, right? I mean we are
    passing it on to the next generation. We are just borrowing the
    money.
        Dr. Kile. The general fund is paid for with a mix of
    current revenue and borrowing, yes.
        Senator Thune. Okay. So tell me, what is the economic
    impact of just continuing to do what we are doing today, which
    is add these things to the debt through general fund transfers?
        Dr. Kile. The long-term effect of increased debt is
    something that CBO has written about, and I am not terribly
    familiar with that work. But as a general statement, it is
    something that is not sustainable in the long term, and it will
    impose an eventual drag on the economy.
        Senator Thune. All right. Well, here is the thing. To me
    there are really three options. You can spend at the current
    level of receipts coming into the Highway Trust Fund, which
    would represent about a 30-percent reduction over existing
    commitments that we have in the Highway Trust Fund. You can
    find savings, which we all ought to do, through reforms, and
    look for ways to do things more efficiently. And I would love
    to get rid of some of the things that we spend out of the
    Highway Trust Fund today, for example, transit, but that was
    tried a couple years ago in the Republican-controlled House,
    and they could not pass it. There are certain things that are
    just politically realistic, that are practical in light of
    where we are, and I do not think reducing spending by 30
    percent is one of those. I think people are going to want to
    make sure that we are taking care of our infrastructure and
    highways.
        So you can spend at that lower level. You can figure out a
    way to find the revenues to pay for the $92 to $94 billion that
    we would need just to keep funding at the current level. Or you
    can borrow it, which is what we have been doing. And to me,
    that is unacceptable. We cannot just keep, as a matter of
    practice, borrowing money from the general fund and handing the
    bill to our children and grandchildren. If we are going to have
    things in this country, we ought to pay for them.
        Now, it gets very complicated, I know, on how to do that,
    but our State of South Dakota has to balance its budget every
    year. I mean, here in Washington, we do not labor under that
    uncomfortable proposition. We can just borrow it and continue
    to add it to the debt. But our State of South Dakota is one of
    those that did this year raise the gas tax, and they did it
    because they felt that they had obligations that they had to
    meet. They were trying to plan for the future.
        And so I guess I am sitting here left with, what do we have
    in terms of alternatives, because nobody around here wants to
    make the hard decisions, and politicians generally follow the
    path of least resistance, and the path of least resistance, at
    least in the recent years, has been to borrow it, because that
    is the easiest thing to do. And that is just not right. We
    cannot keep doing that.
        So I guess, as I look at this issue and you all look at
    this issue, we have had a user fee-based program for a lot of
    years, and it seems to have worked pretty well, but it is
    inadequate to the job today for what we have in terms of
    demands. And so, if we could figure out a combination of
    spending reforms, we ought to start there, figure out how we
    can spend less, but--I guess I would just put it all out there
    for you. Secretary LaHood, you have suggested an increase in
    the gas tax. Mr. Moore says no gas tax. Dr. Kile, you have
    talked about a vehicle-miles-traveled approach. But there has
    to be a user fee-based way of making this work, and it has to
    be a national system. I do not think you can back out and say
    we are just going to devolve all this to the States. I mean,
    certainly that does not work if you are going to have a
    national transportation system.
        So, as you look at all these options and all these
    alternatives and you think of a vehicle-miles-traveled or some
    sort of approach like that, what would you think about that,
    Secretary LaHood? If you had some sort of different approach--
    --
        Mr. LaHood. I think that there is at least one State, the
    State of Oregon, that has put that into a demonstration program
    to see how it works. The demonstration is for 5,000 vehicles to
    see how it works.
        But, Senator, number one, this is truly a user fee. That is
    why it does not cause that much irritation when you say to
    taxpayers, ``We are going to raise the gas tax, which has not
    been raised in 20 years, and we are going to give it back to
    the States. We are going to give it back to Americans. We are
    going to give the money to State DOTs and to Governors, who
    then transfer it back to contractors and road builders and
    bridge builders.'' And what do they do? They pay middle-income
    people to reconstruct, to rebuild our interstates and our
    bridges.
        This money is invested in America. It does not stay here in
    Washington. It does not go into some pot somewhere where nobody
    ever sees it. It is reinvested in our friends and neighbors,
    and reinvested in infrastructure. This infrastructure becomes
    the economic engine that attracts businesses. The first thing a
    business looks for when it goes to a State is, what kind of
    roads do you have? What kind of sewers and water do you have?
    How are my people going to get back and forth to work? And that
    is why Texas is one of the fastest-growing States in the
    country, because they have great infrastructure. That is why
    China is attracting so much business, because every day they
    are building a new road, a new bridge, a new high-speed rail.
    When the national government invests in its people, it is a
    winner.
        The Chairman. Okay. Senator Cantwell?
        Senator Cantwell. ``LaHood for President.'' [Laughter.]
        I wish you would jump in the race of multiple people on the
    other side of the aisle and express that, because I certainly
    agree with you. And I am sorry I missed your testimony earlier,
    but I wanted to ask you, Mr. Secretary, about the freight
    activity that your administration led, when you were Secretary,
    and how important is it that, if we move forward on
    infrastructure financing, that freight and multimodal
    investments be made so we can be competitive in how we move
    products, given the infrastructure investments being made in
    other parts of the world that are going to challenge our
    delivery system?
        Mr. LaHood. Well, first of all, Senator, thank you for your
    leadership on freight. Freight really is multimodal. Obviously,
    a couple years ago you really got that, tried to get it
    included in the MAP-21 bill, and, for whatever reasons, money
    reasons primarily, people around here thought it probably could
    not get done.
        But I think what you were able to do is get a commitment
    from the leadership and from our administration to create a
    Freight Council at DOT. You have put together, I think, a very
    comprehensive program, and, because it is multimodal, it means
    it includes all modes of transportation. Freight capacity is
    the next generation of transportation. It is where the country
    is going. And with the new channel opening at the Panama Canal,
    we know we are going to have to--right now there are only two
    ports in America that can handle the Panamax ships that are
    going to be coming through. Now, that is a disgrace in our
    country. With all the ports that we have, only two can accept
    these Panamax ships?
        But because of the kind of very comprehensive freight
    policy that you have developed, what I encourage you to do,
    Senator, is see if you can get your bill into the next
    transportation bill. It needs to be there. If we are going to
    take advantage of the Panama Canal adding a new channel and all
    the multimodalism that goes with that, whether it is trucks or
    rail or ports, we need a program. And we cannot use the excuse
    that we cannot afford it. We cannot afford not to do it. That
    is the answer, particularly with what is going on at the Panama
    Canal. And every one of you who has a port needs to be thinking
    about this. We need a multimodal, strong freight policy. It
    ought to be included in the next transportation bill, and I
    hope you will keep pushing for it and keep pushing Secretary
    Foxx, my successor, to make it a part of the administration's
    priorities.
        Senator Cantwell. Well, I appreciate that, and ``Ports Are
    Us'' when it comes to the Pacific Northwest. I guarantee you,
    we get it, and we see incredible competition from Vancouver,
    British Columbia, and other ports on the west coast all the
    time. So if we lost that freight business, obviously it would
    hurt our economy immensely.
        But I think it was best said by one of our local providers
    in Vancouver, WA. The second largest grain elevator in the
    entire world is right there at Vancouver. And I said, ``Why is
    the second largest grain elevator in the entire world right
    here?'' And he said, ``Because the rising middle class in Asia
    wants to eat beef, and we have to sell them grain.'' And that
    says it all. There is a rising middle class around the globe.
    The U.S. has a tremendous economic opportunity to ship product
    to them, a new customer base, if you will. But if our
    infrastructure chokeholds them and they can get product from
    South America or someplace else easier, we are going to lose
    critical business. And I already see, because we have this
    complexity of moving so much oil product now and other
    products, basically we are pushing good agricultural products
    off the rails.
        So we have to get an infrastructure solution here that
    helps us move forward, so thank you for your leadership.
        Mr. LaHood. Thank you.
        The Chairman. Okay. Senator Coats?
        Senator Coats. Thank you, Mr. Chairman.
        Just to follow up on the presidential aspirations here,
    since my colleagues said there might be some, we have all we
    need on our side and more. [Laughter.] It appears that the
    other side is looking for an alternative. You have served both
    as a Republican Congressman but in a Democratic administration
    as Secretary of Transportation. Without being too pun-ish here,
    you could be the bridge that gets us on the road to the
    presidency.
        The Chairman. There you go. [Laughter.]
        Mr. LaHood. Here is the bottom line for me. My oldest son
    is running in a special election for Congress in the 18th
    District. The last thing he wants is his father talking about
    running for something.
        Senator Coats. Okay. Mr. Chairman, thank you. I did not
    mean to start with that, but there it is.
        First of all, I want to thank you and the ranking member
    for the selection of witnesses. I have sat through a lot of
    boring hearings, but this one is really dynamic, because
    everybody is speaking their mind straight out, giving us the
    alternatives. They are passionate about it. It is a project
    that has the reality to it that we need to get something done.
    To me, it is a lot more than just finding the cost to pay for
    the gap, but there really needs to be some policy changes here
    if we are going to really address this larger program.
        Now, economic growth was mentioned, and my colleague here,
    Ron Wyden, left, but I know both the chairman and the ranking
    member are intent on moving us to comprehensive tax reform.
    That, combined with regulatory reform and some fiscal reform--
    and by that, I mean finally getting to the point here with our
    Federal revenues where we separate the essential from the,
    ``Yeah, we would like to do that, but we cannot afford it right
    now,'' from the, ``Why are we doing that in the first place?''
    That is how I kind of evaluate fiscal reform here, and,
    clearly, infrastructure falls in the top line. And maybe we
    could pay for this through fiscal reform combined with tax
    reform and regulatory reform, but those are long-term issues
    that we fight over, and we cannot seem to get there. But
    economic growth can solve an awful lot of problems here,
    whether it is medical research or whether it is paving roads
    and building bridges and everything else in between.
        The shift to the States--I would like your responses
    relative to how much we could shift to the States. My State
    tells me, the Department of Transportation tells me, that they
    could save up to 25 percent if they had more flexibility
    relative to what they now have to comply with at the Federal
    level, giving them more flexibility on this. On MAP-21, I had
    several amendments. They all went down in flames relative to
    giving States more flexibility. But you have all mentioned
    that; you have all talked about that. But how essential is it
    that, as a policy reform, we give some flexibility and
    devolution to the States in terms of how--I can go through all
    the statistics, but I think that you know what they are. And if
    we did that, what are the top priorities? Where would you
    start? I had an amendment on separating mass transit, and that
    was mentioned here. For building roads, you pay the gas tax to
    build roads. For mass transit, you pay a tax because you jump
    on the mass transit. And separating those two would make a big
    difference.
        But anyway, let's have the three of you give a quick
    answer--my time is running out--to that question as to if we
    did that, given the political realities, what would be the top
    two or three things you think we could accomplish. Just go down
    the line here.
        Mr. Moore. Well, this is something I very strongly endorse.
    I am not talking about total repeal of the Federal gas tax.
    There is no question--I think Secretary LaHood and I agree that
    there are certain elements of the Interstate Highway System
    that are properly federally funded. And what I am saying is
    that, when we are talking about funding of local roads and
    local transit projects and local bridges and things like that
    that are totally contained in one State, why in the world do we
    want to have the Federal Government collect the money and tell
    the States what they should build?
        The one thing I find that I disagree with the Secretary on,
    as he said, look, we are going to collect all this Federal
    money from the gas tax, and we are going to give it back to the
    States. Well, why? Why does the Federal Government have to be
    in that role at all? Why not have the Federal Government fund
    the portions of the road system that are truly interstate, and,
    for local roads, let States build them and fund them
    themselves? And you are exactly right, Senator, that you are
    going to see efficiency gains, no question about it.
        I mean, the biggest boondoggle, in my opinion, in the
    history of the United States, the biggest, biggest waste of
    money--you know, and that is saying a lot--is probably this
    high-speed rail project in California, $70 billion. And there
    is nobody who is going to ride this thing. You are talking
    about a State that is completely virtually bankrupt with
    pension problems, and they are going to spend $70 billion on a
    high-speed rail system that nobody is going to ride.
        Then you ask the question: why? Why would the people in
    California build such an absurd project? And the answer is very
    simple, Senator. The reason they are building this is that the
    Federal Government, people in Wyoming, people in my home State
    of Illinois, people in Florida, are going to fund this project.
    And, if California had to fund it themselves, I guarantee you
    this big white elephant project would never be funded. And that
    kind of thing happens all the time in our transportation
    sector.
        What I would do--and this gets to what Senator Thune was
    talking about. We have a massive debt problem. You are right
    about this, Senator. We ought to take, you know, five areas--
    transportation, education, health care, job training, labor--
    and just create five giant block grants and just give those
    Governors the money. They can save 20 percent right off the
    top. And you know what? I will bet you, because I have talked
    to the Governors, and I have asked them: if we said we would
    give you the money with more flexibility, would you take 80
    cents on the dollar? And almost all of them have said ``yes.''
        The Chairman. Senator, your time is up.
        Mr. LaHood. Senator, I just need to say one word about
    high-speed rail. I think it is a little funny here that Mr.
    Moore is suggesting that we ought to give more responsibility
    to Governors. The reason that California wants high-speed rail
    is because the Governor wanted it. A Republican Governor,
    Governor Schwarzenegger, started that program. You cannot have
    it both ways here, Mr. Moore. You cannot say, well, let us give
    the Governors all this responsibility and give them the money
    back, and then when they decide they want to use it on high-
    speed rail, well, you do not like that idea, so it is a bad
    idea.
        Hey, it does not work that way. If you want the Governors
    to have it, let them choose. What did Schwarzenegger choose?
    What did Governor Brown choose? High-speed rail. Why? Because
    you think they ought to have the responsibility to do it,
    except when you do not like their idea.
        Mr. Moore. No, but the reason they are building it is
    because the Californians are not paying for it. People from all
    of the other States are paying for it.
        Mr. LaHood. The California Assembly has passed millions of
    dollars of California taxpayer money to fund this project. That
    is how it is getting funded.
        Senator Coats. Like I said, Mr. Chairman, this is a great
    hearing. [Laughter.]
        The Chairman. Ray, I want you to keep your health here now.
    [Laughter.] All of us get worked up on this issue.
        Senator Menendez is next.
        Senator Menendez. Thank you, Mr. Chairman.
        Look, I would like to say that if I followed Mr. Moore's
    thinking, Eisenhower would not have opened up a national
    highway system; we would not have been at the point when we
    were the envy of the world in infrastructure, in ports, in rail
    connections to get people to work, to get product to market, to
    get product shipped internationally. That is just not going to
    be done by the private sector.
        And I will tell you, as a person representing the highest
    per capita income in the Nation, we send a lot of our money to
    a lot of other places, including your State, Mr. Moore. So the
    reality is, that is not a particularly compelling argument to
    me.
        Let me just say we have heard today a lot about the focus
    on highway programs, which are important, but our Nation's
    transit programs are equally, in my view, if not even more
    critical to our mobility and economic competitiveness.
        Now, there are some interesting assertions in today's
    testimony, including a comment that transit should not be
    funded by motorists who, by definition, do not use the trains,
    subways, and buses. Well, let me make it clear. I am a motorist
    who uses mass transit. And given the fact that, under a
    conservative estimate, there are more than 860,000 park-and-
    ride spaces at transit stations, I do not think I am the only
    one.
        In fact, 82 percent of U.S. transit riders live in a
    household with a car, and, of the transit riders with access to
    a car, 87 percent use the vehicle more than three times a week.
    These people are all paying into the Highway Trust Fund, and
    they all rely on more than roads just to get around.
        A modern transportation system cannot be about highways
    alone. We need a system with safe and efficient roads and rails
    and transit lines and ports, and we need to think about it
    holistically, with each mode of transportation working together
    in concert to increase efficiency and synergism. And we have a
    long way to go to get there. I saw the House debating about $1
    billion for Amtrak versus $1.3 billion. China spent $121
    billion in 1 year on their rail and transit systems, and their
    economy is going pretty strong.
        So I would like to ask--and before I do, I would like to
    recognize somebody who I think is very prescient in today's
    debate that we are having. It is a quote that says, ``Anyone
    who has driven the family car lately knows what it is like to
    hit a pothole: a frustration, an expense, a danger caused by
    poor road maintenance. Our cities need new buses, new and
    rebuilt rail cars, and track improvements. Common sense tells
    us that it will cost a lot less to keep the system we have in
    good repair than to let it disintegrate and have to start over
    from scratch. Clearly, this program is an investment in
    tomorrow that we must make today.''
        Now, that quote did not come from some radical liberal or
    even a moderate Democrat. It came from a Republican, and not
    just any Republican: Ronald Reagan at the presidential signing
    ceremony for the 1982 transportation bill, a bill that both
    raised the gas tax and created the mass transit account of the
    Federal Highway Trust Fund. So, despite the passage of time, we
    find ourselves today facing many of the challenges that he
    acknowledged nearly 3 decades ago. And I hope we can do it in a
    bipartisan way.
        Secretary LaHood, I would like you to get to two points, if
    you can, in the time I have left. There is this myth that
    transit is only used in urban, Democratic areas of the country.
    You served as a Republican member of Congress--I was pleased to
    serve with you--representing an area that included Peoria,
    which has had a transit system for decades. Can you speak to
    the importance of Federal investment in transit services for
    communities of all sizes? And can you also speak to the fact
    that your testimony notes that, in the three transportation
    bills prior to MAP-21, Congress increased investment levels in
    the range of 40 to 45 percent, but in MAP-21 we only did a
    small increase to keep up with inflation? What are the real-
    world impacts of the economic consequences of doing that?
    Because I see that half of our entire Nation's GDP is generated
    in 23 metropolitan areas, between the realities of rural
    America and suburban America that very often need rail, and the
    realities of so much GDP generated in these more metropolitan
    areas, this is an economic imperative, isn't it?
        Mr. LaHood. People who are middle-income people or
    certainly people below middle income, people who are working
    people, many of these folks cannot afford a car. They rely on
    mass transit. They rely on buses, light rail--and mass transit
    is their lifeline to their job, to their doctor's appointments,
    to the grocery store. This is how they get around. And not just
    in places like Chicago or New York or other big cities. In
    places like Peoria, IL, where I still have a home, we have a
    great mass transit system. It is all buses. But people rely on
    it every day because it is cost-efficient. They do not have to
    have a car, they do not have to pay insurance for a car, and,
    frankly, they cannot afford it.
        So, for all of the talk about how we are going to help
    people raise their ability to have a good income and to live
    the American dream, part of that is making sure that they have
    the kind of transportation they need. A lot of people cannot
    afford a car, and particularly people who are just coming out
    of college, who are moving to cities like Chicago or
    Washington, DC. They are going to rely on mass transit. They
    are going to rely on buses or Metro systems or the CTA, or
    whatever it is. And certainly in the State you come from,
    Senator, I do not have to tell you how many people use mass
    transit. Thousands. What happened during Sandy? Thousands of
    people could not get to work. And how did they do it? Buses
    were rented so they could get to work.
        This is an important part of our transportation system. We
    are not going to give up on it, and we should not--for the
    people, not for us. We all own cars. But for the people, the
    working people----
        The Chairman. Senator, your time is up.
        Senator Cardin, you are next.
        Senator Cardin. Thank you, Mr. Chairman. I want to thank
    our witnesses, and I want to thank you for holding this
    hearing, because it is particularly important that we deal with
    the 6-year reauthorization of the transportation program, and
    it has to be done by the current deadline of the end of next
    month. It is critically important. If we do not get it done
    now, then we know we are going to be punting again, and it is
    going to have an incredible impact on my State, on Utah, and
    every State in this country.
        The Chairman. If I could just interrupt, I will give you
    some additional time. One of our problems, Mr. LaHood--and I
    have great respect for you, as you know. One of our problems is
    that we do not believe we can get a tax increase through, and
    the House is not going to take it. They made it very clear to
    us. And frankly, a lot of the Senators do not want to do it
    that way either. So we are going to have to come up with a way
    of solving this problem, hopefully to all of your satisfaction,
    really in the next number of weeks, it seems to me.
        Sorry to interrupt you. I will give you----
        Senator Cardin. That is all right. I appreciate it, Mr.
    Chairman, and we understand the political realities, and I am
    going to talk a little bit about that, and hopefully have time
    for some questions.
        But I really want to underscore--I was out in western
    Maryland on Saturday. Mr. LaHood, as you point out, on the
    economic development, that north-south highway in western
    Maryland is critically important to the economic future of the
    western part of my State. If they do not complete the
    Appalachian Highway, it is going to be very difficult to
    attract the type of industry they need. So a 6-year
    reauthorization is the only way they are going to accomplish
    the completion of the Appalachian Highway.
        Or I could go to the Eastern Shore of Maryland, where we
    have 301, an incredibly important road with real safety issues
    that have to be addressed. We cannot do it under just the State
    funds or a short-term patch. You need to have a multi-year
    commitment as a Federal partner in order to be able to move
    forward in those programs.
        I could talk about our two urban areas, Baltimore and
    Washington. I was with Senator Warner yesterday as we got a
    briefing from the FTA as to the safety issues on the Metro
    system here, and they need to be held accountable. They must
    make safety a priority. This is a 40-year-old system. It costs
    money to replace cars to make them more safe. It costs money to
    put in the communications systems they need. They need
    resources. There is no question. They need accountability also.
    We understand that. The expansion of the Metro system here, the
    Purple Line, is critically important for the congestion, or the
    Red Line in Baltimore--all the transit programs.
        I commute back and forth from Baltimore. This region is the
    second most congested region in the Nation outside of New York.
    So if we cannot get a 6-year reauthorization, we are putting
    our communities at risk. There is no question about it. I want
    to start with the fact that there is no option but to pass a 6-
    year reauthorization if we want to deal with the safety issues,
    if we want to deal with the economic issues, if we want to deal
    with the quality of life issues that we are confronting.
        So let me deal with the chairman's comment. If we just hold
    our own, it is going to cost about $100 billion. If we pass a
    bill that represents the current needs--and you can use the
    President's budget as a recommendation--then we are about $250
    billion short. And we need to find the money to go into the
    transportation system that provides the permanent way to deal
    with it. And I must tell you, there have been many suggestions
    made by my colleagues that I am prepared to support, but I am
    mindful of what the chairman said, that we have to find a
    common way to move this forward.
        So, Mr. Chairman, let us look at some of the
    recommendations that have been made by both Democrats and
    Republicans. We have international tax reform that has been put
    on the table. We know that our corporate tax rates are not
    competitive, and we have money trapped overseas, and we have to
    deal with how that money is going to be brought back to this
    country.
        The President has made a recommendation in this area that
    will provide some permanent revenues as well as one-time-only
    revenues. I want to make sure that we have enough permanent
    revenues in the Transportation Trust Fund so that we can have a
    6-year reauthorization without another cliff.
        The Chairman. Well, as you know, that is going to have a
    very rough time flying, especially with the Joint Tax report
    that says really it will lose $120 billion over 10 years. So,
    you know, we are going to go through every possible way of
    funding this, and we have gone through that as well. And I
    just--this is not an easy job, I am telling you. But we are
    going to solve this problem.
        Senator Cardin. And I agree with the chairman that it is
    not an easy job. I would suggest that some of our colleagues
    working across party lines, Democrats and Republicans, have
    come up with recommendations that overcome some of the scoring
    problems that have been raised.
        I agree, bottom line, we have to find the revenue so that
    we have a 6-year reauthorization that does not create another
    cliff at the end of the 6 years. That is absolutely essential.
    And I understand the chairman's concerns as to the political
    realities here. If it were up to me, I am prepared to use some
    pretty direct ways to get the money into the trust fund. I
    think that is what we should do. But I want to make sure that
    we accomplish, by the end of next month, a 6-year
    reauthorization that not only allows us to maintain the Federal
    partnership, but to meet the needs that are out there.
        And I would just urge us to take a look at some of these
    numbers that Joint Tax has come back with on the international
    tax side. They are well beyond the revenues necessary to
    accomplish these goals. The monies are there. And, by the way,
    we unleash additional activity here in the United States. We
    will not get credit for that in the scoring. I understand that.
    But when we bring the money from foreign corporations back into
    the United States, that is going to generate more economic
    activity here, which is going to also produce more revenues for
    this country.
        So I think there are ways that we can work together,
    Democrats and Republicans, to do it, but we must be committed
    to this goal. We cannot let this July date go without a 6-year
    reauthorization, and the level has to be adequate to deal with
    the growing transportation needs in this country--enough
    permanent revenues so we do not create a cliff and creative
    uses of one-time-only revenues. And my colleague Senator Warner
    has recommendations on how we can use one-time-only seed money
    to supplement the transportation program.
        That is the creative way that we can get Democrats and
    Republicans together, but I would just urge all of us--and I
    serve on the Environment and Public Works Committee, and we are
    working in a bipartisan way for a 6-year reauthorization, and I
    know the Banking Committee is also working on this area. We
    cannot let next month go without accomplishing those goals. And
    I understand the political realities. Let us, though, not lose
    this opportunity, because if we do, you are putting the
    citizens of Maryland at risk on the safety projects that are
    not being done. You are putting the people of Maryland at risk
    for the economic opportunities in western Maryland that will
    not be done. And you are putting us at risk every time we spend
    2 hours trying to go 2 miles in this region in order to be able
    to get from our home to work. We can do better for the American
    people.
        The Chairman. Thank you, Senator. Let me just say this: I
    am for a multiyear resolution here, whether it is 2, 3, 4, 5,
    or 6. We are going to have to live with reality. But I am for
    getting this done, and we will see what we can do.
        Senator Warner, you are next.
        Senator Warner. Thank you, Mr. Chairman. I have been
    chomping at the bit.
        First of all, I want to say, Secretary LaHood, when you
    mentioned ports, you said only two ports in America are ready,
    post-Panamax, one of them in Virginia.
        Secondly, Mr. Moore, you and I have had lots of back and
    forth over the years, Governor and Senator, but I do find--and
    Senator Menendez has already raised this. You know, we might
    have never built an Interstate Highway System because there was
    massive wealth transfer from certain States to less populous
    States over 40 years, and suddenly to say now that it is built
    we are going to go to devolution, I think is not an appropriate
    approach.
        Number three, I very much appreciate what you are doing,
    Mr. Chairman, and next week I know we are going to have a
    financing issue. I simply want to indicate that we have, I
    think, a very
    business-focused financing vehicle that we reintroduced
    yesterday called The BRIDGE Act. We have 11 original
    cosponsors--5 Republicans, 6 Democrats. It would generate $300
    billion-plus in financing. Financing is not a silver bullet,
    but it has a business background, unlike some of the other
    proposals that have been put forward. And I hope it gets
    serious consideration because--let us bear in mind, vis-a-vis
    our competition, China is putting together a $100-billion
    infrastructure bank. The fact that we have in our government
    right now an office in the United States Treasury that advises
    American pension funds on how to invest in European and foreign
    infrastructure, because there is no ability for American
    pension funds to invest in a broad way in American
    infrastructure, is ludicrous. And at record-low interest rates,
    we, I think, do not take up that option at our peril.
        I wish Senator Thune was still here, because I support
    repatriation, but I do believe that we are going to have a hard
    time saying to our domestic companies that we have just given
    multinationals whatever blended rate, and they are still paying
    35 percent. And where I have, Mr. Chairman, enormous, enormous
    respect for you, I do not think we can start with the premise
    that we cannot generate new revenues.
        Senator Thune, I think, was open to this. Senator Thune
    mentioned the fact that we are borrowing. We are having a
    debate right now about, you know, the funny money around
    Overseas Contingency Operations. If we had not had to transfer
    $56 billion from the general fund into the Highway Trust Fund,
    we would have a sufficient amount to plus-up on defense or on
    the domestic side without such borrowing techniques. But
    remember, this is robbing Peter to pay Paul in our current
    approach.
        I do think there are some ideas that a number of us, in a
    bipartisan way, are looking at that maybe have not been in the
    full debate yet that would look, Mr. Chairman, at revenues, but
    in a way that would be phased in over a period of time, that
    would not be disruptive to the economy or, frankly, disruptive
    to any of us who have to run in 2016.
        So again, I just ask you, because I know you are always, I
    think, willing to take a broad-based look. Let us not take
    things off the table before we start this discussion. We are
    all willing to give some, but revenues--I have not met anyone,
    echoing Secretary LaHood and all the folks involved in the
    business side, who thinks that we can borrow our way one time
    into fixing our infrastructure needs without an ongoing,
    permanent revenue source.
        And that will bring me to my question, and I am going to
    actually go to Dr. Kile, since you seem to have been left out
    of a lot of these questions. Your projections over the next 10
    years, I think, are good and sobering, but the irony, of
    course, here is that we have two policy constraints
    contradicting each other. We have a gas tax, but we have
    increasing fuel efficiency standards. Have you looked beyond
    the 10-year window in terms of how much further the existing
    revenue source of the gas tax decreases as fuel efficiency
    continues to improve? And I support electric vehicles or
    natural gas vehicles. But the fact is, as our fleet becomes
    more distributed, what that completely does is further hollow
    out the Highway Trust Fund.
        Dr. Kile. Senator, we have a report on that that I do not
    have on the tip of my tongue that I will be happy to send to
    you. Over time, the increase in vehicle efficiency does erode
    the revenues into the trust fund, both within the window and
    beyond it.
        Senator Warner. I will close up with this and not go over
    my time, but to my Republican colleagues, we also have in our
    financing approach--and, again, financing does not solve the
    window. You have to still pay it back. It often translates to
    tolls. But one of the things that we also include is--time is
    money--and we put in a provision for an expedited National
    Environmental Policy Act process, one of the things that
    actually Mr. Moore and I would agree on. As a former Governor,
    you know, it should not take 7 years to do a NEPA review before
    you build any project. And I would be anxious to talk with all
    of my Republican colleagues to join the five or so other
    Republicans who have already joined in this effort.
        Thank you, Mr. Chairman.
        The Chairman. Thank you.
        Senator Brown, you are next.
        Senator Brown. Thank you, Mr. Chairman. Thank you all for
    joining us.
        Secretary LaHood, I would like to address my comments,
    brief comments, and questions to you. You know, when we look at
    sort of the post-World War II history of our country, we know
    that in the 1940s, 1950s, 1960s, 1970s, and into the 1980s we
    had the greatest infrastructure the world had ever seen. Yet
    today, when we think about what our parents and grandparents
    bequeathed to us, this incredible infrastructure, we have
    failed to modernize it, we have failed to upgrade it, and we
    have really failed to maintain it. We have problems in States
    where--in my State, as an example, but other States too--State
    government has cut funding to local communities. So, we see the
    condition of our infrastructure and what it means to
    everything. We know that the Brent Spence Bridge, a huge
    infrastructure project, mostly in the State of Kentucky
    technically, but across the Ohio River, carries 4 percent of
    GDP every day across that bridge because it is I-75 going from
    Detroit south.
        But it seems we are making this whole--and I have watched
    some of the questions and comments. It seems we are making this
    more complicated than it has to be. There is a bipartisan
    proposal you know about, Mr. Secretary. We can fund a 6-year
    bill at the level that a 21st-century infrastructure system
    demands without raising taxes on small business owners and
    working families. We can reform our international corporate tax
    system to make it more competitive, shut down tax havens, grow
    investment in the United States. We can use a one-time
    mandatory tax on those overseas earnings. Not to, again, as we
    do it, encourage more companies to go overseas, but do a deemed
    repatriation with a lower tax rate that would be ongoing so
    companies would act differently.
        Talk about that, why we should move to something like that.
    We have seen some support in both parties. We have seen
    administration support. Does that make sense to get us where we
    need to go?
        Mr. LaHood. You are all very, very astute lawmakers, and I
    think you are going to have an awful lot of heartburn from the
    business community to move in that direction. They are the ones
    who are putting this money offshore. They have their own ideas
    how they want to use their money, and I do not know if every
    one of these companies is going to want to use their money to
    pay for infrastructure. They have lots of other ideas. And so I
    think you are going to get a lot of pushback.
        But I will say what I said earlier to the chairman. Put it
    on the table. See how much revenue you can get from it. See how
    much pushback you get, and if you can include it, do it,
    because it is a good pot of money.
        But I would also urge you--and I heard what the chairman
    said, and I know there are people on the other side of the
    Rotunda who have said absolutely no increase in the gas tax.
    That has to be on the table. That is the pot of money that
    built America, and that is the pot of money that can rebuild
    America again. Why should we turn a blind eye to the pot of
    money that built our country? Ronald Reagan raised the gas tax.
    George Herbert Walker Bush under reconciliation raised the gas
    tax. Bill Clinton raised the gas tax. It has not been raised in
    20 years. Stamps have gone up, eggs have gone up, milk has gone
    up, cars have gone up. Everything in America has gone up except
    the gas tax. If it had been indexed in 1993, we would not be
    having this debate. So think about indexing it.
        So my answer is, if you can get some repatriated funds,
    take a look at it. I do not think the business community is
    going to be all that gung-ho about it, but, you know, maybe you
    do not take it all. Maybe you give them some kind of a tax
    break. But do not take the gas tax off the table, Mr. Chairman.
    Please do not.
        Senator Brown. Okay. Thank you, Mr. Chairman.
        The Chairman. Senator Isakson, you are next.
        Senator Isakson. Thank you, Mr. Chairman.
        Mr. Chairman, I was just thinking, I think you and I are
    the only two people in the room old enough to remember before
    there was an interstate highway system. I was born in 1944, and
    we have all talked about the interstate highway system. But the
    reason Eisenhower proposed it was to evacuate the major
    population centers in the event of a nuclear attack because of
    Nagasaki and Hiroshima. It became the greatest economic
    catalyst for growth, and it created the new South. Atlanta
    would not be Atlanta and Florida certainly would not be Florida
    if it was not for the interstate highway system, because nobody
    could get there. All those Yankees moved south, and we made a
    lot of money. [Laughter.] We gave them a way to do that.
        But my point is this--and Mr. Moore made the point about
    the pro-growth tax policy. Transportation improvements are pro-
    growth, and, if you expand prosperity, you raise revenue, not
    by raising rates but by raising economic activity. And I think
    Mr. Moore referred to that and recognized that there is a role
    for a gas tax at the Federal level, but not as the sole answer,
    not as the sole solution.
        I agree with Secretary LaHood, and I agree with you, Mr.
    Chairman. We have to put everything on the table and stop
    talking at each other and by each other and start talking to
    each other.
        At one point in time in this room today, in this hearing--
    and Senator Coats is right: every potential solution in
    collection has been mentioned. All we have to do is pull the
    trigger. And, if we pull the trigger, not by picking them off
    one at a time like ducks in a shooting gallery, but instead
    putting all the ducks in the tub and saying, okay, what is the
    best formula to make transportation work in the 21st century,
    to raise prosperity, to make ease of transit easier, and to
    expand our opportunities, we have the chance to do it. But if
    we try to find one place to do it, we are going to make a
    serious mistake.
        Now, Secretary LaHood, it was a privilege and pleasure for
    me to serve with you in Congress and on the Transportation
    Committee. I have one loaded question for you. You are the only
    former Secretary of Transportation in the room and a former
    member of Congress. In talking about economic growth and
    opportunity, there is a lot to be said about fast-tracking road
    construction in the United States and breaking away the
    labyrinth of time-consuming regulations of the Federal
    Government. As a former Secretary of Transportation and as a
    former member of Congress--and as one advocating road
    improvements--do you not think part of this reform that gets us
    revenue ought to be less cost of Federal regulations and
    Federal delays in building roads in our States?
        Mr. LaHood. Absolutely. And it can be done at the
    Department; it can be done at the Secretary's office. I met
    with every Governor in the country. We knew every Secretary of
    Transportation in the country. We worked with them day in and
    day out. They were our best partners. And when they brought
    egregious regulations and rules to us that did not make any
    sense, we tried to get them changed to speed up the process so
    people could go to work and roads could be built. And it is
    possible and should be done.
        Senator Isakson. And, if we do put everything on the table
    to solve the crisis--and it is a crisis that we are facing
    right now in terms of our Highway Trust Fund--should that not
    be one of the things we consider to contribute to the solution?
        Mr. LaHood. Absolutely. It should be a part of the bill.
    Find the things that are egregious and get rid of them.
        Senator Isakson. I rest my case, Mr. Chairman. Thank you.
        The Chairman. Thank you, Senator.
        Senator Stabenow?
        Senator Stabenow. Well, thank you very much, Mr. Chairman.
    I think this has actually been a very, very good discussion,
    and I thank you. And I think the majority of us are saying that
    we want to get something done. We have 43 days, and in
    legislative time that is a long time, if people really want to
    get things done.
        Let me start out by saying, Mr. Moore, I am really glad
    that, when I was doing the farm bill, our colleagues in urban
    States did not share your view about not caring what happens in
    other States, because the western States were huge
    beneficiaries. Our livestock disaster assistance program is
    absolutely critical, and on the transportation front, short
    rail for agriculture is absolutely critical but does not go
    through every State. And so we really are in this together as a
    country, and there are things that certainly we do better at
    the State and local level. But we are in this as a country, and
    in Agriculture, I sure saw that, with a lot of my colleagues
    saying, ``I do not have a lot of farmers. Why should I care?''
    But you eat, and so you should care. So we all are connected in
    some way, and I think we have to keep that in mind.
        Mr. Chairman, I also think that we are coming to terms with
    what has been years now of trying to pretend we do not have to
    pay our bills and do not have to pay for things. And I am all
    for streamlining and looking for better ways to do things.
    Again, I have to say, going back to the farm bill, we cut 100
    different programs that were duplications or did not work and
    actually saved $23 billion in total, and then we increased the
    things that were working. So I am all for doing that. But it
    does not take the place of paying our bills. And it does not
    matter whether it was President Eisenhower talking about
    national defense and transportation equaling economic defense,
    bringing that together, or whether it is the chairman of the
    EPW Committee, Senator Inhofe, whom I greatly respect on this
    issue, who has said that both the Department of Defense and
    infrastructure are absolutely critical responsibilities of the
    Federal Government. And I appreciate what he and Senator Boxer
    are doing to bring forth a robust 6-year bill, which it is our
    responsibility to figure out how to fund.
        And I do not in any way pretend this is not challenging.
    But I also know there are multiple ways to do it and that, if
    we all decide that this is important for jobs and economic
    growth and all the other things that have been talked about
    today, as well as just saying to people that they are not going
    to have to pay for their roads by a realignment of their car--I
    talked to one constituent of mine who had to buy seven new
    tires last year. He said, ``Please, there has to be a cheaper
    way to fund what is happening here in terms of highways than my
    continuing to buy new tires or get my car realigned,'' which I
    had to do just by taking the vehicle I have here back to
    Michigan for a month last fall. I had to pay for an entire
    realignment. So, please, there are certainly cheaper ways to
    pay for that than what constituents, all of us, are doing right
    now.
        So, Mr. Chairman, I think, while we are talking about the
    big push on trade, not to understand the infrastructure needs
    that relate to effectively exporting our products makes no
    sense. I would love to see the same focused, bipartisan push on
    infrastructure, on jobs, roads, bridges, rail, airports, ports,
    and so on, that we have seen in this major push on trade. And
    maybe we ought to put them together. Maybe we ought to actually
    say we are going to make sure that we have the millions of
    jobs, American jobs, that come from that and the infrastructure
    to be able to actually do this.
        I want to share one other thing with colleagues. As a
    northern State that has the largest border crossing in the
    north, which is through Detroit to Windsor, we saw what
    happened after 9/11 when we temporarily had to shut that down.
    Over $1 billion--I think it is $1.3 billion in goods that cross
    every single day back and forth, not counting people who are
    working going back and forth. And we realized that we needed to
    have a second bridge, both for national security as well as for
    economic reasons. And, Secretary LaHood, thank you for being
    such a wonderful partner with us, a terrific, important partner
    for us in Detroit and in Michigan and in doing a whole range of
    things, but certainly the bridge.
        What is still terribly embarrassing to me is that the only
    way we could get the bridge done is for the Canadians to
    completely finance it. Now, they have something called a
    ``P3,'' a public-private partnership, and they are financing
    the bridge, because America could not come up with part of it
    to finance a bridge that we desperately need to have. And then
    on top of that, we could not even produce the money for the
    Customs plaza on our side, because we do not have the
    bipartisan will to fund infrastructure in our country. So the
    Canadians are doing that too, Mr. Chairman.
        And so I would hope that we could take this moment of
    opportunities--we have 43 days, and, Mr. Chairman, we are
    willing to work night and day with you on a bipartisan basis to
    step up and decide we are really going to invest in the future,
    we are going to take that next step, we are going to decide to
    truly pay our bills, not send it on to our kids in the form of
    deficits, but actually step up and do something that everybody
    tells their kids they ought to do, which is work hard and pay
    your bills and make good decisions. And we can do that, and we
    have 43 days to do it, and I certainly hope that we are going
    to be able to get it done.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator.
        We will turn to Senator Casey now.
        Senator Casey. Mr. Chairman, thank you very much, and I
    appreciate you having this hearing, and I appreciate the focus
    you have brought on this issue to get a bipartisan solution. I
    think it is good we have some passion here.
        The chairman exhibits passion on some things. He is from
    Pittsburgh, so he has Pennsylvania in him, and we appreciate
    that. We need more than just talk in this. We need to get folks
    together in a bipartisan fashion.
        One area that is of particular concern to me as a
    Pennsylvanian--and I think it is true of a number of States,
    and maybe unfortunately is most emblematic of the challenges we
    have--is our bridges and the number of structurally deficient
    bridges. We have in our State over 5,000 at last count. I am
    just looking at some other States, and these are not east coast
    States. Oklahoma has, at last count--these are December 2014
    numbers from the Federal Highway Administration--4,216;
    Missouri, 3,310; Iowa is similar to Pennsylvania, over 5,000.
    So it is a huge issue. I know, Mr. Moore, in your testimony you
    said the number had come down, and we are at about 10 percent
    nationally. It is right around that percentage. But it is very
    high in some States, and we have a major challenge.
        So I guess, Secretary LaHood, I would start with you, and,
    in addition to your testimony today and your passion, we
    appreciate the work you have put into this as a public
    official, as Secretary, and now as a citizen. And I want to ask
    you about just that challenge alone: the challenge of our
    bridges.
        And then, second, to reference a part of your testimony, I
    think it was on the top of page 4, you cite there the impact on
    a family budget would be a little more than $1,000. Talk about
    that in terms of the impact on families, the overall
    transportation challenge, but specifically the----
        Mr. LaHood. Well, first of all, Senator, thanks for all
    your leadership in Pennsylvania. During our time, we were able
    to get a lot of really good things done for the people of
    Pennsylvania.
        I think that the reality is that every one of these bridges
    that is deficient and in a state of bad repair was built under
    the interstate system. So we owe it to the Commonwealth of
    Pennsylvania and every other State to have a national program
    to fix up our bridges. And we are not going to do it with the
    resources we have now because they are not there.
        So, again, I know you all have the tough job of finding the
    money, but we need to find the money so that people are not
    fearful of crossing bridges in the Commonwealth or in any other
    State in our country. And some people are fearful of crossing
    bridges. People have seen the ``60 Minutes'' report where
    former Governor Rendell is standing under a bridge with Steve
    Kroft, and it is falling down. The bridge that connects
    Arlington Cemetery to the District of Columbia, it is in a
    terrible state of repair. Underneath, the girders are
    crumbling. Where is the money to fix it? That is what we need
    to do.
        With respect to revenue-raising opportunities, you know, I
    mentioned what happens with the gas tax. It does not stay here
    in Washington. It goes back to the Governors and the State
    DOTs, and they spend it, and they put it back into the American
    worker, the ones who are fixing the roads and bridges. And that
    helps them. The highest segment of unemployment in America
    today is in the building trades, people who build roads and
    bridges. And they are middle-income people, and they are out of
    work. They are waiting for Congress to take action.
        We need to have some leadership here and some vision and
    some courage to say, this is what we have to do to help the
    American people, to help our country. So I do not see the
    increase in the gas tax as an impingement on middle-income
    people. I see it helping a lot of middle-income people who are
    building the roads and bridges.
        Senator Casey. I would also say, in reference to just the
    terminology here, when you talk about structurally deficient,
    part of that definition is ``significant defect.'' So in some
    places it may mean that they are a long way from something
    actually collapsing, but in your experience as Secretary, I
    guess there is also a segment of that which would be much more
    grave.
        Mr. LaHood. That is right, and we work with the State DOTs,
    and they actually have to do--you know, they have closed some
    bridges because people cannot travel on them.
        The Chairman. Senator, your time is up. Senator Carper, you
    are next.
        Senator Carper. Thanks, Mr. Chairman. To our witnesses,
    welcome one and all. Great to see you. And, Mr. Secretary, I am
    especially happy to see you again.
        Mr. Chairman, I would like to cite a statement by the
    American Road and Transportation Builders Association. The
    group study in 2014 looked at reelection rates of State
    legislators who voted for increases in user fees to fund
    transportation projects in their States, and they found that,
    surprisingly to a lot of folks, 95 percent of the Republicans
    who voted to do that in their States won their primaries. They
    won their general elections. They were reelected. That is a
    higher percentage than those who voted not to raise those user
    fees. On the Democratic side, it turns out, in the last year in
    those half-dozen or so States, 90 percent of the Democrats who
    voted to raise the user fees for transportation projects were
    reelected. That is more than the percent who voted against
    them.
        I was Governor for 8 years, and three times during those 8
    years I called for raising user fees. We created a
    transportation trust fund. We did not just finance it, we did
    not just borrow money. We actually leveraged that money to fund
    our improvements. But three times during my time as Governor, I
    said, let us raise the user fees--not by a dollar, not by half
    a dollar or 25 cents, but let us raise them. And I ran for
    reelection, and I won. I only won by 70 percent, so it did not
    hurt me too badly. And then in 2000, I ran for the U.S. Senate
    against a fellow who was the chairman of this committee, and I
    won there too. But when the Bowles-Simpson Commission was
    formed, George Voinovich and I suggested that the Bowles-
    Simpson Commission--the Commission reached out and they said,
    give us ideas for reducing our deficits, and Voinovich and I
    put together a letter that said, ``Why don't we raise the gas
    and diesel tax by a penny a month for 25 months?'' A penny a
    month for 25 months, with 10 cents for deficit reduction, 15
    cents for infrastructure.
        The very next day--the very next day--it leaked. This
    letter leaked, and it was a news story. And one of my
    Republican colleagues said to me, he said, ``You have just
    written your first 30-second commercial to be used against you
    when you run for reelection next time.'' You know what? He was
    right. And I won by 70 percent.
        I mean, you can make these tough decisions. People want us
    to do stuff, and actually they are looking to us to provide, as
    you say, Mr. Secretary, some leadership and some courage. And
    if you do, you do not get punished for it. You get rewarded.
    You get rewarded.
        And this idea that the States want us to devolve this stuff
    back to them--I was chairman of the National Governors
    Association for a while. I was a leader at the NGA for the
    better part of 8 years. I loved doing that job--loved doing
    that job. But we never came to the Congress and said, ``Get out
    of our way. We can handle all this.'' We never did that.
        In fact, I got a letter last month from the NGA that said
    just the opposite. I do not think I have the actual quote here,
    but maybe I do. Here is what the NGA said to us last month:
    ``We believe that a commitment to surface transportation at all
    levels of government is necessary and that each level,
    including the Federal Government, has a crucial role to play to
    achieve overall success and keep America competitive in the
    21st-century economy.''
        I live in a little State. We have New Jersey to the east,
    Pennsylvania to the north, and Maryland to the west. We do not
    just build transportation systems to meet our needs in our
    State. We are a region, and we are part of a country. I had a
    meeting this morning with a manufacturing group, and they said,
    ``Please do something on transportation. For God's sake, do
    something on transportation.'' I said, ``Give me a good example
    of why you need it.'' And we were talking about trade in that
    meeting, and I am a big advocate of the President's proposal,
    the Trans-Pacific Partnership. But this one fellow said, ``We
    export a lot of what we make, and we have a window of time when
    we can get our goods or products to a port when a ship is
    there. We have a short window. They are in and they are out,
    and if we do not meet that window, then we lose out.'' And he
    said, ``For God's sake, give us a chance, a fighting chance to
    get our goods, our products, to that port so that we can make
    the window.''
        Here is my question--enough proselytizing from me. Dr.
    Kile, for you, some people think that we can finance our way
    out of this and we do not have to fund our way out of this. And
    I think funding has to be part of it. And financing obviously
    makes some sense. People get confused when we talk about how we
    will just finance our way out of this. What do you think? And
    in the Navy, we used to talk about the straight skinny. Give us
    the straight skinny. Is this something we can do just by
    financing our way out of it?
        Dr. Kile. Well, Senator, ultimately that is a choice for
    you and your colleagues. The way I think of funding is coming
    up with a set of revenues to pay for a set of highway spending
    that would be desirable. And the amount of that is a choice for
    you and your colleagues. And then financing is a way of
    encouraging borrowing by State and local governments or others,
    or the Federal Government if it is Federal spending, to pay for
    highways. But those are ultimately not sources of revenues and
    would be a call ultimately on future taxpayers or future users
    of the system.
        Senator Carper. All right. Mr. Chairman, could I have 30
    more seconds?
        The Chairman. Sure.
        Senator Carper. I just want 30 more seconds, if I could. I
    do not think we are going to raise the gas tax by a penny a
    month for 25 months. We are not going to raise it a penny a
    quarter for 25 quarters or even 15 quarters. At the end of the
    day, we may do something that the President is calling for,
    which is international tax reform, and out of that deem some of
    the money that is held overseas to be brought back and used for
    infrastructure. If that happens, that is terrific. But if it
    does not happen, we need to do something. And if someone was
    going to suggest a way to do something, to do it gradually over
    a period of time, that would include indexing the gas and
    diesel tax. I think at the very least we can do that, and we
    should do that. And the key is leadership. We need leadership
    here, and that includes all of us here in this room.
        Thank you.
        The Chairman. Thank you, Senator.
        One last Senator, and then maybe I will have a question.
    Senator Heller?
        Senator Heller. All right. Saving the best for last, Mr.
    Chairman. Thanks for having this hearing, and thanks for all
    your hard work. I know this is not an easy topic. We have heard
    some great ideas here, and we have some great witnesses here
    also. Thanks for taking the time. I know it has been a long day
    for you, and I will try to finish this up on a positive note.
        Myself and Senator Bennet from Colorado have been working
    on the chairman's subcommittee, the working group on
    infrastructure, and these are the conversations we have had for
    the last 3 months, Mr. Chairman. You can imagine the
    conversations going on once a week similar to this, and as hard
    as Senator Bennet and I and the members of that working group
    have worked on this, I know our staffs have worked just as
    hard, if not harder, to try to solve this problem.
        Last month, we had Transportation Secretary Foxx in the
    office, also with Treasury Secretary Jack Lew, having this very
    conversation that we are having today. And I guess one topic
    that we are not talking about, quite to the fullest extent
    anyway, is: what are the needs? What do we actually need? We
    are talking, Mr. Chairman, in most discussions about maybe $10
    to $12 billion a year for the next 5 or 6 years. But if you sit
    down with the Treasury Secretary and Secretary Foxx--and I
    assume the former Secretary of Transportation could give us
    some insight on this--what are the needs?
        Let me tell you why I say that. The two largest urban areas
    in America that do not have a freeway between them are Las
    Vegas and Phoenix. Now, you can imagine the impact economically
    that would have for those two communities if we had enough
    money to put a new freeway between those two cities. The
    problem is, we have not added a new highway in this country for
    25 years--25 years. So are the needs $10 to $12 billion a year
    so that we are talking $60, $70, $80 billion over 6 years? Or
    are the real needs $100 billion, $200 billion, or $300 billion
    so that we can actually solve the problems?
        If we are going to go $10, $12 billion a year, all we are
    doing is keeping our head above water. That is it: head above
    water. Fix the potholes, you know, and it would do good work.
    It would help with some of these roads. It would help with
    these bridges, and I am all for it. But if we want to expand,
    and if we want to expand economic growth--and, Secretary
    LaHood, you said short-term jobs, long-term economic growth.
    Short-term jobs, long-term economic growth. What we need is a
    good transportation program here in the State.
        Now, I believe that there are three things the Federal
    Government does, and one is defense. You know, we are going to
    work on defense today; I think we are going to pass out of the
    United States Senate our NDAA budget. There we go. We have hit
    national defense. But number two is infrastructure. So here we
    are, national defense, infrastructure, and, frankly, I would
    add a third, and that is a safety net for those who need it.
        But we have an opportunity here in the next 45 days to make
    a real difference--a real difference here for this country;
    again, short-term jobs, long-term growth.
        So I guess the question I have is: what are the real needs?
    Is it $10, $12 billion a year? Is it closer to $200 billion? If
    you talk to the administration, they say it is closer to $300
    billion if you really want to expand the infrastructure we
    have. I will start with the CBO on this.
        Dr. Kile. Thank you. Several years back, CBO did an
    analysis of some work by FHWA, and we found at the time that in
    order to maintain current surfaces, spending would need to rise
    by a few tens of billions of dollars per year from the current
    level, and that the number of projects that would be
    justifiable on a benefit-cost basis would be somewhat higher
    than that. That was based on a several-years-old analysis, but
    I think the sign of that answer would be the same.
        Senator Heller. Okay. I want to hear from the former
    Transportation Secretary.
        Mr. LaHood. The answer is $300 to $500 billion to get us
    back to being number one in infrastructure, to get the road
    between Las Vegas and Phoenix, to do some of the other things
    that need to be done on the interstate system, to fix up the
    thousands of bridges that are in a state of bad repair, to
    really make progress. We just need a lot of money, and, you
    know, we are talking sort of around the edges here in terms of,
    as you put it, just keeping our head above water. It is still a
    lot of money.
        Senator Heller. It is. It is.
        Mr. LaHood. But to get back to being number one, it is an
    enormous amount of money, $300 to $500 billion.
        Senator Heller. Okay. Mr. Moore, is it my understanding
    that in your testimony you said funding the Federal highway
    system is done? Did I understand that correctly?
        Mr. Moore. I am glad you asked this question, because there
    has been some misunderstanding about what I have said about the
    Federal interstate highway system.
        First of all, I am a huge fan of what Eisenhower did in the
    1950s. The Secretary is exactly right. It was a huge, huge
    economic boon to the country that connected us through a
    transportation infrastructure that was second to none in the
    world. So let there be no misunderstanding about that. It was
    an incredibly important economic development project that has
    paid dividends for a century.
        What I am saying is, there is a big difference between the
    Federal Government funding interstate transportation and inner-
    State transportation. It is extremely inefficient for the
    United States Federal Government to determine what inner-State,
    within-State transportation projects should be funded. Those
    should be funded by the people who are going to use them.
        With all due respect to the Secretary----
        Senator Heller. I am out of time. Mr. Moore, are you
    arguing against a freeway between Las Vegas and Phoenix?
        Mr. Moore. No, look, I think--I do not know----
        Senator Heller. Who would then pay for that? Who would pay
    for that?
        Mr. Moore. Who would pay for it? I think that--if it is
    something that is needed in our interstate highway system, it
    should be paid by Federal taxpayers. I do not know the
    specifics about that particular road, but I think the one
    disagreement that the Secretary and I have is, I do not believe
    we need to spend more money on infrastructure. What we need to
    do is spend more wisely on infrastructure, because we are
    wasting tens of billions of dollars a year on projects that
    never should have been funded and that are only funded because
    States are getting money from people out of State to finance
    them. And Virginia is a perfect example. The Silver Line, which
    is a huge waste of money, I am going to have to pay for that
    now through the tolls that I pay on the toll road. That never
    would have been funded except for the fact that the people out
    of the State of Virginia, around the country, and in your State
    of Nevada have to pay taxes for that. That is not fair. We have
    to move back to a--and, in fact, Mr. Chairman, as you determine
    what is the best way to fund these important infrastructure
    projects over the next 6 years, I hope you will keep this in
    mind. User pays. The single best way to make sure we are
    efficient with our transportation infrastructure is to make
    sure the user who is going to make use of these projects is the
    one who pays for them.
        Senator Heller. Mr. Chairman, thank you. My time has run
    out, but thank you for all you are doing on this particular
    topic.
        The Chairman. Well, thank you.
        Let me just end this hearing. I am very appreciative of all
    three of you being here. Mr. LaHood, for a while there I
    thought you were going to have a heart attack. [Laughter.] I
    was worried about it. We need you too badly.
        But let me just say this: one thing that bothers me a
    little bit is the administration's view of the gas tax as a
    source of revenue. The Obama administration has never included
    a gas tax increase in any of their budgets, and their current
    pay-for for infrastructure is essentially international tax
    reform, which has all kinds of problems. I am looking at it
    with everything I've got, but there are all kinds of problems,
    and it just bothers me that the administration has not sought
    to increase the gas tax if it is that important. But I do not
    want to waste your time today on that.
        All I can say is this: as chairman of this committee, I
    intend to solve this problem. It is almost insoluble under
    current circumstances. All of my Democrat friends want to spend
    any amount of money, increase taxes and so forth, and all at
    the same time that we are totally out of money and are in such
    debt that now Joint Tax and CBO are both saying that we cannot
    continue the way we are going. It is a very, very serious set
    of problems for me, and I think it should be for everybody. I
    would like to solve this problem, and I am going to solve it
    one way or the other, if it is only on a multiyear basis. And
    if I can solve it on a long-term basis, I will see what I can
    do, though I am not the sole person who has to work on this,
    and I appreciate the colleagues who are helping me and continue
    to help me in a bipartisan way on this committee.
        So, having said that, let me just once again thank the
    three of you for being here, for appearing here today, and all
    of our colleagues who have participated. As you can see, this
    is a very participatory committee. It drives me nuts sometimes.
    [Laughter.]
        I think we have had an informative discussion that will
    give us a lot to think about as we tackle these very, very
    essential and important problems.
        I would ask that any written questions anybody on the
    committee wants to give for the record be submitted by Monday,
    June 22nd. And with that, I want to thank you again, and----
        Senator Carper. Mr. Chairman? Could I have maybe one more
    minute? Would you mind?
        The Chairman. I will give you another minute.
        Senator Carper. That would be great. Thanks so much.
        The Chairman. I just want to let you know that I appreciate
    you.
        Senator Carper. Thanks, Mr. Chairman.
        Thomas Jefferson used to say, ``If the people know the
    truth, they will not make a mistake.''
        The Chairman. That is right.
        Senator Carper. The truth is our roads, highways, bridges,
    our transit systems are in bad shape and getting worse.
        Another truth is, if things are worth having, they are
    worth paying for. Historically, we have paid for transportation
    through user fees. I am happy to support that. If somebody can
    come up with a better idea, I am happy to support that as well.
    At the end of the day, we need to do something.
        Leadership has been described as having the courage to stay
    out of step when everybody else is marching to the wrong tune.
    The wrong tune is to do nothing. The wrong tune is to kick the
    can down the road like we have done 12 times over the last 5
    years. The wrong thing to do is to have stop-and-go funding for
    these projects. And I can tell you, as an old Governor, that if
    you do not know for certain the money is going to be there, we
    waste a huge amount of money.
        And I would just say to you, Mr. Moore, when I was
    Governor, I vetoed a Davis-Bacon law, and I also called for
    increases in user fees to pay for these things. I am willing to
    make some tough choices to get this done. We have to get this
    done.
        Thank you.
        The Chairman. Well, thank you, Senator. I appreciate you
    very much. I really do appreciate having this hearing. We are
    going to try to solve this problem. Right now it looks almost
    insoluble with both Houses, but we will see what we can do.
        Thanks again for being here. With that, we will recess
    until further notice.
        [Whereupon, at 12:09 p.m., the committee was adjourned.]

                                A P P E N D I X

                  Additional Material Submitted for the Record

                                  ----------

                  Prepared Statement of Hon. Orrin G. Hatch,
                            a U.S. Senator From Utah
    WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah)
    today delivered the following opening statement at a Committee hearing
    examining responsible and sustainable funding options for the Highway
    Trust Fund:

        Good morning, everyone. Today, we will be discussing the challenges
    Congress faces as we work to provide funding for the federal Highway
    Trust Fund.

        Right now, when it comes to highways, we find ourselves caught in a
    familiar dilemma, between raising taxes or cutting back on the highway
    program. As always, a long-term, bipartisan solution to this dilemma
    will be difficult to achieve and, some days, it almost seems out of
    reach.

        However, in the past, this committee has consistently stepped up to
    the plate to find ways to keep the Highway Trust Fund solvent. I am
    confident that we can do so again.

        I want to make it clear at the outset that my goal as chairman of
    this committee to find a way to fund a long-term infrastructure bill.
    Chairman Ryan over in the House said much the same thing in yesterday's
    Ways and Means Committee hearing.

        While some friends on the other side of the aisle have suggested
    that it would be politically advantageous to force votes on a series of
    very short-term extensions, virtually everyone in Congress agrees that
    we need to get to the point where we are no longer facing a highway
    cliff every few months.

        We've all heard that the gold-standard for a long-term highway bill
    is 6 years. That's what everyone apparently wants to see happen. Of
    course, according to CBO, a 6-year highway bill that maintains the
    current spending baseline will cost roughly $92 billion.

        You don't find that kind of money by sifting through the cushions
    of your couch. It's going to take hard work and real policy changes to
    get us anywhere near that level of funding.

        And, once again, that's if we maintain current spending levels. I
    know that some of my colleagues believe we should raise the spending
    baseline at the same time, which would put even more pressure on
    highway funding and require us to find even more offsets to keep the
    trust fund solvent.

        Long story short, a 6-year highway bill is a great goal. I'm
    committed to working to get us as close to that goal as possible.

        Earlier this week, some of the leaders in the Senate Democratic
    Caucus sent a letter to the Senate Majority Leader spelling out a list
    of demands for enacting a long-term surface transportation
    reauthorization bill. The letter purported to dictate to Senate
    Republicans precisely when hearings should occur in the various
    committees, when those committees should hold their markups, and when
    the final bill should come to the floor.

        Of course, any specific proposals or ideas on how to fund a long-
    term highway bill were noticeably absent from the letter. Instead, we
    were treated to a discourse on how previous Congresses had dealt with
    highway funding and how the current Senate leadership is, in the eyes
    of Senate Democrats, falling short.

        I don't want to spend too much time deconstructing this letter.
    But, I would like to point out a few simple facts.

        First of all, neither party should point fingers and try to lay
    blame when it comes to the now-common practice of passing short-term
    highway extensions.

        Between the 110th and 113th Congresses, when the Democrats
    controlled the Senate, we enacted 11 short-term highway extensions.
    That doesn't include the 2012 MAP-21 legislation, which, according to
    the Senate Democrats' letter, was the paragon for how Congress should
    consider and pass a long-term extension of highway funding. Of course,
    MAP-21 extended highway funding for only 2 years, far short of the
    goals that are being cited in Congress these days.

        As I recall, during that same period, when Republicans were in the
    minority, we didn't turn the struggles over highway funding into a
    political football. In fact, we approached these negotiations in a
    spirit of cooperation as much as possible. We came to the table with
    specific and concrete proposals that included both revenue and spending
    options.

        I ask unanimous consent that a letter dated December 11, 2011, from
    Finance Committee Republicans to then-Chairman Baucus be inserted in
    the record. This letter didn't dictate a path forward to Chairman
    Baucus. Instead, it spelled out, in detail, policy proposals that
    Republicans could support to address an imminent shortfall in highway
    funding.

        This was a constructive contribution to the debate over legislation
    that eventually became MAP-21, which was, once again, recently cited by
    our friends on the other side. MAP-21 was the product of bipartisan
    work on the Finance Committee and was evenly split between taxpayer-
    friendly revenue raisers and spending reductions.

        For example, it was Republicans who first advanced the idea of
    transferring unobligated funds from the Leaking Underground Storage
    Tank Trust to help pay for highways. Whatever one may think of this
    particular pay-for, it has become a go-to revenue source in recent
    highway bills, including the last two highway bills enacted under the
    Democrat-controlled Senate.

        By contrast, one of the very few specific highway funding proposals
    I've seen from any of the signatories of this week's letter is the so-
    called repatriation holiday, which, according to the Joint Committee on
    Taxation, actually loses nearly $120 billion over 10 years. In other
    words, it is a not a serious proposal to pay for a long-term highway
    bill.

        Put simply, the rhetoric we're hearing from many of my friends on
    the other side of the aisle--which was exemplified by the letter they
    sent earlier this week--is not helpful.

        It is not constructive. It is, I suspect, intended to have a
    political impact, not to actually lead to good policy.

        To this point, I ask unanimous consent that an article from the
    June 3, 2015 edition of Politico be entered into the record. This
    article, titled ``Democrats Steer Towards Highway Funding Cliff,''
    basically spells out the political strategy being employed here and
    even quotes members of the Senate Democratic Leadership saying that
    they plan to force frequent votes on highway funding to make the
    process as politically difficult as possible.

        If we're going to address these challenges, we need people to set
    aside the politics. We need people to do more than just talk about a
    long-term highway bill. We need people to bring actual ideas to the
    table and to come together to work toward a real, lasting solution.

        I hope that's what we can talk about during this hearing. I hope we
    can have a productive conversation about what solutions are out there,
    which ones can work, and what ideas need to be put to bed.

        Once again, my hope is that we can focus on solutions that can
    actually work--that can actually be enacted into law to pay for
    highways.

        For example, while I know the idea has some support, I don't think
    a massive increase in the gas tax could be enacted into law. Of course,
    anyone who believes otherwise is free to publicly correct me and to try
    to make their case. That's the type of discussion I want to have here
    today--one that will actually lead to solutions. To facilitate this
    discussion, we've assembled a distinguished panel of witnesses who I
    think will all bring a unique perspective to these issues. I look
    forward to hearing from all of the witnesses on today's panel.

                                     ______

                              United States Senate

                              COMMITTEE ON FINANCE

                           Washington, DC 20510-6200

                                December 2, 2011

    The Honorable Max Baucus
    Chairman
    U.S. Senate Committee on Finance
    219 Dirksen Senate Office Building
    Washington, DC 20515

    Dear Mr. Chairman:

    On Wednesday, November 9th, the Senate Committee on Environment and
    Public Works (EPW) reported the ``Moving Ahead for Progress in the 21st
    Century Act of 2011,'' or ``MAP-21.'' According to Chairman Boxer and
    Ranking Member Inhofe, this legislation would authorize the Federal-aid
    highway program at the Congressional Budget Office's baseline level,
    plus inflation, through September 2013. EPW has made it known that they
    expect the Senate Committee on Finance to produce $12 billion in
    revenues above and beyond estimates of Highway Trust Fund (HTF)
    receipts. The Congressional Budget Offices (CBO) month-to-month
    estimates of revenues generated from current fuel taxes have often
    provided projections of future revenue that exceed actual revenues, and
    outlays from the trust fund are uneven and difficult to estimate on a
    year-to-year basis. Though we have serious concerns as to the accuracy
    of current estimates of HTF revenues and outlays, we believe it is in
    the best interest of the nation for states to be provided the certainty
    guaranteed by a surface transportation reauthorization bill. In
    addition, we think it would be a mistake to raise fuel or other taxes
    given the fragile economic climate the country is currently afflicted
    with. We suggest the following proposals as possibilities for closing
    the estimated $12 billion hole in the EPW bill by a more efficient
    allocation of federal resources.

    Rescission of funds provided for the Advanced Technology Vehicle
    Manufacturing Loan Program. The ``Energy Independence and Security Act
    of 2007'' established this program to support the development of
    advanced technology vehicles. The FY 2009 Continuing Resolution,
    enacted on September 30, 2008, appropriated $7.5 billion to support a
    maximum of $25 billion in loans. We understand that up to $3.5 billion
    could be rescinded for outlay savings. Given the continuing concern
    regarding the administration of federal loan programs, we think it is
    appropriate to consider this program for HTF funding.

    Transfer of funds from the Leaking Underground Storage Tank Trust Fund.
    Funded primarily by a 0.1 cent-per-gallon tax on motor fuels, the
    Leaking Underground Storage Tank (LUST) Trust Fund was established in
    1986 to support states and the Environmental Protection Agency in
    efforts to remediate leaks from underground storage tanks. Due to the
    fact that revenues to the LUST Fund have consistently been greater than
    outlays, the fund has accumulated a balance of more than $3.5 billion
    as of the end of fiscal year 2011, according to a report released by
    the Treasury Office of Inspector General. A Joint Committee on Taxation
    report titled ``Present Law and Background Information on Federal
    Excise Taxes,'' which was released this past January, utilizes the
    latest CBO estimates available to show that the LUST Fund is estimated
    to hold cash balances that increase year-by-year through 2020, and that
    estimated revenues attributable only to tax revenue, as opposed to
    interest, are projected to be greater than estimated outlays every
    year. Given this information we encourage the Committee to consider a
    transfer of up to $3 billion from the LUST Fund to the HTF. This option
    is not suggested to signal a lack of support for the purpose of the
    LUST Fund, but rather to make the most efficient use of available
    resources to avoid the impending insolvency of the HTF. Additionally,
    for the long-term the Finance Committee should consider altering the
    0.1 cent-per-gallon tax on motor fuels so that the LUST Fund is able to
    fulfill its intended purpose without diverting money from other
    important programs, such as those funded by the HTF.

    Reclamation of HTF funds transferred to the Land and Water Conservation
    Fund (LWCF) and redirection of Outer Continental Shelf receipts.
    Created by the ``Land and Water Conservation Fund Act'' in 1964, the
    LWCF has received more than $573 million from the HTF since then.
    Though the LWCF is authorized at $900 million a year, historically less
    than half of that has been appropriated in a given year. Given that the
    LWCF is a federal fund, as opposed to a trust fund, a transfer should
    be offset. Additionally, the LWCF received most of its revenues from
    oil and gas leasing in the Outer Continental Shelf (OCS). Given that
    the full $900 million annually authorized has never been appropriated,
    and that the unappropriated receipts balance of the LWCF is greater
    than $17 billion, we encourage the consideration of a diversion of a
    portion of future OCS revenues to the HTF. We think oil and gas
    revenues are an appropriate source of highway funding given that
    current highway funding is largely derived from excise taxes on fuels.
    If $250 million were to be diverted annually from the LWCF, it would be
    unlikely to affect current appropriations from the LWCF, provided they
    remain consistent with past history. A diversion of $250 million a year
    from the LWCF to the HTF would deposit an additional $2.5 billion in
    the HTF over 10 years.

    Expanded oil and gas exploration in Alaska and the Outer Continental
    Shelf (OCS). Currently our nation is not fully utilizing available
    energy resources. Based on past Congressional Budget Office estimates,
    an expansion of oil and gas exploration and development could result in
    up to $5.2 billion in revenue to the federal government within a 10-
    year budget window. Allowing for increased oil and gas exploration
    would actually create new jobs, and provide additional revenues that
    are badly needed.

    Rescission of unspent federal funds. Though we recognize that this
    option has not been popular with the current Senate majority and the
    White House, we include it as an option in order to emphasize our
    conviction that we do not, and should not, need to raise taxes to fund
    transportation infrastructure, but instead more efficiently utilize
    current federal resources. Informally the Congressional Budget Office
    has indicated that a rescission of $30 billion would be required to
    produce $12 billion in outlay savings over a 10-year period. Though in
    the past criticism of variants of this proposal have been based on the
    dollar amount of budget authority rescinded, the actual amount of
    outlays, or real spending impacted is much lower. Assuming the
    administration is less than enthusiastic about other ideas for filling
    the $12 billion hole in the EPW bill, this proposal would allow the
    administration to determine what federal spending it prioritizes as
    less or more important than surface transportation funding. A
    rescission of unspent federal funds was used earlier this year as an
    offset for an amendment agreed to by unanimous consent that repealed an
    expansion of information reporting enacted into law as part of health
    care reform. Before adoption of the amendment, a vote on a motion to
    waive budgetary discipline with respect to the amendment passed 81 to
    17.

    We also want to note that there are many ways current funding for
    highways could be spent more efficiently. This would allow a given
    amount of money to do more. Specifically, repeal or relaxation of
    Davis-Bacon requirements could drastically increase the efficiency of
    highway spending. ``The Davis-Bacon Act'' requires that all federally
    funded projects worth more than $2,000 must pay workers the
    ``prevailing wage,'' which, according to a study released by the
    Republican staff of the Joint Economic Committee, has resulted in wages
    being 22 percent higher, on average, than prevailing market rates.
    Though modifications to Davis-Bacon requirements would not produce new
    revenue to be spent on infrastructure projects, modifications such as
    an increase in the project cost threshold, or a temporary suspension,
    would reduce the cost of individual projects while promoting job
    creation.

    Mr. Chairman, we offer the suggestions in this letter as a commitment
    to you of our willingness to work together to provide for the creation
    and maintenance of transportation infrastructure that enhances our
    economy. However, we also note that at best, a fully funded ``MAP-21''
    would only give us up to 2 more years to address the disparity between
    current transportation funding levels and revenues deposited into the
    HTF. It is doubtful that ``MAP-21'' will even be sufficient to fund
    surface transportation programs through the end of fiscal year 2013, as
    is currently promised. Our efforts now are, at best, a down payment on
    a necessary rethinking of infrastructure funding and financing that
    circumstances will demand, whether we are prepared for it or not.
    Finance Committee Republicans are prepared to engage in this process,
    and this letter represents the beginning of a long-term plan, and not
    the conclusion of a 2-year extension.

                Sincerely,

    Orrin G. Hatch                      Chuck Grassley
    Ranking Member

    Olympia J. Snowe                    Pat Roberts

    John Cornyn                         Tom Coburn

    John Thune

                                     ______

                 Democrats Steer Towards Highway Funding Cliff
                    (By Burgess Everett and Heather Caygle)
    From Politico, June 3, 2015

    Democrats are threatening an aggressive confrontation with Republicans
    over federal highway money, foreshadowing yet another round of
    brinkmanship with the GOP and raising the specter of a temporary
    shutdown of transportation construction sites nationwide.

    House and Senate Democrats are weighing a hard-line strategy that would
    force Republicans to stumble through a series of painful short-term
    highway extensions if they don't fix the program's long-term funding
    woes, with the Highway Trust Fund slated to run out of money after July
    31st.

    Democrats have long insisted that Congress needs to put the highway
    fund on firm financial footing for years to come, but bipartisan
    antipathy to new taxes has produced a series of stopgaps and patches
    under the leadership of both parties.

    ``I think it's horrible that they're even thinking about the short-term
    extension,'' said Senate Minority Leader Harry Reid in an interview.
    ``I think it's ridiculous.''

    Unless Republicans can come up with tens of billions of dollars in new
    tax money or spending cuts, the GOP could be forced to acquiesce to
    Democratic demands or risk a shutdown of infrastructure projects in the
    middle of the summer construction season. Still, the strategy could
    also blow up in Democrats' faces, as the GOP is sure to paint them as
    obstructionists, particularly if a shutdown comes to pass in July.

    The goal, Democratic sources said, is to expose the GOP's lack of
    planning ahead of the July deadline and pressure them to come up with
    as much as $90 billion for a 6-year transportation bill, a near
    impossibility without politically painful tax increases. The most
    aggressive tactic, raised by Senate Minority Whip Dick Durbin at a
    private bicameral leadership meeting on Tuesday, would have Democrats
    filibuster any transportation funding extension lasting longer than 30
    days.

    Democratic leaders are now shopping the idea to their chairmen and the
    rank and file to test just how far the party is willing to press
    Republicans on an issue that's sharply divided the GOP: Finding tens of
    billions of dollars in spending savings or new taxes to pass a long-
    term highway bill.

    The early returns inside the Democratic leadership meeting were
    positive, sources said, suggesting Democrats will force a showdown over
    the looming transportation cliff.

    ``They're nothing but trouble,'' said Senate Majority Whip John Cornyn.
    ``They're just feeling a bit feisty and cantankerous.''

    ``They're going to try to jam us on everything,'' added Senator John
    Thune of South Dakota, the No. 3 GOP leader.

    Democrats have not yet settled on how much rope they are willing to
    give Republicans, but they believe they can score political points
    hammering the GOP over legislation that supports thousands of American
    jobs. Senator Chuck Schumer (D-NY) is expected to take the lead in the
    campaign, and he hopes to eventually enlist influential transportation
    lobbying groups to join Democrats' push.

    But it's Durbin who's suggesting the toughest tack: requiring
    Republicans to come up with either tens of billions for a long-term
    bill or approximately $2 billion every month to avoid a construction
    shutdown. Durbin reasons Democrats can hit Republicans for running up
    against deadlines right after the Senate GOP allowed key surveillance
    laws to go dark for 2 days this week.

    ``We're serious about it,'' Durbin said. It ``really keeps reminding
    them you can't put this off for 6 months or a year and expect us to
    just stand by and let you get away with it.''

    But Republicans may have a trump card to play if they pursue a 5-month
    transportation extension, the most popular length among GOP leaders.
    They could dangle a vote to attach the Export-Import Bank to a highway
    patch and dare Democrats to block the legislation after making such a
    show of support for Ex-Im in last month's divisive debate over fast-
    track trade bills.

    Democratic senators acknowledged in interviews this could complicate
    their plans to uniformly stand against any short-term highway bills,
    but attaching Ex-Im could also deplete support for a transportation
    bill among conservative Republicans.

    Key Republicans on transportation acknowledged their party is
    vulnerable on the issue, and they're racing to come up with a counter-
    strategy. Senate Republican chairmen agreed on Tuesday in a private
    meeting to prioritize a long-term highway bill, which could cost $90
    billion for a 6-year piece of legislation that only keeps current
    project funding levels going without making any increases that
    Democrats will also demand.

    But that complicates the job of Senate Finance Chairman Orrin Hatch (R-
    UT) and House Ways and Means Chairman Paul Ryan (R-WI), who have to
    find $11 billion in new revenue just to get to the end of the year.
    There's a major division on Capitol Hill between Republicans who write
    transportation policy and those like Hatch and Ryan that actually have
    to come up with the money, which is very unlikely to come through new
    tax revenues.

    Instead, Republicans suggest they can cut spending across the
    government to come up with the $15 billion per year that the federal
    highway program would need for a meaty bill.

    ``The shortfall is $15 billion,'' said Senator Ron Johnson of
    Wisconsin, a belt-tightening Republican up for reelection next year.
    ``Are you telling me you can't find $15 billion of lower-priority
    spending?''

    Johnson may be disappointed given what lawmakers have been able to
    accomplish. So far; it's been difficult to find enough money just to
    pay for the short-term patches Congress has been using.

    Democrats and Republicans on the two tax-writing committees appeared
    close to a deal on an $11 billion extension in mid-May with the GOP
    even agreeing to some tax compliance measures they'd previously
    opposed. But that fell apart after Democrats blamed Republicans for
    trying to force spending cuts into the deal and lawmakers punted the
    fight until July.

    Now, with highway funding set to dry up in less than 2 months,
    lawmakers seem no closer to a deal than they were in May. Several Ways
    and Means Republicans said highways didn't even come up during their
    weekly Wednesday luncheon.

    Leaders of the House and Senate transportation committees have already
    started laying the groundwork for a year-end extension. Hatch has a
    ``significant'' amount of money squirreled away for the path, Senators
    said, but is keeping it close while some of his colleagues talk tough
    about no longer kicking the can.

    ``There's nothing that we'll know at the end of the year that we don't
    know right now. And I'll be really disappointed if we go beyond the end
    of July without a long-term highway bill,'' said Senator Roy Blunt of
    Missouri, a GOP leader. ``My view is we should engage.''

    Hopping from extension to extension also seems to be taking its toll on
    rank-and-file members. Representative Reid Ribble (R-WI)--one of 12
    House Republicans to vote no on the most recent patch--said he's
    lobbying his colleagues to oppose any more short-term deals that allow
    lawmakers to avoid solving the fundamental imbalance between revenue
    shortfalls from the gas tax and the more than $50 billion Congress
    seeks to spend on transportation annually.

    ``This is not rocket science, it's mathematics,'' Ribble said.

    Those divisions and the lack of a public strategy for dealing with
    infrastructure have Democrats thinking they have Republicans right
    where they want them.

    ``They have to govern,'' Durbin said of Republicans' highway plans.

    ``It's a good issue for [Democrats],'' conceded one Republican
    intimately involved in transportation planning.

    The impact of Capitol Hill inaction on the highway program has already
    started to ripple across the country. Seven state DOTs have canceled or
    delayed construction projects worth more than $1.6 billion this year
    according to a tally kept by the American Road and Transportation
    Builders Association. A further 12 states have warned they might be
    forced to take similar action.

    With Republicans overseeing highway funding in both chambers of
    Congress for the first time in more than 8 years, their vows to govern
    responsibly are about to be tested. And no one expects the Democrats to
    be particularly helpful.

    John Bresnahan contributed to this report.

                                     ______

                   Committee for a Responsible Federal Budget

     1900 M Street NW  Suite 850  Washington, DC 20036  Phone: 202-596-
                                     3597
                        Fax: 202-478-0681  www.crfb.org

                            The Road to Sustainable

                                Highway Spending

                                  May 13, 2015

    Introduction

    The current legislation authorizing highway and mass transit spending
    is scheduled to expire at the end of May, and only a few months later
    the Highway Trust Fund will run out of reserves. Extending the life of
    the trust fund through the end of the year will require $11 billion,
    and extending it for a decade will require nearly $175 billion.

    For over 50 years, federal highway spending had been financed with
    dedicated revenue, mainly from the gas tax. Since 2008, however,
    dedicated revenues have fallen short of spending, and policymakers have
    covered the difference with about $65 billion of general revenue
    transfers--often without truly paying for the cost. Those transfers are
    projected to run out before the end of the year, disrupting
    infrastructure spending across the county.

    To maintain important infrastructure investments and avoid adding an
    additional $175 billion to the debt, Congress must identify responsible
    solutions to close the shortfall in the Highway Trust Fund.
    Fortunately, Congress has many options at its disposal to do so (see
    the appendix).

    One solution that has recently gained popularity would rely on revenue
    generated from business tax reform to close some of the $175 billion
    gap. While this would be a sensible solution, tax reform will not pass
    before the current highway bill expires, and there is a risk it will
    not pass at all this year.

    CRFB's plan, The Road to Sustainable Highway Spending, would encourage
    the passage of tax reform while also ensuring the Highway Trust Fund
    remains adequately funded regardless of tax reform's fate. The plan
    would:

    1. Get the Trust Fund Up to Speed ($25 billion) by paying the ``legacy
    costs'' of pre-2015 obligations with savings elsewhere in the budget.

    2. Bridge the Financing Gap ($150 billion) with a default policy to
    raise the gas tax by 9 cents after a year and limit annual spending to
    income.

    3. Create a Fast Lane to Tax Reform to help Congress identify
    alternative financing before the gas tax increase and spending limits
    take effect.

    The Road to Sustainable Highway Spending would ensure the Highway Trust
    Fund remains solvent while giving policymakers flexibility to decide
    the level of highway spending and how it would be paid for. Our plan
    represents just one of many possible solutions. Importantly, any
    solution must responsibly address the gap between spending and revenue
    without resorting to gimmicks or deficit-financed transfers.

    Background

    Since 1956, most federal transportation infrastructure has been paid
    for out of the Highway Trust Fund.\1\ Transportation is financed from
    an 18.4 cent per gallon gasoline tax, 24.4 cent diesel tax, and several
    smaller revenue sources. Since 2008, highway spending has continuously
    exceeded dedicated revenue. Nominal outlays have continued to rise
    modestly faster than inflation, while revenue has remained largely flat
    due to fuel efficiency improvements and the lack of inflation
    adjustment for the gas and diesel taxes.
    ---------------------------------------------------------------------------
        \1\ The Highway Trust Fund has two separate accounts: one for
    highways and one for mass transit. Technically, they have separate but
    related and intertwined financing.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    This year, for example, federal highway spending will total $52 billion
    while dedicated revenue will equal only $39 billion--leaving a $13
    billion deficit. That annual shortfall will grow to $23 billion by
    2025. While general revenue has helped cover this deficit since 2008,
    the funds from these transfers are projected to run low by this summer,
    disrupting reimbursements for existing projects and putting new
    ---------------------------------------------------------------------------
    projects on hold.

    Policymakers must identify $11 billion to ensure adequate funding
    through the end of this year and roughly $175 billion to maintain
    highway spending at current levels over the next decade.

    This is the equivalent of a 14 cent gas and diesel tax increase,\2\ a
    37 percent spending reduction, or a 3-year delay of new projects. Time
    for action is running short. We explain many of the issues surrounding
    the Highway Trust Fund in more detail in our 2014 report, ``Trust or
    Bust: Fixing the Highway Trust Fund.''
    ---------------------------------------------------------------------------
        \2\ This paper often describes the federal taxes on gasoline and
    diesel fuel together as ``the gas tax.'' It also describes the ``net
    revenue'' raised, subtracting potential payroll and income tax losses.
    ---------------------------------------------------------------------------

    Existing Plans to Fund Highway Spending

    Fortunately, lawmakers have plenty of options to deal with the trust
    fund shortfall. In Trust or Bust, we identified four different types of
    options: reductions in federal highway spending, increases in existing
    revenue sources, new revenue sources, and general tax increases or
    spending cuts to offset general revenue transfers.

    Since that report, a number of policymakers and outside groups have
    proposed to increase or index for inflation the federal gas tax. A
    bipartisan proposal introduced in the House this April, for example,
    would index the gas tax to inflation and put in place automatic tax
    increases in 2017 and 2020 to close the shortfall if lawmakers do not
    otherwise act.

    An alternative proposal that appears to have growing traction would use
    revenue from business tax reform to close some of the funding gap. Both
    President Obama and former House Ways and Means Committee Chairman Dave
    Camp (RMI) suggested using a deemed repatriation tax to finance a
    general revenue transfer. Current House Ways and Means Committee
    Chairman Paul Ryan (R-WI) and Senate Finance Committee Chairman Orrin
    Hatch (R-UT) have also suggested tax reform as a vehicle for highway
    funding.

    Within tax reform, there are alternatives to funding highway spending,
    including ``deemed repatriation,'' the use of temporary revenues from
    changing cost-recovery schedules, or more permanent changes to
    dedicated revenue sources such as the gas tax. With the right design,
    such reform would allow for continued infrastructure investment while
    also promoting economic growth by creating a more competitive tax code.

    However, tax reform is not far enough along to pass in Congress before
    the highway bill expires at the end of May, is highly unlikely to be
    enacted before additional highway funding needs arise this summer, and
    might not pass at all this year due to the political challenges
    associated with designing and enacting major tax reform legislation.
    Relying solely on tax reform to fund the Highway Trust Fund could put
    its finances at risk.

    Principles for Reform

    Although lawmakers have many options to address the Highway Trust Fund
    shortfall, any responsible solution should abide by three principles:

    1. Act quickly to ensure adequate funding. Congress must extend the
    highway bill this month and provide sufficient funding to avoid
    disruptions this summer.

    2. Offset any general revenue transfers with real savings. While at
    least a short-term general revenue transfer is likely, it would be
    irresponsible to enact a transfer without equal-sized spending cuts or
    revenue increases to offset the cost. Using gimmicks such as pension
    smoothing undermine the trust fund's credibility.

    3. Close the structural imbalance. Lawmakers cannot rely on general
    revenue transfers in perpetuity and must ultimately bring highway
    spending and dedicated revenue in line. Plans should close this gap,
    and any that fail to do so should acknowledge that further action will
    need to be taken in the future.

    The Road to Sustainable Highway Spending

    The Road to Sustainable Highway Spending acknowledges interest in using
    tax reform as a vehicle to fund the highway program, and facilitates
    efforts to do so. But rather than relying on tax reform as the only
    strategy, the plan ensures the Highway Trust Fund remains permanently
    solvent regardless of tax reform's ultimate fate. It also gives future
    Congresses both the authority and responsibility to decide how much the
    federal government should spend on infrastructure and how it will pay
    for such costs.

    The Road to Sustainable Highway Spending has three parts. First, it
    would enact a fully-offset general revenue transfer to pay off ``legacy
    costs'' from past obligations made in 2014 and earlier. Second, it
    would ensure highway spending and revenue remain in line by extending
    the current highway bill for 2 years, scheduling a 9-cent gas tax
    increase at the end of the first year, and limiting future highway
    spending to trust fund income. Finally, the plan would create a ``fast
    lane'' process for tax reform, allowing Congress to identify
    alternatives or supplements to the scheduled gas tax increase before it
    takes effect.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Get the Trust Fund Up To Speed--$25 billion

    The Highway Trust Fund has about $25 billion of ``legacy costs'' from
    underfunded spending authorized prior to this year that is scheduled to
    be spent in future years. Under the current funding mechanism, future
    gas taxes (and other dedicated sources) would be required not only to
    pay for recent and new infrastructure projects, but also the projects
    established by prior Congresses.

    The Road to Sustainable Highway Spending would fund legacy costs out of
    general revenue in hopefully the final transfer to the Highway
    TrustFund. The plan would offset this transfer over 10 years with $15
    billion from reducing and reforming agricultural subsidies and $10
    billion from extending the mandatory sequester and mandatory
    designation of aviation security fees through 2025. Other offsets could
    also be used.

    Bridge the Financing Gap--$150 billion

    Enact a Two-Year Highway Bill at Current Levels. The current highway
    bill expires at the end of May. The Road to Sustainable Highway
    Spending would continue the bill for 2 additional years, keeping
    nominal spending at that level over this time period. Alternatively, a
    2-year highway bill could adjust spending levels in various areas,
    keeping top-line number the same. Savings could be achieved by
    expanding the use of tolls, reducing spending in lower priority areas
    like hiking trails, reforming contracting rules, leveraging private and
    state funding to reduce direct federal costs, or other changes.

    Schedule a 9-Cent Gas Tax Increase After 1 Year. Since 1993, the
    federal gas tax has totaled 18.4 cents per gallon (24.4 cents for
    diesel fuel) and has not been adjusted for inflation. Although The Road
    to Sustainable Highway Spending would give Congress the opportunity to
    identify a funding source of its choice, it would schedule a 9-cent gas
    tax increase by default--about adjusting the tax for past inflation--to
    take effect in June 2016. This would bring revenue up to current
    spending and raise $100 billion through 2025.\3\
    ---------------------------------------------------------------------------
        \3\ Note that this policy would generate about $100 billion over 10
    years net of income and payroll tax losses. Actual revenue to the trust
    fund would be significantly higher. This excess revenue could be used
    to schedule ``reverse general revenue transfers'' to repay past un-
    offset transfers from general revenue.

    Limit Future Highway Spending to Income. Although a 9-cent gas tax
    increase would bring revenue up to current spending, revenue would
    still fail to keep pace with inflation. To ensure future highway
    spending does not grow faster than gas tax revenue, The Road to
    Sustainable Highway Spending would limit future annual spending
    levels--as measured by contract authority--to revenue plus interest
    collection in the prior year. The plan would also change the budgetary
    treatment of highway spending so it is accounted for entirely on the
    mandatory side (for more details, see Box 1 of Trust or Bust). These
    two changes would prevent future trust fund shortfalls by requiring
    Congress to live within its means and would greatly reduce the
    ---------------------------------------------------------------------------
    likelihood of another general revenue transfer.

    Technically, this change would hold spending to current revenue,
    roughly approximating a spending freeze that would require policymakers
    to either forego inflation adjustments or else cut lower priority
    spending. As a practical matter, it would require and empower future
    lawmakers to either increase revenue, reduce spending (relative to an
    inflation adjustment), identify alternative sources of financing, or
    some combination. In concert with the 2-year freeze of highway spending
    described above, this policy would save about $50 billion over 10
    years.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Create a Fast Lane to Tax and Transportation Reform

    Encourage Tax Reform. Although The Road to Sustainable Highway Spending
    would schedule a future gas tax increase and constrain spending, it
    would give policymakers ample time and opportunity to identify an
    alternative revenue source to replace some or all of the gas tax
    increase and/or allow for increased spending up what whatever level of
    infrastructure investment policymakers believe appropriate.
    Specifically, the plan would create a special process for the passage
    of legislation that both reforms the tax code and provides funds for
    the Highway Trust Fund, so long as that plan doesn't double-count the
    highway money and otherwise abides by statutory pay-as-you-go (PAYGO)
    rules.

    One option which appears to be gaining support would be to dedicate
    one-time revenue from tax reform--either from ``deemed repatriation''
    or the temporary transition revenue from certain accounting or cost-
    recovery changes--to the Highway Trust Fund. Such a transfer could
    temporarily reduce or replace the scheduled gas tax increase, pay for
    increases in infrastructure spending, or both. Importantly, though,
    when the scheduled transfer ran out, the gas tax increase would go into
    effect without further legislation.

    A better alternative would be for tax reform to permanently increase
    dedicated revenue going toward the Highway Trust Fund--for example by
    reforming the gas tax \4\ or creating a new source of revenue--in order
    to permanently replace the scheduled 9-cent gas tax increase and/or
    increase spending levels. Making such changes as part of a broader tax
    reform would make it easier for policymakers to address distributional
    concerns and provide transition relief if necessary.
    ---------------------------------------------------------------------------
        \4\ Among the options, the gas tax could be increased, indexed to
    inflation, replaced with a percentage tax, or replaced with a variable
    tax to add stability to the price of gasoline.

    Encourage Future Highway Bills to Make Tax and Spending Decisions
    Together. Currently, lawmakers determine highway funding in a
    disjointed and haphazard way by settling on spending levels and then
    providing ad hoc general revenue transfers. Instead, revenue and
    spending decisions should be made together. New highway bills should
    either set spending based on projected revenue levels or increase
    revenue levels to align with desired spending. By bringing revenue up
    to current spending levels and then setting strict caps to limit future
    spending to income, The Road to Sustainable Highway Spending would
    encourage such decision making. Further changes in the legislative
    process could reinforce this practice.

    Conclusion

    A lasting solution to the Highway Trust Fund's financing issue has
    evaded lawmakers for several years now, and the series of short-term
    patches often financed by gimmicks have not been helpful for
    transportation policy or the budget. However, recent developments such
    as lower gas prices and a number of proposals involving transition
    revenue from tax reform suggest that a bipartisan highway solution may
    be possible this year.

    The Road to Sustainable Highway Spending combines a one-time general
    revenue transfer, a 2-year highway bill, a future scheduled gas tax
    increase, and a requirement that highway spending remain at or below
    income in order to ensure the short- and long-term solvency of the
    Highway Trust Fund. At the same time, it creates a ``fast lane'' to tax
    and transportation reform to give Congress and the President the
    authority and responsibility to decide how highway spending will
    ultimately be paid for and at what level.

    Importantly, this plan represents one of many different possibilities,
    as can be seen in the appendix, to solve the Highway Trust Fund's
    structural imbalance. Regardless of how it is done, it is important for
    lawmakers to come up with a real solution rather than continue to paper
    over the shortfall with budget gimmicks and deficit spending. A real
    solution will provide much more certainty for surface transportation
    projects across the country and improve the budget outlook.

    Appendix

    The policies contained in The Road to Sustainable Highway Spending are
    certainly not the only policies available to fund surface
    transportation spending. In this appendix, we provide several other
    options to close the Highway Trust Fund shortfall. Broadly speaking, we
    divide the options into four categories: reductions in federal highway
    spending, increases in existing revenue sources, new revenue sources,
    and general tax increases or spending cuts to offset general revenue
    transfers. As this appendix and the body of the report show, there is
    no shortage of options to make the Highway Trust Fund solvent.

                               Table 1: Options to Reduce Surface Transportation Spending
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Percent of Shortfall Closed
                             Policy                            10-Year Savings   -----------------------------------
                                                                                    4-Year      6-Year      10-Year
    ----------------------------------------------------------------------------------------------------------------
    Freeze spending at 2015 levels for 10 years                     $45 billion         10%         15%         25%
    ----------------------------------------------------------------------------------------------------------------
    Freeze spending at 2015 levels for 2 years                      $15 billion          8%          8%          9%
    ----------------------------------------------------------------------------------------------------------------
    Reduce spending to 2008 levels                                  $90 billion         50%         55%         55%
    ----------------------------------------------------------------------------------------------------------------
    Reduce spending by 37 percent                                  $175 billion         95%        105%        100%
    ----------------------------------------------------------------------------------------------------------------
    Limit spending to prior year's revenue                         $155 billion         70%         80%         85%
    ----------------------------------------------------------------------------------------------------------------
    Eliminate new commitments for 1 year                            $50 billion         85%         60%         30%
    ----------------------------------------------------------------------------------------------------------------
    Eliminate new commitments for 2 years                          $105 billion        165%        115%         60%
    ----------------------------------------------------------------------------------------------------------------
    Eliminate funding for capital investment grants                 $15 billion          7%          9%         10%
    ----------------------------------------------------------------------------------------------------------------
    Reduce Highway Safety Improvement funding to 2012               $10 billion          6%          6%          7%
     levels
    ----------------------------------------------------------------------------------------------------------------
    Reduce CMAQ program by 50%                                      $10 billion          5%          6%          6%
    ----------------------------------------------------------------------------------------------------------------
    Eliminate funding for alternative transportation                $10 billion          5%          5%          5%
    ----------------------------------------------------------------------------------------------------------------
    Return TIFIA program funding to 2012 levels                     $10 billion          4%          4%          5%
    ----------------------------------------------------------------------------------------------------------------
    Repeal Davis-Bacon Act for highway projects                      $5 billion          3%          4%          4%
    ----------------------------------------------------------------------------------------------------------------
    Eliminate funding for federal lands transportation               $5 billion          1%          2%          2%
    ----------------------------------------------------------------------------------------------------------------
    Improve grants to focus on high-priority spending                       N/A         N/A         N/A         N/A
    ----------------------------------------------------------------------------------------------------------------
    Leverage state. local, and private spending                             N/A         N/A         N/A         N/A
    ----------------------------------------------------------------------------------------------------------------
    Sources: CBO, Federal Highway Administration, CRFB calculations.
    All numbers are rounded and calculated very roughly by CRFB based on data from a variety of sources.
    Percentages represent average effect over the time period and do not address timing issues.

                            Table 2: Options to Increase Current Sources of Highway Revenues
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Percent of Shortfall Closed
                             Policy                            10-Year Savings   -----------------------------------
                                                                                    4-Year      6-Year      10-Year
    ----------------------------------------------------------------------------------------------------------------
    Index gas and diesel fuel taxes to inflation                    $40 billion         12%         17%         24%
    ----------------------------------------------------------------------------------------------------------------
    Raise gas and diesel fuel taxes by 14 cents                    $175 billion        134%        124%        100%
    ----------------------------------------------------------------------------------------------------------------
    Raise fuel taxes by 11 cents and index to inflation            $175 billion        128%        120%        101%
    ----------------------------------------------------------------------------------------------------------------
    Raise gas tax to match diesel tax                               $55 billion         45%         40%         32%
    ----------------------------------------------------------------------------------------------------------------
    Eliminate special exemptions from the gas tax                   $15 billion         11%         10%          9%
    ----------------------------------------------------------------------------------------------------------------
    Increase truck and trailer tax from 12% to 20%                  $25 billion         17%         16%         13%
    ----------------------------------------------------------------------------------------------------------------
    Double heavy vehicle use tax                                    $10 billion          7%          7%          6%
    ----------------------------------------------------------------------------------------------------------------
    Double truck tire tax                                            $5 billion          4%          3%          2%
    ----------------------------------------------------------------------------------------------------------------
    Repeal special tax rates on certain fuels                       $20 billion         13%         12%         10%
    ----------------------------------------------------------------------------------------------------------------
    Sources: CBO, National Surface Transportation Infrastructure Financing Commission, and CRFB calculations.

                                       Table 3: Options for New Sources of Revenue
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Percent of Shortfall Closed
                             Policy                            10-Year Savings   -----------------------------------
                                                                                    4-Year      6-Year      10-Year
    ----------------------------------------------------------------------------------------------------------------
    Institute 1% motor fuel sales tax                               $55 billion         40%         37%         32%
    ----------------------------------------------------------------------------------------------------------------
    Impose $1 per barrel tax on oil                                 $45 billion         30%         30%         30%
    ----------------------------------------------------------------------------------------------------------------
    Impose $10 per-tire tax on car tires                            $30 billion         15%         15%         15%
    ----------------------------------------------------------------------------------------------------------------
    Impose 2% vehicle sales tax                                     $15 billion         12%         11%         10%
    ----------------------------------------------------------------------------------------------------------------
    Institute $20 fee on containers in U.S. ports                   $10 billion          5%          5%          5%
    ----------------------------------------------------------------------------------------------------------------
    Institute 0.05 cent per ton-mile tax on freight                 $20 billion         12%         12%         12%
    ----------------------------------------------------------------------------------------------------------------
    Apply 3.5% surcharge to customs duties                          $10 billion          7%          7%          6%
    ----------------------------------------------------------------------------------------------------------------
    Impose vehicle registration fee of $10 on light                 $35 billion         20%         20%         20%
     vehicles and $20 on trucks
    ----------------------------------------------------------------------------------------------------------------
    Institute $10 driver's license surcharge                        $20 billion         12%         12%         12%
    ----------------------------------------------------------------------------------------------------------------
    Impose 0.5 cent-per-mile VMT fee                               $150 billion         85%         85%         85%
    ----------------------------------------------------------------------------------------------------------------
    Replace current taxes with 1.9 cent-per-mile VMT fee           $175 billion        100%        100%        100%
    ----------------------------------------------------------------------------------------------------------------
    Replace current taxes with carbon tax (rebate 50%)             $175 billion        100%        100%        100%
    ----------------------------------------------------------------------------------------------------------------
    Replace gas tax with a percentage tax                              Dialable         N/A         N/A         N/A
    ----------------------------------------------------------------------------------------------------------------
    Replace gas tax with flexible tax to help stabilize gas            Dialable         N/A         N/A         N/A
     prices
    ----------------------------------------------------------------------------------------------------------------
    Sources: National Surface Transportation Infrastructure Financing Commission and CRFB calculations.
    Numbers are rounded and calculated very roughly by CRFB.
    Estimates are intended to include the effect of income and payroll tax offsets under the assumption that revenue
      losses are compensated with reverse revenue transfers.
    Percentages represent average effect over the time period and do not address timing issues.

            Table 4: Options to Offset a Transfer of General Revenue
    ------------------------------------------------------------------------
                                                               Trust Fund
                  Policy                 10-Year Savings       Extension
    ------------------------------------------------------------------------
    Dedicate one-time ``deemed             $125+ billion           8+ years
     repatriation'' tax to the HTF
    ------------------------------------------------------------------------
    Dedicate temporary transition            $90 billion            6 years
     revenue from repealing LIFO to
     the HTF
    ------------------------------------------------------------------------
    Repeal certain oil and gas tax           $35 billion          30 months
     preferences
    ------------------------------------------------------------------------
    Eliminate tax exclusion for new          $30 billion          24 months
     private activity bonds
    ------------------------------------------------------------------------
    Require filers to have a SSN to          $20 billion          16 months
     file for a refundable child tax
     credit
    ------------------------------------------------------------------------
    Eliminate Amtrak subsidies *             $15 billion          12 months
    ------------------------------------------------------------------------
    Eliminate ``Capital Investment           $15 billion          12 months
     Grants'' for the rail system *
    ------------------------------------------------------------------------
    Reduce farm subsidies                    $15 billion          12 months
    ------------------------------------------------------------------------
    Close Section 179 ``luxury SUV           $10 billion           8 months
     loophole''
    ------------------------------------------------------------------------
    Reduce Strategic Petroleum Reserve       $10 billion           8 months
     by 15 percent
    ------------------------------------------------------------------------
    Increase sequestration by $1             $10 billion           8 months
     billion/year
    ------------------------------------------------------------------------
    Repeal tax deduction for moving          $10 billion           8 months
     expenses
    ------------------------------------------------------------------------
    Clarify worker classification            $10 billion           8 months
    ------------------------------------------------------------------------
    Prevent ``double dipping'' between        $5 billion           4 months
     unemployment and Social Security
     Disability
    ------------------------------------------------------------------------
    Allow drilling in ANWR and the            $5 billion           4 months
     Outer Continental Shelf
    ------------------------------------------------------------------------
    Reduce federal research funding           $5 billion           4 months
     for fossil fuels and nuclear
     energy *
    ------------------------------------------------------------------------
    Repeal or phase-out tax credit for   $1.5-$5 billion         1-4 months
     plug-in electric vehicles
    ------------------------------------------------------------------------
    Require inherited IRAs to be paid         $5 billion           4 months
     out within 5 years
    ------------------------------------------------------------------------
    Extend current Fannie/Freddie fees   $4 billion/year      3 months/year
     after 2021
    ------------------------------------------------------------------------
    Extend customs fees through 2025          $4 billion           3 months
    ------------------------------------------------------------------------
    Deny biofuels credit for black            $3 billion           3 months
     liquor (retroactively)
    ------------------------------------------------------------------------
    Increased mortgage reporting              $2 billion           2 months
    ------------------------------------------------------------------------
    Require the IRS to hire private           $2 billion           2 months
     debt collectors
    ------------------------------------------------------------------------
    Make coal excise tax permanent          $1.5 billion            1 month
    ------------------------------------------------------------------------
    Clarification of statute of             $1.5 billion            1 month
     limitations on overstatement of
     basis
    ------------------------------------------------------------------------
    Make Travel Promotion Surcharge           $1 billion            1 month
     permanent
    ------------------------------------------------------------------------
    Close the "gas guzzler" loophole          $1 billion            1 month
    ------------------------------------------------------------------------
    Enact federal oil and gas                 $1 billion            1 month
     management reforms in the
     President's Budget
    ------------------------------------------------------------------------
    Revoke passports for seriously         <$0.5 billion           <1 month
     delinquent taxpayers
    ------------------------------------------------------------------------
    Sources: CBO, OMB, JCT, and CRFB calculations.
    All numbers are rounded and calculated by CRFB based on a variety of
      sources.
    * These discretionary changes would need to be accompanied by reductions
      in the discretionary spending caps.
     Includes expensing for exploration and development as well as the
      ``percentage depletion allowance.''

                                     ______

       Prepared Statement of Joseph Kile, Ph.D., Assistant Director for
               Microeconomic Studies, Congressional Budget Office
        Chairman Hatch, Senator Wyden, and Members of the Committee, thank
    you for the invitation to testify about the status of the Highway Trust
    Fund and options for paying for highway improvements and construction.
                                    summary
        In 2014, governments at various levels spent $165 billion to build,
    operate, and maintain highways, and they spent $65 billion on mass
    transit systems. For both types of infrastructure, most of that
    spending was by state and local governments; about one-quarter of that
    total came from the federal government, mostly through the Highway
    Trust Fund. For several decades, the trust fund's balances were stable
    or growing, but more recently, annual spending for highways and transit
    has exceeded the amounts credited to the trust fund from taxes
    collected on gasoline, diesel fuel, and other transportation-related
    products and activities. Since 2008, in fact, lawmakers have
    transferred $65 billion from the U.S. Treasury's general fund to the
    Highway Trust Fund so that the trust fund's obligations could be met in
    a timely manner.

        Moreover, with its current revenue sources, the Highway Trust Fund
    cannot support spending at the current rate. The Congressional Budget
    Office estimates that spending in fiscal year 2015 for highways and
    transit programs funded from the Highway Trust Fund will be $44 billion
    and $8 billion, respectively, whereas revenues collected for those
    purposes are projected to be $34 billion and $5 billion, respectively.
    By CBO's estimate, at the end of fiscal year 2015, the balance in the
    trust fund's highway account will fall to about $2 billion and the
    balance in its transit account will be about $1 billion.

        The Department of Transportation (DOT) would probably need to delay
    payments to states at some point before the end of fiscal year 2015 in
    order to keep the fund's balance above zero, as required by law. In
    fact, because of the timing of the deposits to the trust fund, DOT has
    stated that it would need to delay payments if cash balances fell below
    $4 billion in the highway account or below $1 billion in the transit
    account. Then, if nothing changes, the trust fund's balance will be
    insufficient to meet all of its obligations in fiscal year 2016, and
    the trust fund will incur steadily accumulating shortfalls in
    subsequent years.

        Several options (or combinations of those options) could be pursued
    to address projected shortfalls in the Highway Trust Fund:

      Spending on highways and transit could be reduced. If lawmakers
        chose to address the projected shortfalls solely by cutting
        spending, no new obligations from the fund's highway account or its
        transit account could be made in fiscal year 2016; that would also
        be the case for the transit account in fiscal year 2017. Over the
        2016-2025 period, the highway account would the authority to
        obligate funds, and the transit account's authority would decrease
        by about two-thirds, compared with CBO's baseline projections.

      Revenues credited to the trust fund could be increased.
        Lawmakers could address the projected shortfalls by raising
        existing taxes on motor fuels or other transportation-related
        products and activities; by imposing new taxes on highway users,
        such as vehicle-miles traveled (VMT) taxes; or by imposing taxes on
        activities unrelated to transportation. The staff of the Joint
        Committee on Taxation (JCT) estimates that a one-cent increase in
        taxes on motor fuels--primarily gasoline and diesel fuel--would
        initially raise about $1.7 billion annually for the trust fund,
        declining over the next 10 years to about $1.5 billion each year.
        If lawmakers chose to meet obligations projected for the trust fund
        solely by raising revenues, they would need to increase motor fuel
        taxes by roughly 10 cents per gallon, starting in fiscal year 2016.

      The trust fund could continue to receive supplements from the
        Treasury's general fund. Lawmakers could maintain funding for
        surface transportation programs at the average amounts provided in
        recent years, but to do so they would need to transfer $3 billion
        before the end of fiscal year 2015 and between $11 billion and $22
        billion every year thereafter through 2025. Spending resulting from
        such general fund transfers could be paid for by reducing other
        spending or by increasing revenues from broad-based taxes, or such
        transfers could add to deficits and thus increase federal
        borrowing.

        The projected shortfalls in the Highway Trust Fund have generated
    interest in greater use of borrowing by state and local governments to
    finance highway projects. In particular, state and local governments
    (and some private entities) can use tax-preferred bonds that convey
    subsidies from the federal government in the form of tax exemptions,
    credits, or payments in lieu of credits to finance road construction.
    Similarly, some of those governments make use of direct loans from the
    federal government to finance projects.

        Federal policies that encourage partnerships between the private
    sector and a state or local government may facilitate the provision of
    additional transportation infrastructure, but a review of those
    projects offers little evidence that public-private partnerships
    provide additional resources for roads except in cases in which states
    or localities have chosen to restrict spending through self-imposed
    legal constraints or budgetary limits.

        Only a small number of highway projects in the United States have
    involved public-private partnerships with private financing. Some that
    have been financed through tolls have failed financially because the
    private-sector partners initially overestimated their revenues and as a
    result have been unable to fully repay their projects' debts. Perhaps
    as a response, projects that are still under construction rely less on
    tolls as a revenue source; more commonly, private partners are
    compensated from a state's general funds, thus limiting the private
    risk of not being repaid and leaving the risk of lower-than-expected
    revenues to the public partner.

        Regardless of its source, however, borrowing is only a mechanism
    for making future tax revenues or user fee revenues available to pay
    for projects sooner; it is not a new source of revenues. Borrowing can
    augment the funds available for highway projects, but revenues that are
    committed for repaying borrowed funds will be unavailable to pay for
    new transportation projects or other government spending in the future.
                     spending for highways and mass transit
        Almost all spending on highway infrastructure and transit projects
    in the United States is funded publicly. Although the private sector
    participates in building, operating, and maintaining projects, the
    federal government and state and local governments typically determine
    which projects to undertake and how much to spend on them. Despite
    several prominent examples, private spending on highway projects
    constitutes only a small fraction of the total.

        Almost three-quarters of all public spending on highways is by
    state and local governments: In 2014, state and local governments spent
    $118 billion, and the federal government spent $46 billion. Almost all
    federal highway spending is capital spending, which is used to build
    and improve highways; by contrast, about 40 percent of the total for
    state and local governments is capital spending and 60 percent is for
    operations and maintenance. Public-private partnerships that involve
    private financing have accounted for less than 1 percent of all
    spending on highways during the past 25 years.

        Real (inflation-adjusted) total spending on highways by federal ,
    state, and local governments increased in the 1980s and 1990s, but it
    has fallen off since then. Real spending on transit programs is much
    less than for highways but has generally grown--especially spending by
    state and local governments--during recent decades (see Figure 1).\1\
    ---------------------------------------------------------------------------
        \1\ For more information on infrastructure spending, see
    Congressional Budget Office, Public Spending on Transportation and
    Water Infrastructure, 1956 to 2014 (March 2015), www.cbo.gov/
    publication/49910.
    ---------------------------------------------------------------------------
    The Highway Trust Fund
        The federal government's surface transportation programs are
    financed mostly through the Highway Trust Fund, an accounting mechanism
    in the federal budget that comprises two separate accounts, one for
    highways and one for mass transit. The trust fund records specific cash
    inflows from revenues collected through excise taxes on the sale of
    motor fuels, trucks and trailers, and truck tires; taxes on the use of
    certain kinds of vehicles; and interest credited to the fund. The
    Highway Trust Fund also records cash outflows for spending on
    designated highway and mass transit programs, mostly in the form of
    grants to states and local governments.

        Spending from the Highway Trust Fund is controlled by two types of
    legislation:

      Authorization acts that provide budget authority (which allows
        the government to incur financial obligations that will result in
        immediate or future outlays of federal funds), mostly in the form
        of contract authority (which permits the government to enter into
        contracts or to incur obligations in advance of appropriations),
        and

      Annual appropriation acts, which customarily set limits on the
        amount of contract authority that can be obligated in a given year.

        The Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-
    21) authorized current highway and transit programs through fiscal year
    2014. That authorization was subsequently extended. Most recently, the
    Highway and Transportation Funding Act of 2015 (Public Law 114-21)
    authorized those programs until July 31, 2015. The extension provided
    contract authority for highway and transit programs at an annualized
    rate of $51 billion; the 2015 obligation limitations total about $50
    billion.

        Excise taxes on motor fuels account for 87 percent of the Highway
    Trust Fund's revenues, mostly from the tax of 18.4 cents per gallon on
    gasoline and ethanol-blended fuels.\2\ Receipts from the gasoline tax
    now constitute almost two-thirds of the fund's total revenues (see
    Table 1). Under current law, all but 4.3 cents per gallon of that tax
    is set to expire on September 30, 2016. If that occurs, the receipts
    from the remaining tax will no longer be credited to the trust fund but
    instead will go into the Treasury's general fund. The second-largest
    share, accounting for about one-quarter of the fund's revenues, comes
    from the diesel fuel tax of 24.4 cents per gallon. The remainder comes
    from other taxes and from a very small amount of interest that is
    credited to the fund. Most of the revenues from motor fuel taxes are
    credited to the highway account of the trust fund, but 2.86 cents per
    gallon goes into the mass transit account, which receives about 13
    percent of the trust fund's total revenues and interest.
    ---------------------------------------------------------------------------
        \2\ The total gas tax is 18.4 cents per gallon. Of that, 18.3 cents
    is credited to the Highway Trust Fund, and 0.1 cent goes to the Leaking
    Underground Storage Tank Trust Fund. (The Omnibus Budget Reconciliation
    Act of 1993 increased the gas tax by 4.3 cents, from 14.1 cents to 18.4
    cents; the added receipts were not initially credited to the trust fund
    but instead went into the Treasury's general fund.)

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     Table 1. Estimated Revenues Credited to the Highway Trust Fund, by Source, 2015
                                                   Billions of Dollars
    ----------------------------------------------------------------------------------------------------------------
                                                                                                    Share of Total
                                                                                                      Trust Fund
                                        Highway Account     Transit Account          Total           Revenues and
                                                                                                      Interest a
                                                                                                       (Percent)
    ----------------------------------------------------------------------------------------------------------------
    Gasoline Tax                                   20.6                 3.8                24.4                  62
    Diesel Tax                                      8.5                 1.1                 9.7                  25
    Tax on Trucks and Trailers                      3.8                   0                 3.8                  10
    Use Tax on Certain Vehicles                     1.0                   0                 1.0                   3
    Tire Tax on Trucks                              0.5                   0                 0.5                   1
                                     -------------------------------------------------------------------------------
        Total                                      34.4                 4.9                39.4                 100
    ----------------------------------------------------------------------------------------------------------------
    Source:  Congressional Budget Office.
    a In 2015, CBO estimates, a small amount of interest will be credited to the Highway Trust Fund, in keeping with
      provisions of the Hiring Incentives to Restore Employment Act of 2010.

        History of the Trust Fund's Balances. For several decades, the
    balances in the highway account were relatively stable or growing, but
    since 2001, receipts have consistently fallen below expenditures.\3\
    (The transit account was not established until 1983 and, until 2006, it
    had a different accounting treatment that makes historical comparisons
    inapplicable.) During the 1980s and the first half of the 1990s,
    balances in the highway account held steady in the vicinity of $10
    billion. The most recent increase in the gasoline tax occurred in 1993,
    and after the Taxpayer Relief Act of 1997 redirected 4.3 cents of that
    tax from the general fund to the Highway Trust Fund, the unexpended
    balance in the highway account began to grow rapidly, reaching almost
    $23 billion in 2000. In 1998, the Transportation Equity Act for the
    21st Century (known as TEA-21) authorized spending that was sufficient
    to gradually draw down those balances. As a result of that legislation
    and the Safe, Accountable, Flexible, Efficient Transportation Equity
    Act: A Legacy for Users (SAFETEA-LU), which was enacted in 2005,
    outlays have generally exceeded revenues since 2001.
    ---------------------------------------------------------------------------
        \3\ In 2010, the trust fund saw a significant decrease in outlays
    because states spent funds from the general fund of the Treasury that
    were appropriated in the American Recovery and Reinvestment Act of
    2009. That act did not require states to match federal funds or even to
    contribute funds to projects, and the same projects that were eligible
    for funding from the Highway Trust Fund were eligible for funding under
    the act.

        Since 2006, when certain accounting changes specified in TEA-21
    took effect, spending from the transit account has grown and, since
    2008, has exceeded revenues credited to the account. TEA-21 and SAFETE-
    LU authorized spending from the account that has exceeded revenues
    ---------------------------------------------------------------------------
    credited to the fund by between $3 billion and $4 billion every year.

        Because of looming shortfalls, since 2008 lawmakers have enacted
    legislation to transfer a total of $65 billion to the trust fund--
    mostly from the Treasury's general fund--including $22 billion in 2014.
    Those intragovernmental transfers have allowed the fund to maintain a
    positive balance, but they did not change the amount of receipts
    collected by the government. After those transfers, at the end of
    fiscal year 2014, the trust fund's balance totaled $15 billion.

        Projections of Outlays and Revenues in 2015. According to CBO's
    estimates, absent further legislation, the highway account will end
    fiscal year 2015 with a balance of $2 billion--at the end of 2014, that
    balance was $11 billion (see Table 2). By CBO's estimates, outlays from
    the highway account will total $44 billion in 2015, but revenues and
    interest earnings will amount to just $34 billion for the year. The
    situation is similar for the transit account, which is on track to end
    fiscal year 2015 with a balance of about $1 billion, CBO estimates,
    down from $3 billion a year earlier. Revenues and interest earnings are
    projected to amount to $5 billion in 2015, but outlays are expected to
    total more than $8 billion.

                                    Table 2. Projections of the Highway Trust Fund's Accounts Under CBO's March 2015 Baseline
                                                               Billions of Dollars, by Fiscal Year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             2014    2015    2016    2017    2018    2019    2020    2021    2022    2023     2024     2025
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Highway Account

    Start-of-Year Balance.................................       4      11       2       a       a       a       a       a       a       a        a        a
    Revenues and Interest b...............................      34      34      35      35      35      35      35      35      35      35       34       34
    Intragovernmental Transfers c.........................      18       0       0       0       0       0       0       0       0       0        0        0
    Outlays...............................................      45      44      45      45      46      46      47      48      48      49       50       50
    End-of-Year Balance...................................      11       2       a       a       a       a       a       a       a       a        a        a

    Transit Account

    Start-of-Year Balance.................................       2       3       1       a       a       a       a       a       a       a        a        a
    Revenues and Interest b...............................       5       5       5       5       5       5       5       5       5       5        5        4
    Intragovernmental Transfers c.........................       4       0       0       0       0       0       0       0       0       0        0        0
    Outlays...............................................       8       8       8       8       8       9       9       9      10      10        9       10
    End-of-Year Balance...................................       3       1       a       a       a       a       a       a       a       a        a        a

    Memorandum:
    Cumulative Shortfall a
        Highway account...................................    n.a.    n.a.      -8     -19     -29     -41     -52     -65     -79     -93     -108     -125
        Transit account...................................    n.a.    n.a.      -3      -6      -9     -13     -17     -22     -27     -32      -37      -43
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Source:  Congressional Budget Office.

    Note:  n.a. = not applicable.

    a Before the end of fiscal year 2015, CBO projects, revenues credited to the highway and transit accounts of the Highway Trust Fund will be insufficient
      to meet the fund's obligations. Under current law, the trust fund cannot incur negative balances, nor is it permitted to borrow to cover unmet
      obligations presented to the fund. Under the Deficit Control Act of 1985, however, CBO's baseline for highway spending must incorporate the assumption
      that obligations incurred by the Highway Trust Fund will be paid in full. The cumulative shortfalls shown here thus are estimated on the basis of
      spending that is consistent with obligation limitations contained in CBO's March 2015 baseline--adjusted for projected inflation--for highway and
      transit spending. To meet obligations as they come due, the Department of Transportation estimates, the highway account must maintain cash balances of
      at least $4 billion, and the transit account must maintain balances of at least $1 billion.

    b Some taxes that are credited to the Highway Trust Fund are scheduled to expire on September 30, 2016--among them the taxes on certain heavy vehicles
      and tires and all but 4.3 cents of the federal tax on motor fuels. Under the rules that govern CBO's baseline projections, however, these estimates
      reflect the assumption that all of those expiring taxes would be extended.

    c The Moving Ahead for Progress in the 21st Century Act and the Highway and Transportation Funding Act of 2014 required certain intragovernmental
      transfers, mostly from the U.S. Treasury's general fund, to the Highway Trust Fund in 2014. Those amounts totaled about $22 billion. CBO's baseline
      reflects an assumption that no additional transfers from the general fund will occur.

        Unless additional funds are provided (either through an increase in
    revenues or through additional transfers from the general fund), the
    disparity between the receipts credited to the fund and outlays from
    the fund will require DOT to delay its reimbursements to states for the
    costs of construction. CBO estimates that such a delay would probably
    take effect sometime before the end of fiscal year 2015. Such a
    slowdown in payments occurred in 2008 when DOT announced that balances
    in the highway account had fallen below what it needed to reimburse
    states for the bills presented to the fund. Because deposits into the
    fund are made only twice each month, DOT has testified that it would
    need to delay payments if cash balances fell below $4 billion in the
    highway account or below $1 billion in the transit account.\4\
    ---------------------------------------------------------------------------
        \4\ Department of Transportation, Office of Inspector General,
    Refinements to DOT's Management of the Highway Trust Fund's Solvency
    Could Improve the Understanding and Accuracy of Shortfall Projections,
    CR-2012-071 (March 2012), p. 22,
        https://www.oig.dot.gov/library-item/29434.

        Projections of Outlays and Revenues From 2016 Through 2025. CBO's
    baseline projections reflect the assumptions that expiring excise taxes
    would be extended and that obligations from the trust fund would grow
    at the rate of inflation. Under those assumptions, CBO projects,
    shortfalls in both accounts of the trust fund would grow steadily
    larger over the next decade because revenues from the excise taxes are
    expected to grow very little, but spending would continue to rise (see
    Figure 2).\5\ By 2025, the cumulative shortfalls would total about $125
    billion for the highway account and about $43 billion for the transit
    account, CBO estimates.
    ---------------------------------------------------------------------------
        \5\ CBO constructs its baseline in accordance with provisions set
    forth in the Balanced Budget and Emergency Deficit Control Act of 1985
    and in the Congressional Budget and Impoundment Control Act of 1974.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Revenues generated by excise taxes and credited to the Highway
    Trust Fund are projected to decline slightly over the coming decade
    from about $40 billion in 2016 to about $39 billion in 2025, mostly
    because increases in revenues from taxes on the use of diesel fuel and
    on truck sales are expected to be offset by declines in revenues from
    the tax on gasoline. Tax revenues from diesel fuel and truck sales are
    projected to increase, on average, by about 2 percent annually over the
    2016-2025 period. In contrast, revenues from the tax on gasoline are
    projected to decline at an average annual rate of 2 percent over that
    period, mainly because of mandated increases in corporate average fuel
    economy standards.\6\
    ---------------------------------------------------------------------------
        \6\ For more information, see Congressional Budget Office, How
    Would Proposed Fuel Economy Standards Affect the Highway Trust Fund?
    (May 2012), www.cbo.gov/publication/43198.

        If lawmakers do not address the projected shortfalls, all revenues
    credited to the Highway Trust Fund in 2016 will be used to meet
    obligations made before that year. Most obligations involve capital
    projects that take years to complete--meaning that outlays for such
    projects are often spread across several years after funds have been
    committed. (The Federal-Aid Highway program, for example, typically
    spends about 25 percent of its budgetary resources in the year funds
    are first made available for spending; the rest is spent over the next
    several years.) Thus, in any given year, the vast majority of outlays
    from the Highway Trust Fund stem from contract authority provided and
    obligated in prior years. Because existing obligations far exceed the
    amounts in the fund at any given time, most of the trust fund's current
    obligations will be met using tax revenues that have not yet been
    ---------------------------------------------------------------------------
    collected.

        As a result, the fund's balances are not indicative of the amounts
    available to cover proposed new spending authority. A more useful
    measure is the projected balances in the trust fund minus prior
    obligations that have not yet been liquidated and that must be paid for
    from future tax revenues collected under current law. At the end of
    2014, for example, $65 billion in contract authority for highway
    programs had been obligated but not yet spent and another $26 billion
    was available to states but not yet obligated, for a total of $91
    billion in contract authority. Tax receipts dedicated to the highway
    account are projected to be about $35 billion per year over the 2016-
    2018 period for a total of $105 billion. Thus, under the calculation
    suggested above, there would be only about $16 billion ($105 billion
    plus the $2 billion in the fund at the end of 2015 minus $91 billion)
    in the fund over the next 3 years to cover the costs that would result
    from providing new spending authority. So even if states were given no
    further authority to spend, close to another 3 years' worth of motor
    fuel taxes would need to be collected just to meet the highway
    account's obligations at the end of 2014 plus any new obligations from
    contract authority made available before 2015. For the transit account,
    collections of almost 5 years' worth of taxes, at about $5 billion per
    year, would be needed to meet current obligations and any new
    obligations from contract authority made available before 2015.\7\
    ---------------------------------------------------------------------------
        \7\ See Office of Management and Budget, Budget of the U.S.
    Government, Fiscal Year 2016: Appendix (February 2015),
    www.whitehouse.gov/omb/budget/Appendix. At the end of fiscal year 2014,
    the balance in the transit account was about $3 billion, but unspent
    contract authority for transit programs totaled $16 billion in
    obligated balances and $8 billion in unobligated amounts.
    ---------------------------------------------------------------------------
    Options for Addressing Projected Shortfalls in the Highway Trust Fund
        Lawmakers have three primary options for addressing the projected
    shortfalls in the Highway Trust Fund:

     Reduce spending on highways and transit,

     Increase taxes dedicated to the trust fund, or

     Transfer general revenues to supplement the trust fund.

        Of course, many combinations of such changes are possible.

        Reduce Spending From the Trust Fund. Policymakers might want to
    address projected shortfalls by limiting federal spending for highways
    and mass transit to the amount of revenues generated by users. That
    reduction in spending would probably have significant negative
    consequences for the condition and performance of the nation's highway
    and mass transit infrastructure. In addition, unless some other federal
    spending was increased or federal taxes lowered, the reduction in
    federal spending would slow economic growth and employment during the
    next few years relative to what it would otherwise be. Over the longer
    term, the smaller amount of infrastructure would impose a drag on
    economic performance, but the smaller amount of federal debt stemming
    from the decrease in spending would provide an economic boost.

        If lawmakers chose to avert projected shortfalls solely by cutting
    spending, then the trust fund could not support any new obligations in
    2016, probably significantly delaying investment in infrastructure and
    halting numerous transportation projects across the country. Neither
    the highway account nor the transit account would be able to support
    new obligations in 2016 because reimbursements to states for multiyear
    projects already under way would be expected to exceed the estimated
    revenue collections for that year. The highway account would be able to
    support new obligations in 2017, but the transit account would not (see
    Figure 3). Such sudden shifts in the amount of annual spending
    authority would probably make program administration and planning
    difficult for DOT as well as for state and local grant recipients.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Over the 2016-2025 period, obligational authority for the highway
    account would be about one-third less, and for the transit account,
    about two-thirds less, than the amounts projected in CBO's baseline.
    Such a cut would reduce obligations for highway programs from current
    projections of about $47 billion per year, on average, to about $31
    billion per year, on average, from 2016 through 2025. Similarly, such a
    cut would reduce obligations for transit projects from current
    projections of about $10 billion per year, on average, to about $4
    billion per year, on average, for the 2016-2025 period.

        The consequences of such reductions in federal spending could be
    ameliorated, at least in part, if state and local governments responded
    to the reduction in federal funds by increasing their own spending
    through some combination of raising additional revenues, shifting
    spending from other purposes, and borrowing.

        If total funding for investment in highways and mass transit was
    significantly reduced, then it would be especially important to
    allocate the remaining funding, and to use that infrastructure, in the
    most effective way. Specifically, the negative consequences of a
    substantial reduction in funding could be partly alleviated if the
    remaining spending was focused on projects with especially large
    benefits and if people's use of highways and mass transit was focused
    on the highest-value uses (for example, through taxes on vehicle-miles
    traveled or congestion pricing).\8\ In addition, the economic
    efficiency of each dollar of funding could be improved if the federal
    government limited its support to projects (such as the Interstate
    highways) that offer significant benefits to more than one state,
    leaving state and local governments to fund projects with more
    localized benefits. If the people who benefit from a project bear its
    costs, the likelihood is diminished that too large a project (or too
    many projects) will be undertaken or that too many infrastructure
    services will be consumed relative to the resources needed to provide
    them.
    ---------------------------------------------------------------------------
        \8\ For a comprehensive discussion of the benefits and challenges
    of congestion pricing, including options for its design and
    implementation for highways, see Congressional Budget Office, Using
    Pricing to Reduce Traffic Congestion (March 2009), www.cbo.gov/
    publication/20241.

        Increase Revenues Dedicated to the Trust Fund. Another approach to
    bringing the trust fund's finances into balance would be to increase
    its revenues--for example, by raising the taxes on motor fuels; by
    imposing mileage-based, or VMT, taxes; or by imposing taxes on
    activities that are not related to transportation.\9\ Increasing the
    charges that highway users pay also could promote more efficient use of
    the system. Economic efficiency is enhanced when highway users are
    charged according to the marginal (or incremental) costs of their use,
    including the external costs that their highway use imposes on society.
    A combination of a fuel tax and a VMT tax that accounts for the type
    and weight of a vehicle and the location and time of its use could
    provide incentives for reducing driving's social costs and could
    generate funds for federal spending on highways.\10\ But generating
    additional funds that way would raise questions of fairness, including,
    for example, whether the structure of user charges would impose
    relatively greater burdens on low-income and rural users.
    ---------------------------------------------------------------------------
        \9\ See Congressional Budget Office, Alternative Approaches to
    Funding Highways (March 2011), www.cbo.gov/publication/22059.
        \10\ For example, see David Austin, Pricing Freight Transport to
    Account for External Costs, Working Paper 2015-03 (Congressional Budget
    Office, March 2015), www.cbo.gov/
    publication/50049.

        Fuel Taxes. Excise taxes credited to the Highway Trust Fund come
    primarily from taxes on gasoline, ethanol-blended fuels, and diesel
    fuels. Those excise taxes were last increased in 1993, and their
    purchasing power is about 40 percent below that in 1993. If those taxes
    had been adjusted to keep pace with the consumer price index, for
    example, the tax on gasoline, which is currently 18.4 cents per gallon,
    would be about 30 cents per gallon, and the tax on diesel fuel,
    ---------------------------------------------------------------------------
    currently 24.4 cents per gallon, would be about 40 cents per gallon.

        According to JCT's estimates, a one-cent increase in the taxes on
    motor fuels, effective October 1, 2015, would initially raise about
    $1.7 billion annually for the Highway Trust Fund, declining over the
    next 10 years to about $1.5 billion annually.\11\ The decline occurs
    mainly because, under current law, annual increases in the use of
    diesel fuel are expected to be more than offset by annual declines in
    gasoline use because of mandated increases in corporate average fuel
    economy standards. If lawmakers chose to meet obligations projected for
    the trust fund solely by raising revenues, they would have to increase
    the taxes on motor fuels by roughly 10 cents per gallon, starting in
    fiscal year 2016.
    ---------------------------------------------------------------------------
        \11\ Because excise taxes reduce the tax base of income and payroll
    taxes, higher excise taxes would lead to a reduction in revenues from
    income taxes and payroll taxes. The estimates shown here do not reflect
    those reductions. Those reductions would amount to about 25 percent of
    the estimated increase in excise tax receipts.

        Fuel taxes offer a mix of positive and negative characteristics in
    terms of many people's conception of equity. They satisfy a ``user
    pays'' criterion--that those who receive the benefits of a good or
    service should pay its cost. But they also can impose a larger burden
    relative to income on people who live in low-income or rural households
    because those people tend to spend a larger share of their income on
    transportation. Fuel taxes impose a burden even on households that do
    not own passenger vehicles by raising transportation costs, which are
    ---------------------------------------------------------------------------
    reflected in the prices of purchased goods.

        Fuel taxes have two desirable characteristics that are related to
    economic efficiency: They cost relatively little to implement (the
    government collects taxes from fuel distributors, and users pay the
    taxes when they purchase fuel), and they offer users some incentive to
    curtail fuel use, thus reducing some of the social costs of travel.
    However, a fuel tax discourages some travel too much and other travel
    too little, because it does not reflect the large differences in cost
    for use of crowded roads compared with uncrowded roads or for travel by
    trucks that have similar fuel efficiency but cause different amounts of
    pavement damage. Moreover, for a given tax rate on fuels, the incentive
    to reduce mileage-related costs diminishes over time as more driving is
    done in vehicles that are more fuel efficient.

        VMT Taxes. VMT taxes provide stronger incentives for efficient use
    of highways than fuel taxes do because VMT taxes are better aligned
    with the costs imposed by users. Most of those costs--including
    pavement damage, congestion, accidents, and noise--are tied more
    closely to the number of miles vehicles travel than they are to fuel
    consumption.

        For VMT taxes to significantly improve efficiency, however, they
    would need to vary greatly according to vehicle type, time of travel,
    place of travel, or some combination of such characteristics. For
    example, because pavement damage increases sharply with vehicle weight
    but decreases with the number of axles on a vehicle, the portion of VMT
    taxes assessed to maintain pavement could be small or nonexistent for
    passenger vehicles but substantial for heavy-duty trucks, particularly
    those with high weight per axle. Similarly, VMT taxes could be higher
    for any travel on crowded urban roads during peak hours than for travel
    in off-peak hours or on roads that are less congested.

        In fact, a system of VMT taxes would not need to apply to all
    vehicles on every road. There already exist less comprehensive systems
    of direct charges for road use: Toll roads, lanes, and bridges are
    common in the United States, and several states and foreign countries
    place weight-and-distance taxes on trucks. Expansion of existing
    systems could focus on highly congested roads or on entry points into
    congested areas; such targeted approaches would cost less to implement
    if they required relatively simple equipment to be placed in vehicles.
    Alternatively, the focus could be on specific vehicle types: Although
    trucks (excluding light-duty trucks), for example, constitute only 4
    percent of all vehicles in the United States, they account for roughly
    25 percent of all costs that highway users impose on others, including
    almost all of the costs associated with pavement damage.

        The costs of implementing VMT taxes include capital costs for
    equipment and operating costs for metering, payment collection, and
    enforcement. The cost to establish and operate a nationwide program of
    VMT taxes is uncertain and difficult to estimate because projections so
    far are based mainly on small trials that have used a variety of
    evolving technologies and because the cost would depend on whether VMT
    taxes varied by time, place, or type of vehicle. Although the costs of
    charging drivers are declining with improvements in technology, the
    costs remain higher than those for collecting revenues through the
    motor fuel taxes. The idea of imposing variable VMT taxes also has
    raised concerns about privacy: The collection process could give the
    government access to specific information about when and where
    individual vehicles are used.

        Impose Taxes Unrelated to Transportation. Lawmakers could also
    impose new taxes or increase existing ones on activities that are
    unrelated to transportation. Such taxes could be designed in many ways
    and might raise more or less than the projected shortfall in the
    Highway Trust Fund. However, such taxes would not provide the same
    incentives to use highway infrastructure efficiently as would
    increasing taxes on motor fuels or imposing a VMT tax.

        Transfer Money From the General Fund. Lawmakers could choose to
    continue to supplement the Highway Trust Fund with general revenues,
    thus providing more money for highways and transit systems than is
    collected from excise taxes dedicated to those purposes. For 2015, to
    continue funding for surface transportation programs at the amounts for
    which obligation limitation was provided, lawmakers would need to
    transfer $3 billion to the Highway Trust Fund, CBO estimates.\12\ That
    transfer would allow the trust fund to maintain cash balances of at
    least $4 billion in the highway account and at least $1 billion in the
    transit account. Subsequently, to continue funding for surface
    transportation programs at the average amounts provided in recent
    years, adjusted for inflation, lawmakers would need to transfer $11
    billion in 2016; such transfers would need to increase gradually to $22
    billion by 2025 to maintain current spending, adjusted for inflation.
    At that pace, by 2025, CBO projects, general fund transfers would
    account for about one-third of the receipts credited to the Highway
    Trust Fund.
    ---------------------------------------------------------------------------
        \12\ For more information, see Congressional Budget Office, letter
    to Hon. Sander M. Levin regarding the estimated revenue shortfall if
    spending authority for the Highway Trust Fund were extended beyond May
    31, 2015 (May 2015), www.cbo.gov/publication/50234.

        Spending that resulted from such transfers could be paid for by
    reducing other spending or by increasing broad-based taxes, such as
    income taxes; or it could add to deficits and thus increase federal
    borrowing. Reductions in other spending would mean that the benefits of
    the spending on transportation would be at least partially offset by a
    reduction in whatever benefits that other spending would have provided.
    Boosting the already-high federal debt would have long-term negative
    ---------------------------------------------------------------------------
    effects on the economy.

        Increasing broad-based taxes would offer advantages and
    disadvantages compared with raising taxes on highway users. Two
    arguments can be made in support of using such a source of funding for
    highways. First, some benefits of better highway infrastructure are
    distributed more broadly than to just highway users. For example,
    reducing transportation costs for suppliers and customers increases
    efficiency by allowing businesses to specialize more in terms of the
    products and services they produce and the materials they use. Second,
    large amounts could be raised through small changes in tax rates. JCT
    has estimated that raising all tax rates on ordinary individual income
    by 1 percentage point would yield an average of $69 billion per year
    from 2015 to 2024--more than all of the current Highway Trust Fund
    taxes combined.\13\ Moreover, funding highways through broad-based
    taxes does not impose a larger burden relative to income on rural or
    low-income users (unlike some taxes on fuel use).
    ---------------------------------------------------------------------------
        \13\ See Congressional Budget Office, Options for Reducing the
    Deficit: 2015 to 2024 (November 2014), p. 29, www.cbo.gov/budget-
    options/2014.

        In other respects, however, the use of general revenues poses
    disadvantages. In particular, the approach gives users no incentive to
    drive less or to use less fuel, and it does not satisfy the principle
    that a user-pays system may be fairest and most efficient. Moreover,
    even a small increase in existing tax rates would hamper economic
    efficiency by discouraging work and saving and by encouraging people to
    shift income from taxable to nontaxable forms and to shift spending
    from ordinary to tax-deductible goods and services.
                               financing highways
        The projected shortfalls in the Highway Trust Fund have generated
    interest in increasing the amount of spending that can be sustained in
    the near term by encouraging state and local governments to rely more
    heavily on debt financing. Most highway projects now are paid for with
    current state or federal revenues. Apart from increasing their own
    taxes or cutting other spending, state and local governments or other
    public entities could finance additional spending on highways in a
    number of ways, including one or more of the following:

     Issuing tax-preferred government bonds,

     Obtaining federal loans or loan guarantees, or

     Joining with a private partner to obtain private financing.

        Tax-preferred government bonds include tax-exempt bonds (among them
    qualified private activity bonds, or QPABs) and tax credit bonds, both
    of which transfer some of the cost of borrowing from state and local
    governments and the private sector to the federal government in the
    form of forgone federal tax revenues. Investors are generally willing
    to accept a relatively low rate of return on tax-preferred bonds
    because interest income is exempt from federal (and many state) taxes
    and because those bonds are backed by the taxing authority of the
    public entity.

        Federal loans or loan guarantees can reduce state and local
    governments' borrowing costs, depending on the terms of the loan, in
    part because the federal government assumes the risk that would be
    borne by a lender and paid for by a borrower in the form of higher
    interest rates. A current federal loan program offers state and local
    governments an opportunity to borrow money for highways and certain
    other transportation projects at interest rates that are based on the
    long-term Treasury rate.

        Assessments of the experience with private financing of highways in
    the United States suggest that turning to a private partner does not
    typically yield additional financing, although doing so may speed the
    provision of financing and make new roads available sooner than they
    would have been otherwise. Private financing can provide the capital
    necessary to build a new road, but it comes with the expectation of
    repayment and a future return, the ultimate source of which is either
    tax revenues collected by a government or fees from road users, like
    tolls--the same sources that are available to governments. All told,
    the total cost of the capital for a highway project, whether that
    capital is obtained through a government or through a public-private
    partnership, tends to be similar once all relevant costs are taken into
    account. Regardless of its source, financing is only a mechanism for
    making future tax or user fee revenues available to pay for projects
    sooner; it is not a new source of revenues.
    Tax-Preferred Bonds
        The federal government provides several types of tax preferences to
    subsidize infrastructure financing. Tax-exempt bonds use the well-
    established tax preference of paying interest that is not subject to
    federal income tax. Such bonds can be issued to finance the functions
    of state and local governments or, in the case of QPABs, certain types
    of projects undertaken by the private sector. A second, more recently
    developed type of tax preference for infrastructure financing is
    associated with tax credit bonds. Such bonds come in two basic forms:
    those that provide a tax credit to the bondholder in lieu of paying
    interest and those that allow the bond issuer to claim a tax credit.
    (For issuers with no tax liability, the credit in the second scenario
    takes the form of a payment from the Secretary of the Treasury. Such
    bonds are known as direct-pay tax credit bonds.) Tax-exempt and tax
    credit bonds alike transfer some of the cost of borrowing from state
    and local governments and the private sector to the federal government,
    either in the form of forgone federal tax revenues or, in the case of
    direct-pay tax credit bonds, a federal outlay.

        Tax preferences provide federal support for infrastructure
    financing while generally allowing state and local governments to
    exercise broad discretion over the types of projects they finance and
    the amount of debt they issue. However, tax preferences are not
    governed by the annual appropriation process, so lawmakers exercise
    less oversight over their continuation and use than is applied to
    federal grant and loan programs. Also, because forgone revenues are not
    identifiable in the federal budget, the use of tax preferences can mask
    the full scope of the government's financial activities. Using some
    types of tax-preferred bonds can be an inefficient way to deliver a
    federal financial subsidy to state and local governments. With a tax
    exemption for interest income, for example, state and local borrowing
    costs (and the costs of the private entities that make use of QPABs)
    are reduced by significantly less than the amount of forgone federal
    revenues; the remainder of that tax expenditure accrues to bond buyers
    in the highest income tax brackets.

        Subsidizing borrowing through the use of payments made directly to
    borrowers can be more efficient--in terms of the benefits to state and
    local governments per dollar of federal cost--and more conducive to
    budgetary review and control.\14\
    ---------------------------------------------------------------------------
        \14\ For more information, see Congressional Budget Office and
    Joint Committee on Taxation, Subsidizing Infrastructure Investment with
    Tax-Preferred Bonds (October 2009), www.cbo.
    gov/publication/41359.

        Tax-Exempt Government Bonds. Federal tax exemptions for interest
    income from government bonds (and QPABs) allow issuers of such debt to
    sell bonds that pay lower rates of interest than do taxable bonds.
    Because purchasers of tax-exempt bonds demand a return that is at least
    as high as the after-tax yield they could obtain from comparable
    taxable bonds, the amount by which the return from tax-exempt bonds is
    lower than the yield on comparable taxable debt depends on the income
    tax rate of the marginal (or market-clearing) buyer of tax-exempt
    bonds. Thus, the amount of subsidy that state and local governments
    receive by issuing tax-exempt bonds is determined not by an explicit
    decision of the federal government, but indirectly by the federal tax
    ---------------------------------------------------------------------------
    code and the financial circumstances of potential investors.

        JCT estimates that the tax exemption for state and local debt
    resulted in $33 billion of forgone federal revenues in 2014; for the
    subsequent 4 years, it estimates that tax-exempt debt will reduce
    revenues by an additional $147 billion. According to data from the
    Internal Revenue Service, tax-exempt bonds issued between 1991 and 2012
    to finance highway and other transportation projects (both for new
    construction and to refund existing transportation debt) accounted for
    between about one-eighth and one-fifth of the total value of tax-exempt
    bonds issued that can be classified by the type of project financed.
    Thus, a rough estimate of the tax expenditure for transportation bonds
    in 2014 would be between $4 billion and $7 billion. Data from
    proprietary sources suggest that highway bonds may account for as much
    as one-half of all tax-exempt debt issued to finance transportation
    projects.\15\
    ---------------------------------------------------------------------------
        \15\ See Joint Committee on Taxation, Estimates of Federal Tax
    Expenditures for Fiscal Years 2014-2018, JCX-97-14 (August 2014), p.
    33, https://www.jct.gov/publications.html?func=
    startdown&id=4663; Internal Revenue Service, Statistics of Income,
    ``Table 2. Long-Term Tax-Exempt Governmental Bonds, by Bond Purpose and
    Type of Issue,'' www.irs.gov/uac/SOI-Tax-Stats-Tax-Exempt-Bond-
    Statistics; and Thomson Reuters, ``Transportation Highlights,'' The
    Bond Buyer Yearbook (various issues).

        Qualified Private Activity Bonds. Qualified private activity bonds
    are tax-exempt bonds that finance large infrastructure and other
    projects that are primarily undertaken by a private entity. Thus, QPABs
    essentially provide publicly-supported financing to private businesses
    or individuals; a qualified governmental unit serves as a conduit
    between those entities and the purchaser of the bond. QPABs may be
    issued to finance a wide range of infrastructure (and other) projects,
    ---------------------------------------------------------------------------
    including those for transportation.

        SAFETEA-LU allowed QPABs to be issued for certain surface
    transportation projects, but the law placed a cap of $15 billion on the
    issuance of such bonds. According to DOT (as of May 12, 2015), bonds
    with a value of $5.8 billion have been issued for 14 projects in all
    since 2005. DOT has allocated another $5.3 billion of that $15 billion
    to projects that, although approved, have not started and could use
    QPABs in the future; about 60 percent of that amount has been allocated
    during the past year or so. That leaves roughly $4 billion available
    for future applicants. However, the $11 billion in bonds currently
    issued or allocated under the $15 billion cap may overstate the amount
    of QPABs that those projects will use eventually, because some projects
    that receiveda QPAB allocation have switched to other forms of
    financing. For example, in April 2014, DOT allocated about $5.3 billion
    from QPABs to seven projects that had not yet issued bonds. By May
    2015, however, only three of them had issued QPABs, all for amounts
    that were significantly less than originally allocated.

        Giving private entities access to the tax-exempt market using QPABs
    lowers the cost of capital for those borrowers and can promote
    infrastructure projects when state and local governments have self-
    imposed limits on borrowing. But, like tax-exempt government bonds,
    QPABs result in forgone tax revenues. And, to the extent that private
    funding was available without QPABs, albeit at a higher cost, only
    projects of marginal value would be unable to receive financing without
    them.

        Because of the growing number of projects seeking to use QPABs,
    some financial market analysts are concerned that the limit on their
    use will be reached soon. Development of large, complex infrastructure
    projects often takes years, so financial analysts are seeking certainty
    that QPABs will be available if they choose to apply for them. In his
    2016 budget proposal, the President proposed measures to address the
    borrowing limits. First, the President proposed raising the cap, by $4
    billion, to $19 billion. According to JCT's estimates, such an
    additional allocation would begin to be used sometime in 2017. Second,
    the President proposed authorizing a new type of QPAB for financing
    infrastructure investment that would be fully tax-exempt and that would
    also not be subject to any volume cap.

        Tax Credit Bonds. Starting in the late 1990s, the Congress turned
    to tax credit bonds as a way to finance public expenditures. In their
    early form, those bonds allowed their holders to receive a credit
    against federal income tax liability instead of--or in addition to--the
    cash interest typically paid on the bonds. The amount of the credit
    equals the credit rate, which is set by the Secretary of the Treasury,
    multiplied by the face amount of the bond.

        Tax credit bonds offer some advantages over other types of tax-
    preferred bonds, such as tax-exempt bonds. Because bondholders pay
    taxes on the amount of credit they claim, tax credit bonds do not
    result in investors in high marginal tax brackets receiving a portion
    of the forgone tax revenues. Rather, the revenues forgone by the
    federal government through tax credit bonds reduce state and local
    borrowing costs dollar for dollar, a more efficient use of federal
    resources than that resulting from tax-exempt bonds. Tax credit bonds
    also allow the amount of federal subsidy to be determined explicitly,
    rather than depending on other federal polices (such as marginal income
    tax rates).

        The American Recovery and Reinvestment Act of 2009 authorized Build
    America Bonds, tax credit bonds that were sold only in 2009 and 2010.
    state and local governments issued the bonds either as traditional tax
    credit bonds or, if certain conditions were met, as direct-pay tax
    credit bonds (known as qualified Build America Bonds). In contrast to
    earlier tax credit bonds, Build America Bonds have an interest rate (or
    coupon) that is set by the issuer rather than by the Secretary of the
    Treasury. For the direct-pay bonds, the federal government provided
    payments directly to issuing state and local governments equal to 35
    percent of the interest, in lieu of a tax credit going to the
    bondholder. The amount of that financing subsidy is greater than the
    reduction in the interest costs that those state and local governments
    would have realized if they had issued traditional tax-credit bonds
    because, in the latter case, the bond buyer claimingthe tax credit
    would have had to be compensated with additional interest income for
    the resulting tax liability.

        The interest subsidies provided by direct-pay tax credit bonds
    appear as outlays in the federal budget, making the cost more
    transparent and, in principle, enabling comparison with other federal
    outlays for the same purposes. Also, because the yields provided to
    holders of direct-pay tax credit bonds are similar to the yields of
    other taxable securities, direct-pay tax credit bonds are more
    attractive to tax-exempt entities than other tax credit bonds are and
    may therefore increase the pool of funds available to state and local
    governments to finance infrastructure projects and other activities.

        The President's budget proposal for 2016 includes a direct-pay tax
    credit bond with a credit equal to 28 percent of each interest payment.
    By allowing state and local governments to substitute taxable for tax-
    exempt bonds, the proposal would increase taxable interest income,
    boosting federal revenues by $54 billion between 2016 and 2025,
    according to JCT. Because the proposal also would increase subsidy
    payments to state and local governments (which are recorded in the
    federal budget as outlays) by an estimated $58 billion, the net effect
    would be to increase the cumulative 10-year deficit by$4 billion.\16\
    ---------------------------------------------------------------------------
        \16\ See Joint Committee on Taxation, Estimated Budget Effects of
    the Revenue Provisions Contained in the President's Fiscal Year 2016
    Budget Proposal, JCX-50-15 (March 6, 2015), http://go.usa.gov/3Pu5Q.
    ---------------------------------------------------------------------------
    Federal Loans and Loan Guarantees
        The federal government also subsidizes borrowing by state and local
    governments by providing and guaranteeing loans for infrastructure.
    Such credit assistance can reduce state and local governments' costs
    because it can facilitate borrowing at interest rates that are lower
    than otherwise might be available, and it may open additional access to
    the capital markets. Specifically, in providing loans and loan
    guarantees, the federal government assumes the risk that would be borne
    by a lender and paid for by a borrower in the form of higher interest
    rates.

        The Federal Credit Reform Act of 1990 (FCRA) established rules for
    calculating the budgetary costs of direct loans and explicit loan
    guarantees issued by the federal government. The budgetary cost of
    federal credit assistance programs is recorded as the net present value
    of the cash flows to and from the government--the loan amount and the
    expected repayments--when the loan is disbursed to recipients.\17\ That
    subsidy cost represents an estimate of the net cost that the government
    bears. In contrast, the cash flows associated with that loan between
    the Treasury, an agency, and borrowers occur over time and are not
    recorded in the budget.
    ---------------------------------------------------------------------------
        \17\ The net present value is the single number that expresses a
    flow of current and future income (or payments) in terms of an
    equivalent lump sum received (or paid) today.

        An important aspect of the budgetary treatment of federal credit
    programs is that agencies must receive an appropriation equal to the
    estimated subsidy cost before they can make or guarantee a loan.\18\ In
    the case of direct loans, FCRA specifies that loan repayments are
    unavailable for future spending; those repayments are already accounted
    for in the estimated net present value of the loan, so they are not
    available to ``revolve'' into new loans. Such a revolving fund is the
    model on which many state infrastructure banks are based. However, for
    the federal government, those repayments represent part of the
    financing for the original loans and are implicit in the subsidy
    calculation. Allowing loan repayments to be used for new loans--without
    any additional appropriation to cover the subsidy costs of the new
    loans--would raise the effective FCRA subsidy cost of the original
    loans to 100 percent (the same as for grants).
    ---------------------------------------------------------------------------
        \18\ In contrast, no appropriations are necessary for the periodic
    revisions to subsidy estimates that agencies make to reflect actual
    experience with loans and guarantees. Permanent indefinite budget
    authority exists for those revisions, which are recorded in the budget
    as increases or decreases in outlays.

        FCRA accounting, however, does not provide a comprehensive measure
    of the economic cost of credit assistance. Through its use of Treasury
    rates for discounting, FCRA implicitly treats market risk--a type of
    risk that investors require compensation to bear--as having no cost to
    the government. Specifically, FCRA's procedures incorporate the
    expected cost of defaults on government loans or loan guarantees but
    not the cost of risk associated with uncertainty about the magnitude
    and timing of those defaults. Investors require compensation--a
    ``market risk premium''--to bear that risk. That premium on a risky
    loan or guarantee compensates investors for the increased likelihood of
    sustaining a loss when the overall economy is weak and resources are
    scarce; that likelihood is reflected in higher expected returns and
    lower prices for assets that carry more market risk. Taxpayers bear the
    investment risk for federal credit obligations. By omitting the cost of
    market risk and thereby understating the economic cost of federal
    credit obligations, FCRA accounting may lead policymakers to favor
    credit assistance over other forms of aid that have a similar economic
    cost.\19\
    ---------------------------------------------------------------------------
        \19\ Moreover, subsidy rates computed under FCRA exclude federal
    administrative costs, even those that are essential for preserving the
    value of the government's claim to future repayments, such as loan-
    servicing and collection costs; those costs are accounted for
    separately in the budget. For more information, see Congressional
    Budget Office, Fair-Value Accounting for Federal Credit Programs (March
    2012), www.cbo.gov/publication/43027.

        Loans Made Under the Transportation Infrastructure Finance and
    Innovation Act. DOT administers a loan program under the Transportation
    Infrastructure Finance and Innovation Act of 1998 (TIFIA) that provides
    credit assistance to state and local governments to finance highway
    projects and other types of surface transportation infrastructure. The
    TIFIA program offers subordinated federal loans for up to 35 years at
    interest rates that are based on the rate for Treasury securities of
    similar maturity. (On June 1, 2015, the interest rate on the 30-year
    Treasury bond was 2.94 percent.) TIFIA assistance may be used for up to
    49 percent of a project's cost. Combined with other federal grants and
    credit assistance, TIFIA loans can be part of a package of federal
    ---------------------------------------------------------------------------
    assistance that funds up to 80 percent of the cost of a project.

        MAP-21 made several changes to the TIFIA program, notably
    increasing the amount of budget authority for the subsidy cost of the
    program's loans from $122 million per year in the previous
    authorization for highway and transit programs to $750 million in 2013
    and $1 billion in 2014. Because contract authority is provided for only
    about three-fourths of 2015, TIFIA has received $750 million so far
    this year. If an insufficient amount of that budget authority was used,
    provisions of the law directed DOT to reallocate some of those funds to
    states for use by their formula programs. As of April 1, 2015,
    uncommitted budget authority for TIFIA totaled $1.139 billion. As a
    result, on April 24, 2015, DOT reallocated about $640 million to
    states.\20\
    ---------------------------------------------------------------------------
        \20\ Gregory G. Nadeau, Federal Highway Administration, Notice:
    Fiscal Year (FY) 2015 Redistribution of Transportation Infrastructure
    Finance and Innovation Act (TIFIA) Funds and Associated Obligation
    Limitation (April 24, 2015), http://www.fhwa.dot.gov/legsregs/
    directives/notices/n4510783.cfm.

        MAP-21 also authorized master credit agreements and created an
    extra interest rate subsidy for projects in rural areas. Master credit
    agreements would allow DOT to make commitments of future TIFIA loans,
    contingent on future authorizations, to a group of projects secured by
    a common revenue source. Under provisions of MAP-21, rural projects
    receive a minimum of 10 percent of the funds appropriated and are
    eligible to receive loans at half the Treasury rate. Such an interest
    rate subsidy makes a project relatively less expensive for the sponsors
    and relatively more expensive for the federal government. It may result
    in federal loans for projects that would not otherwise generate enough
    ---------------------------------------------------------------------------
    revenues to cover the costs of financing the projects.

        Proposals for a Federal Infrastructure Bank. In recent years, the
    Congress has considered several proposals for establishing a federal
    bank to fund infrastructure projects through loans and grants.\21\ In
    recent years, the President's budget has included a request to create a
    similar entity.\22\
    ---------------------------------------------------------------------------
        \21\ Other government programs that provide credit assistance for
    infrastructure projects include the Environmental Protection Agency's
    grants for states' revolving loan funds for water projects and states'
    infrastructure banks, all capitalized with federal funds and
    administered by states.
        \22\ Some other proposals to establish an infrastructure bank
    include providing bond insurance to issuers.

        Whether federal credit assistance is provided through an existing
    federal agency or a newly created special entity, however, it would
    involve similar budgetary costs to the federal government. The support
    offered for surface transportation by most proposed infrastructure
    banks would not differ substantially from the loans and loan guarantees
    already offered by DOT through its TIFIA program. Therefore,
    differences between the existing TIFIA program and an infrastructure
    bank would primarily be operational, concerning the types of
    infrastructure to fund, the kinds of credit assistance to provide, the
    selection process for projects, the amount of leverage to provide for
    federal funds, and the amount of private-sector participation to
    encourage or require. For example, an infrastructure bank could focus
    on financing transportation infrastructure, or it could define
    infrastructure more broadly to include sewers, wastewater treatment
    facilities, drinking water supply facilities, broadband Internet
    access, or even schools. In principle, an infrastructure bank could use
    any of several methods to finance projects, including federal loans,
    ---------------------------------------------------------------------------
    lines of credit, and guarantees for private loans.

        CBO has previously analyzed an illustrative federal infrastructure
    bank--one that is representative of certain recent proposals but that
    would focus on surface transportation programs.\23\ That entity, which
    would be federally funded and controlled, would select new, locally
    proposed construction projects for funding on the basis of several
    criteria, including the projects' costs and benefits, and it would
    provide financing for the projects through loans and loan guarantees.
    To repay the loans, projects would have to use tolls, taxes, or other
    dedicated revenue streams. Financial assistance could be provided to
    any consortium of partners with an eligible project, such as a group of
    state and local entities or a group of nongovernmental partners. The
    bank could provide the subsidy amounts needed to compensate private-
    sector investors for benefits that accrue to the general public and to
    the economy at large.
    ---------------------------------------------------------------------------
        \23\ See Congressional Budget Office, Infrastructure Banks and
    Surface Transportation (July 2012). www.cbo.gov/publication/43361.

        Such an infrastructure bank could have a limited role in enhancing
    investment in surface transportation projects by providing new federal
    subsidies (in the form of loans or loan guarantees) to certain large
    projects, potentially including multijurisdictional or multimodal
    projects, and by allowing the benefits of potential projects to be more
    ---------------------------------------------------------------------------
    readily compared in a competitive selection process.

        A key limitation of such a bank is that many surface transportation
    projects would not be good candidates for its support, because most
    projects do not involve toll collections or other mechanisms to collect
    funds directly from project users or other beneficiaries.
    Private Financing
        Only a small number of highway projects in the United States have
    involved
    public-private partnerships with private financing.\24\ Assessments of
    those projects indicate that such partnerships may accelerate the
    availability of financing--for example, by circumventing states' self-
    imposed limits on borrowing--but they do not generally result in
    additional financing. Some of the projects that have been financed
    through tolls have failed financially because the private-sector
    partners initially overestimated their revenues and as a result have
    been unable to fully repay their projects' debts. Perhaps as a
    response, projects that are still under construction rely less on tolls
    as a revenue source; more commonly, private partners are compensated
    from a state's general funds, thus limiting the private risk of not
    being repaid and leaving the risk of lower-than-expected revenues to
    the public partner.
    ---------------------------------------------------------------------------
        \24\ For additional information on the experience with public-
    private partnerships, see the testimony of Joseph Kile, Assistant
    Director for Microeconomic Studies, Congressional Budget Office, before
    the Panel on Public-Private Partnerships, House Committee on
    Transportation and Infrastructure, Public-Private Partnerships for
    Highway Projects (March 5, 2014), www.cbo.gov/publication/45157.

        Increasingly, public-private partnerships also have replaced the
    funds obtained through private means (at market rates) with tax-exempt
    bonds or bonds that provide a credit against taxes owed. That change
    has brought the projects more in line with the way states typically
    finance infrastructure projects, lowering the private partners' costs
    at the expense of costs to federal taxpayers and increasing the amount
    of the government's implicit equity and risk. In doing so, newer
    projects may have diminished the incentives associated with private
    ---------------------------------------------------------------------------
    financing to control costs and to be completed quickly.

        In addition, more recent agreements have reduced private partners'
    debt-service payments--that is, interest payments on any money borrowed
    to finance the projects--by increasing the share of financing provided
    by the state or locality or by the federal government. Accordingly, the
    financing provided by the TIFIA program or by tax-exempt private
    activity bonds has become increasingly prominent for highway projects
    that involve public and private partners.

        The history of privately financed roads in the United States
    encompasses 36 projects that are either under way or have been
    completed during the past 25 years. The value of the contracts for
    those projects totals $32 billion, a little less than 1 percent of the
    approximately $4 trillion that all levels of government spent on
    highways over the period. (Both of those amounts are in 2014 dollars.)
    In the past few years, the number of partnerships for road projects
    with private financing has increased; one-half of the $32 billion in
    contracts has been committed in the past 5 years.

        The amount of risk transferred to private partners has varied from
    project to project. In some instances, the financial risk was borne
    primarily by taxpayers, who were responsible for repaying debt incurred
    by the private partner. Under one program in Florida, for example,
    private businesses finance each project entirely with private debt that
    is to be repaid over a predetermined time--usually 5 years--with future
    grants from the federal government, state funds, and revenues from
    tolls collected from users of the completed road. The state's guarantee
    of repayments eliminates much of the transfer of risk that takes place
    with other privately financed projects. Thus, the financing is
    essentially public, and the structure of the public-private partnership
    is similar to that of an approach without private financing. In other
    instances, the private partner has borne more of the risk of the
    investment--specifically, some of the private partners' money might be
    lost if the project did not produce revenues as expected.

        Over the past 25 years, 14 privately financed projects--of various
    sizes but all involving contracts of at least $50 million--have been
    completed (see Table 3). A review of those projects offers little
    evidence that public-private partnerships provide additional resources
    for roads except in cases in which states or localities have chosen to
    restrict spending through self-imposed legal constraints or budgetary
    limits. To varying degrees, the projects that made use of private
    financing were in states in which the government could have issued
    bonds to finance the work through traditional means. In some cases,
    however, the use of a public-private partnership accelerated a
    project's access to financing by circumventing restrictions that states
    have imposed on themselves and that limit their ability to issue
    additional debt. (Earlier financing of a road project adds value when
    it allows the public to enjoy the benefits of the new road sooner than
    would otherwise be possible.)

        Several such projects are still under construction (see Table 4).
    New public-private partnerships have sought to reduce their borrowing
    costs by relying on publicly subsidized borrowing through the TIFIA
    program and through QPABs issued by local municipalities; the QPABs
    have tax advantages that lower the private partner's debt-service
    payments. All but two of those projects have made use of federal
    subsidies through the TIFIA program. That choice of financing
    constitutes a return to some features of the traditional approach in
    which the public sector--the federal government, in particular--retains
    greater risks, especially the risk of default. For instance, the South
    Bay Expressway, which had received some financing from the TIFIA
    program, illustrates what can happen to taxpayers as the ultimate
    equity holders. The project filed for Chapter 11 bankruptcy in March
    2010, finally emerging in May 2011. The new financing and ownership
    structure required by the bankruptcy court imposed a loss of 42 percent
    on federal taxpayers, replacing the original TIFIA investment with a
    package of debt and equity worth only 58 percent of the original
    investment.\25\ New public-private partnerships also typically secure
    state or local loans or grants as part of their financing. In the other
    cases, project managers who are responsible for a project's financing
    have had to take out bank loans. That source of private capital was
    more attractive during the recent economic downturn as interest rates
    fell relative to the yields for bonds in municipal bond markets
    (including those of QPABs). Fewer ongoing projects today are using
    private debt.
    ---------------------------------------------------------------------------
        \25\ Randall Jensen, ``Tollway Exits Chapter 11: TIFIA Ends Up
    Taking a Haircut,'' Bond Buyer (May 6, 2011), http://tinyurl.com/
    3fn8nvj.
    ---------------------------------------------------------------------------
    Budgetary Principles for the Treatment of Projects With Complex
            Financing
        Under the principles that govern federal budgeting, the budgetary
    treatment of complex financing arrangements--those that involve an
    intermediary other than the Treasury raising money in private capital
    markets on behalf of the federal government--should depend on its
    economic substance: who controls the program and its budget, who
    selects the managers, who provides the capital, and who owns the
    resulting entity.\26\ Is the activity governmental (that is, initiated,
    controlled, or funded largely by the government for governmental
    purposes) or is it an initiative of the private sector (driven by
    market forces independent of the government)?
    ---------------------------------------------------------------------------
        \26\ See Congressional Budget Office, Third-Party Financing of
    Federal Projects (June 2005), www.cbo.gov/publication/16554.

        An investment that is essentially governmental should be shown in
    the budget whether it is financed directly by the Treasury or
    indirectly by a third party that is borrowing on behalf of the
    government. Activities need not be conducted by a federal agency to be
    classified as governmental and included in the budget. When doubt
    exists about whether a program should be recorded in the federal
    budget, those same principles indicate that ``border-line agencies and
    transactions should be included in the budget unless there are
    exceptionally persuasive reasons for exclusion.'' \27\
    ---------------------------------------------------------------------------
        \27\ The President's Commission on Budget Concepts, Report of the
    President's Commission on Budget Concepts (October 1967).

        Likewise, spending financed by all forms of agencies' borrowing,
    including debt not backed by the full faith and credit of the U.S.
    Government, appears in the budget. However, bond proceeds or repayable
    equity investments are not recorded as federal receipts; they are a
    means of financing a project--not the ultimate source of capital, which
    ---------------------------------------------------------------------------
    is the income that will be generated by their operation.

                                Table 3. Completed Highway Projects That Used Public-Private Partnerships With Private Financing
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Sources of Funding (Millions of 2014 dollars)
                                                                                         ------------------------------------------------------
                                                                                                Private                    Public                   Total
                         Date of      Sources of         Bankruptcy      Public  Buyout  ------------------------------------------------------ Project Cost
                         Opening       Revenues           Declared         of  Private                                     Qualified              (Millions
                                                                            Partners                             TIFIA      Private                of 2014
                                                                                            Debt     Equity     Program    Activity    Other b    dollars)
                                                                                                                            Bonds a
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Dulles Greenway        1995   Tolls............  No...............  No..............      470        60           0           0         0           530
     (Va.)
    SR-91 Express          1995   Tolls............  No...............  Yes.............      164        33           0           0         0           197
     Lanes (Calif.)
    Camino Columbia        2000   Tolls............  Yes..............  No..............       97        19           0           0         0           117
     Bypass (Tex.)
    Atlantic City-         2001   Tolls/Taxes......  No...............  No..............      157         0           0           0       305           462
     Brigantine Tunnel
     (N.J.)
    Southern Connector     2001   Tolls............  Yes..............  No..............      264         0           0           0         0           264
     (S.C.)
    Pocahontas Parkway     2002   Tolls............  No...............  No..............      701         0           0           0         0           701
     (Va.)
    Route 3 North          2005   Taxes............  No...............  No..............      515         0           0           0         0           515
     (Mass.)
    South Bay              2007   Tolls............  Yes..............  No..............      428       224         177           0         0           828
     Expressway (South
     section; Calif.)
    SH-130 (Segments 5     2012   Tolls............  No...............  No..............      749       231         470           0         0         1,450
     and 6; Tex.)
    I-495 HOT Lanes        2012   Tolls............  No...............  No..............        0       380         643         643       591         2,257
     (Va.)
    I-595 Merged Lanes     2014   Tolls/Taxes......  No...............  No..............      842       234         651           0       250         1,977
     (Fla.)
    North Tarrant          2014   Tolls............  No...............  No..............        0       459         701         429       618         2,208
     Express (Segments
     1 and 2; Tex.)
    Port of Miami          2014   Taxes............  No...............  No..............      368        87         368           0       334         1,157
     Tunnel (Fla.)
    I-95 HOV/HOT Lanes     2014   Tolls............  No...............  No..............        0       285         305         257        91           938
     (Va.)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Source:  Congressional Budget Office based on data from the Federal Highway Administration.

    Note:  HOT = high occupancy/toll; HOV = high occupancy vehicle; TIFIA = Transportation Infrastructure Finance and Innovation Act.

    a A qualified private activity bond is a bond issued by or on behalf of a local or state government to finance the project of a private business. The
      Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), enacted in 2005, added highways (and freight
      transfer facilities) to the types of private projects for which tax-exempt qualifying private activity bonds may be used.

    b Mostly loans or grants from states or localities.

              Table 4. Ongoing Highway Projects That Use Public-Private Partnerships With Private Financing
    ----------------------------------------------------------------------------------------------------------------
                                                     Sources of Funding (Millions of 2014 dollars)
                                               --------------------------------------------------------
                      Start and                       Private                     Public                    Total
                    Expected End    Sources of -------------------------------------------------------- Project Cost
                         of          Revenues                                    Qualified                (Millions
                    Construction                                       TIFIA      Private                 of  2014
                                                  Debt     Equity     Program    Activity     Other b     Dollars)
                                                                                  Bonds a
    ----------------------------------------------------------------------------------------------------------------
    I-635 LBJ      2011-2016.....  Tolls......        0       724         917         654         529         2,824
     Freeway
     (Tex.)
    Midtown        2012-2017.....  Tolls......        0       276         429         686         731         2,123
     Tunnels
     (Va.)
    Presidio       2013-2015.....  Taxes......      170        47         152           0           0           371
     Parkway
     (Calif.)
    Ohio River     2013-2016.....  Tolls/Taxes        0        79         165         516         580         1,340
     Bridges East
     End Crossing
     (Ind.)
    I-69 Section   2014-2016.....  Taxes......        0        41           0         244          80           364
     5 (Ind.)
    U.S.-36        2014-2016.....  Tolls......       21        21          60          20          87           208
     Managed
     Lanes
     (Colo.)
    Goethals       2014-2017.....  Tolls/Taxes        0       107         474         453         425         1,459
     Bridge
     (N.Y.)
    North Tarrant  2014-2018.....  Tolls......        0       420         532         275         172         1,399
     Express
     Segment 3A
     (Tex.)
    Northwest      2014-2018.....  Tolls/Taxes       60         0         275           0         499           834
     Corridor
     (Ga.)
    Rapid Bridge   2015-2017.....  Taxes......        0        59           0         794         265         1,119
     Replacement
     (Penn.)
    Southern Ohio  2015-2018.....  Taxes......        0        49         209         251         125           634
     Veterans
     Highway
     (Oh.)
    I-4 Ultimate   2015-2019.....  Taxes......      484       103       1,256           0       1,035         2,877
     (Fla.)
    ----------------------------------------------------------------------------------------------------------------
    Source:  Congressional Budget Office based on information from the Federal Highway Administration.

    Note:  TIFIA = Transportation Infrastructure Finance and Innovation Act.

    a A qualified private activity bond is a bond issued by or on behalf of a local or state government to finance
      the project of a private business.

    b Mostly loans or grants from states or localities.

                                     ______

                Question Submitted for the Record to Joseph Kile
                   Question Submitted by Hon. Orrin G. Hatch
        Question. Dr. Kile, as funding from the Highway Trust Fund has
    become more unstable and authorizations have been for shorter periods
    of time, there has been more interest from States, localities, and many
    Members of Congress in financing mechanisms. I am talking about things
    like tax-exempt bonds, and infrastructure banks, and other instruments
    where the intention is to get private money invested in public
    infrastructure. Dr. Kile, to what extent, if at all, can financing
    options be thought of as substitutes for money from the Highway Trust
    Fund? Does relying more on financing reduce the need of the federal
    government, or any government, to come up with the money to produce
    infrastructure?

        Answer. The money in the Highway Trust Fund comes from taxes on
    gasoline, ethanol-blended fuels, and diesel fuel; other transportation-
    related taxes; and a very small amount of interest that is credited to
    the fund. In recent years, the Highway Trust Fund has also received
    transfers from the general fund of the Treasury. But other sources of
    revenues, such as state taxes and user fees, also pay for
    transportation projects; and if financing options increased theextent
    to which those revenues paid for transportation projects, those options
    could be considered substitutes for money from the Highway Trust Fund.
    Many of those financing options--such as loans that are made or
    guaranteed by the federal government and tax-preferred borrowing by
    state and local governments or the private sector--impose some costs on
    the federal government but do not necessarily draw upon the resources
    of the Highway Trust Fund.

        For example, tax-exempt bonds (which pay interest that is not
    subject to federal income tax) can be issued to finance the functions
    of state and local governments or, in the case of qualified private
    activity bonds, certain types of projects undertaken by the private
    sector. Another, more recently developed type of tax preference for
    infrastructure financing is associated with tax credit bonds. Most of
    the costs of paying off tax-exempt and tax credit bonds are borne by
    state and local governments or the private sector, but some of them are
    transferred to the federal government, in the form of either forgone
    Federal tax revenues or, in the case of direct-pay tax credit bonds, a
    federal outlay. But those costs are not attributed to the Highway Trust
    Fund. The support offered for surface transportation by most proposed
    infrastructure banks would not differ substantially from the loans and
    loan guarantees already offered by the Department of Transportation
    under the Transportation Infrastructure Finance and Innovation Act of
    1998. In principle, an infrastructure bank could use any of several.
    methods to finance projects, including federal loans, lines of credit,
    and guarantees for private loans. Depending on how the program was
    structured, the resulting costs might not be attributable to the
    Highway Trust Fund.

        Financing is a mechanism for making future tax or user fee revenues
    available to pay for projects sooner; it is not a new source of
    revenues. Ultimately, money that is borrowed has to be repaid with some
    future source of revenues. So borrowing to finance highway projects can
    augment the funds available for such projects in the short term, but
    revenues that are committed for repaying borrowed funds will be
    unavailable to pay for new transportation projects or other government
    spending in the future.
                                     ______

                    Prepared Statement of Hon. Ray Lahood,
                        Senior Policy Adviser, DLA Piper
        Chairman Hatch, Ranking Member Wyden, and members of the committee,
    thank you for the opportunity to testify before you on the challenges
    facing the nation's Highway Trust Fund. This hearing is quite timely as
    the Highway Trust Fund is again facing insolvency sometime in August.

        I am here today as a co-chair of Building America's Future, an
    organization that was co-founded by former Pennsylvania Governor Ed
    Rendell, former New York Mayor Mike Bloomberg and former Governor
    Arnold Schwarzenegger. Building America's Future represents a diverse
    and bipartisan coalition of state and local elected officials working
    to advance infrastructure investment to promote economic growth, global
    competitiveness and better quality of life for all Americans.

        Whether it's on our roads, in the air, in our ports or on our
    rails--our nation's infrastructure is falling apart. That is causing us
    to lose our economic competitiveness and to negatively impact our
    quality of life.

        The nation's roads are essentially one big pothole, and the tens of
    thousands of bridges that millions of Americans drive across every day
    are in dire need of repair.

        Forty-two percent of our major roadways are congested causing
    delays and inefficiencies for commerce and the average driver. The
    Texas Transportation Institute's 2012 Urban Mobility Report states that
    traffic congestion had Americans wasting time and 2.9 billion gallons
    of fuel at a cost of $121 billion--that equates to $818 per commuter.
    And it's no wonder. From 2000 to 2012 the nation's population grew by
    11.6 percent and the vehicle fleet increased by 10.7 percent but the
    road system has grown by 4 percent.

        When it comes to air travel our skies are approaching gridlock and
    our World War II-era air traffic control system can't keep pace with
    the demand. According to the U.S. Travel Association, within the next
    decade, 25 of the nation's top 30 airports will suffer the same level
    of congestion as the day before Thanksgiving at least 2 days each week.

        Despite a large surplus in the Harbor Maintenance Trust Fund, the
    busiest U.S. harbors are under-maintained. The U.S. Army Corps of
    Engineers estimates that full channel dimensions of the nation's
    busiest 59 ports are available less than 35 percent of the time. And
    only two of our East Coast ports are deep enough to accommodate the
    post-Panamax ships that will become the norm when the newly widened
    Panama Canal opens.

        Although we still don't have all of the answers to the cause of the
    horrific derailment of the Amtrak train near Philadelphia last month,
    it serves as a wake-up call on the critical importance of properly
    maintaining our infrastructure--whether it be rails, roads or bridges.
    The safety of all Americans depends upon it.

        These challenges are immense but not impossible. Building America's
    Future is calling on Congress to pass a long term and sustainable bill
    that does much more than provide small inflationary increases in
    funding. To do that it's going to take all of us working together--
    Republicans with Democrats; the House and the Senate; and both ends of
    Pennsylvania Avenue. It's also going to take vision and courage. Vision
    to craft a long-term strategic plan that is based on measurable
    economic results and courage to make the tough choices to pay for it.

        The next bill must include a growth rate more aligned to ISTEA,
    TEA-21 and SAFETEA-LU. The growth rate in each of these bills was on
    average 40 percent higher than what was in MAP-21. This chart prepared
    by the U.S. Department of Transportation clearly demonstrates the
    growth rate from these reauthorizations:

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        .epsAccording to the American Society of Civil Engineers, failing
    to provide funding levels above the baseline by 2020 would have dire
    consequences. The impact on a family's budget would be $1,060 and
    American businesses and workers would pay a heavy price in that 877,000
    jobs would be lost and transportation costs would increase by $430
    billion.

        It is past time for Washington to step up and produce a long term
    transportation plan that is robust and sustainable. To do otherwise
    would amount to putting a Band-Aid on a gunshot wound. America needs a
    strategic plan with a vision--not another short term bill that isn't
    even enough to keep filling the potholes.

        A level-funded bill will not have what it takes to maintain and
    modernize our roads, bridges and transit systems. In short, we won't be
    able to build--or rebuild--to keep Americans moving safely and reliably
    around the country.

        For examples of what has been working I would encourage the
    committee to take a look at what has been happening in the States.
    Governors, mayors and State legislators have been watching the gridlock
    in Congress with growing alarm. They are concerned that the level of
    funding they have traditionally received from Washington has been
    shrinking and will continue to do so without a change in vision and
    courage in Washington.

        As a result, many of them have made the hard choices to propose
    legislation to increase the fuel tax, replace the gas tax with a sales
    tax on fuels, or referenda allowing voters to increase local sales
    taxes.

        This has been occurring in red, blue and purple states alike.

        Over the past 3 years 14 states have successfully increased either
    their fuel or sales taxes including Wyoming, Virginia, New Hampshire,
    Maryland, Pennsylvania, Vermont, Massachusetts, Rhode Island, Georgia,
    Iowa, Idaho, Nebraska, South Dakota and Utah.

        In 2013, Oregon approved legislation to undertake a pilot program
    with 5,000 volunteers to test the feasibility of transitioning to a
    system where motorists are charged by miles driven instead of paying a
    gas tax. This program will be getting underway next month. Other states
    that have adopted mileage-based user fee-related legislation include
    California, Indiana and Washington. And states that considered such
    legislation this year include Arkansas, Florida and Massachusetts.

        Governors and mayors have also used the private sector to leverage
    their dollars, and as a result, more than 30 states have passed laws to
    authorize partnerships with the private sector.

        The public has also endorsed many of these revenue increases by
    consistently approving well-constructed ballot measures to increase
    investment in transportation. In last November's elections, 72 percent
    of ballot measures were approved and in 2013 the success rate was 91
    percent. One of the critical reasons why these measures were successful
    is that a clear and coherent case was made about which projects would
    be built in exchange for approval of the revenue increase.

        Examples of some recent success include: the approval of $250
    million in bonds to fix aging roads, bridges, sidewalks and buildings
    in Atlanta in March of this year. In order for citizens to track the
    projects and their progress, the city has set up a special webpage. In
    November of 2014 voters in Arlington, VA approved four bond referenda
    totaling more than $218 million to fund Metro and transportation as
    well as local parks, recreation, community infrastructure and schools.
    And in 2008 voters in Los Angeles approved Measure R to hike the sales
    tax by half a cent and generate up to $40 billion over 30 years to fund
    various transit and highways projects.

        But it is important to understand that these local and statewide
    efforts can not replace the federal government's responsibility.
    Devolution is not the answer. The role of the federal government in
    promoting interstate commerce is clearly stated in the Constitution.

        Legislation such as the Transportation Empowerment Act (TEA) would
    reduce funding for the federal-aid highway program by more than 80
    percent by 2019, from $45 billion to less than $8 billion. A recent
    study by the Transportation Construction Coalition showed that under
    the TEA Act states would need to increase their gas tax by an average
    of nearly 24 cents--just to achieve level funding. Specifically, Utah
    would need to raise its gas tax by 18.7 cents; Oregon by 24.1 cents;
    Idaho by 25.5 cents; Ohio by 15.9 cents; and North Carolina by 16.4
    cents.
                                federal options
        The nation's surface transportation program has traditionally been
    funded through the most pure and direct of all sources--a fee paid by
    the users of the system. But with better fuel economy and an increasing
    number of hybrids and vehicles that use little or no gasoline at all,
    spending from the Highway Trust Fund has outpaced revenues since 2008.
    In order to prevent the Highway Trust Fund from becoming insolvent,
    Congress acted in a bipartisan fashion and transferred $8 billion from
    the General Fund to the Highway Trust Fund. Since 2008, approximately
    $63 billion has been transferred to the Highway Trust Fund. But all of
    these transfers have done nothing to increase the amount of revenue
    needed to address the nation's vast transportation challenges.

        The most straightforward way to generate the needed revenue for a
    long term transportation bill is to increase the gas tax which has not
    seen a raise since 1993. The cost of everything has gone up since
    1993--except for the gas tax. In 1993 the cost of a First Class stamp
    was 29 cents--today it is 49 cents. A dozen eggs cost 87 cents in 1993
    and today the average cost is $2. The cost of the average car was
    $12,750 in 1993 and today the average cost is $31,252.

        Yet the gas tax has remained at 18.4 cents for 21 years. And since
    that time it has lost over a third of its purchasing power.

        In order to begin generating sorely needed revenue, Building
    America's Future is calling on Congress to immediately increase the
    gasoline user fee by 10 cents and index it to inflation. According to
    the Congressional Budget Office, a one cent increase in the gas tax
    generates $1.5 billion annually so a 10 cent increase would generate
    $15 billion. While this would not be enough to fund a robust long term
    bill, it would be enough to keep the Highway Trust Fund solvent while
    Congress considers other sustainable and longer term solutions.

        As a former elected official I fully understand the difficult
    politics of raising revenue. Voting to increase the gas tax is a tough
    vote. But leadership takes vision to see the big picture and courage to
    do the right thing.

        Your colleagues in the states have stepped up and their actions did
    not result in defeat at the ballot box. To the contrary. A political
    analysis by the American Road and Transportation Builders Association
    showed that 95 percent of all Republican state legislators who voted to
    increase their state gas tax in 2013 and 2014 and ran for re-election
    in last November's elections won their races. For Democrats there was
    an 88 percent re-election rate.

        Prior to 1993, votes to increase the gas tax in Congress were a
    bipartisan affair. In 1982 Congress approved a four cent hike by a vote
    of 54 to 33 in the Senate and 180 to 87 in the House. The legislation
    was signed into law by President Ronald Reagan. Another five cent
    increase was included in the Omnibus Reconciliation Act of 1990 that
    passed the Senate 54 to 45, the House by 228 to 200 and was signed by
    President George H.W. Bush.

        It wasn't until the Omnibus Reconciliation Act of 1993 when the
    politics of increasing gas tax revenue began to turn more partisan. The
    final package contained a 4.3 cent increase that ended up being devoted
    to deficit reduction--not the Highway Trust Fund. The package passed
    the House with no Republican votes and although there were a handful of
    Republican votes in the Senate, Vice President Gore had to cast the
    51st vote to break the tie. President Clinton signed the package into
    law.

        The Taxpayer Relief Act of 1997 ultimately re-allocated the 4.3
    cent increase from 1993 away from deficit reduction and to the Highway
    Trust Fund.

        It is time to get serious and increase the gas tax. Proposals to do
    so have been offered by Democrats and Republicans alike in Congress. In
    particular I want to commend Senators Corker and Murphy as well as
    Representatives Blumenauer and Renacci for their vision and courage in
    offering such proposals.

        We must also look at a variety of other options such as
    establishing a National Infrastructure Bank, raising the cap on Private
    Activity Bonds, creating a new kind of tax-exempt municipal bond called
    Qualified Public Infrastructure Bonds, consider other user based
    funding mechanisms such as road user charges, and lift Federal
    restrictions on tolling so that states may take greater advantage of
    partnering with the private sector.

        There has been much discussion in recent months about using
    repatriated funds to fund a 6 year transportation bill. While I am much
    more supportive of continuing the tradition of relying on a true user
    fee to fund our transportation system, I can see the merit of tapping
    into repatriated funds to give Congress more time to come up with a
    more long term and sustainable funding source.

        If America wants to maintain its global economic competitiveness we
    must reverse course. We must reject the Band-Aid and duct tape approach
    and go big and bold.

        This committee has an opportunity to work together to do the right
    thing to put America back on the right path. We can no longer sit on
    the sidelines as our infrastructure continues to deteriorate and we as
    a nation fall behind our global economic competitors. In just 10 years
    the economic competitiveness of our infrastructure has gone from being
    number one in the world to number 12 according to the World Economic
    Forum.

        There is no better time to invest in our infrastructure. Interest
    rates are at record lows and putting our friends and neighbors to work
    repairing and modernizing our roads and bridges is an economic plus for
    everyone. Let's get to it.

        Thank you, Chairman Hatch. I look forward to answering the
    Committee's questions.

                                     ______

             Questions Submitted for the Record to Hon. Ray LaHood
                   Questions Submitted by Hon. Orrin G. Hatch

        Question. Secretary LaHood, in your testimony you discuss the
    recent history of the federal excise tax on gasoline, and recommend
    increasing it by 10 cents per gallon immediately. As an elected
    official yourself, and a senior member of the Obama administration, I
    am interested in your perspective in how the administration view the
    gas tax as a source of revenue. The Obama administration has never
    included a gas tax increase in any of their budgets, and their current
    pay-for for infrastructure is essentially international tax reform. As
    a former member of the administration, why hasn't the administration
    sought to increase the gas tax?

        Answer. While the administration has been consistent in its
    opposition to raising the gas tax as a way to fund transportation
    infrastructure, administration officials have also said that they are
    open to working with Congress on various options. For current insight
    into the administration's position I would encourage you to speak
    directly with Secretary Foxx.

        Question. With the emergence of fuel efficient cars, many believe a
    fuel per gallon tax system is steadily becoming obsolete and an
    ineffective means of collecting revenue. A different system would
    therefore eventually be necessary in order to ensure collection of
    revenue. Secretary LaHood, you cite in your testimony that in 2013,
    Oregon approved legislation to undertake a pilot program with 5,000
    volunteers to test the feasibility of transitioning to a system where
    motorists are charged by miles driven instead of paying a gas tax. What
    types of steps would be involved in adopting such a system, and what
    would the time frame be to transition from a fuel per gallon system to
    a different system, potentially like the system with which Oregon is
    experimenting?

        Answer. I applaud the leadership that Oregon has demonstrated with
    its latest pilot program. They clearly understand that a sustainable
    revenue source to fund transportation infrastructure must be
    identified. With regard to how a program similar to Oregon's can be
    implemented at the federal level, I would encourage you to talk
    directly with experts on road user charge programs at the Federal
    Highway Administration or with the appropriate officials at the Oregon
    Department of Transportation.
                                     ______

                    Questions Submitted by Hon. Dean Heller
                               vmt pilot program
        Question. Does the Department of Transportation have the capacity
    to implement a similar volunteer pilot VMT program to replace the
    federal gas tax?

        Answer. I encourage you to direct this question to the experts at
    the Federal Highway Administration.

        Question. If so, how many drivers would be needed nationwide to
    collect enough data to adequately evaluate the benefits and concerns of
    VMT?

        Answer. I encourage you to direct this question to the experts at
    the Federal Highway Administration.

        Question. Being a member of the Commerce Committee, I also
    understand concerns about privacy in implementing such a program. What
    safeguards would need to be put in place so that constituents can feel
    comfortable with this system? Can you also speak to Oregon's second
    pilot program and what safeguards to protect privacy were put into
    place?

        Answer. On July 1st Oregon's road user fee pilot program--OreGO--
    got underway. The pilot is limited to 5,000 participants who will be
    charged 1.5 cents per mile while driving in Oregon and receive a credit
    for the state gas tax they paid at the pump. According to the official
    OreGO website, the Oregon Department of Transportation has set in place
    strict policies and procedures to ensure security and privacy for those
    participating in the pilot program. You may review this information
    directly at: http://www.myorego.org/.
                            vehicle registration fee
        Question. In addressing a solution for the Highway Trust Fund, our
    working group analyzed a number of options, including but not limited
    to, a national vehicle registration fee. The Joint Committee on
    Taxation estimated for our working group that an annual registration
    fee of between $200-$300 would be necessary to cover Highway Trust Fund
    outlays if all present-law Highway Trust Fund taxes were repealed and
    replaced with this fee.

        What are your views on this fee?

        Answer. I believe that all options should be on the table.

                                      vmt
        Question. Secretary LaHood, you have been a vocal advocate of
    raising the federal gas tax as a means to build a funding bridge that
    will carry us until a sustainable replacement is ready. I am closely
    following developments in the West whereas some states are beginning to
    pursue a fee based on charging by distance, not on a gas tax. This type
    of ``road usage charge'' or ``mileage based user fee'' gives motorists
    a choice of what type of technology is used, and in fact even if a
    driver chooses a GPS option it never tracks location, only distance.

        Could you please speak to the importance of finding a short-term
    revenue source to keep America competitive while simultaneously seeking
    out and investing in user-fee based alternatives for the long-term?

        Answer. The Highway Trust Fund will become insolvent sometime in
    August and the authorization for surface transportation programs
    expires on July 31st. It is critical that Congress act to ensure that
    the Trust Fund remains solvent. The consequences of inaction would mean
    that thousands of projects all over America would be at risk of
    shutting down and thousands of jobs in jeopardy as federal funding
    dries up.

        The easiest and most direct way to provide the needed revenue to
    boost the Trust Fund is to raise the gas tax and index it to inflation.
    In theory, this can be done immediately. However, having been an
    elected official I understand the challenging politics of raising
    revenue.

        As the long term sustainability of the gas tax is an issue, it is
    imperative that other long-term options such as a mileage based user
    fee be further examined. As you noted, several states are exploring the
    feasibility of this option and the lessons learned will further inform
    policy makers at the federal level of the viability of implementing
    such a system nationally.

        Make no mistake, in order to remain competitive America needs a
    long-term infrastructure investment strategy.

                                     ______

      Prepared Statement of Stephen Moore, Visiting Fellow in Economics,
                            The Heritage Foundation
        My name is Stephen Moore. I am a Visiting Fellow in Economics at
    The Heritage Foundation. The views I express in this testimony are my
    own, and should not be construed as representing any official position
    of The Heritage Foundation.

        Mr. Chairman, with gas prices having fallen by roughly $1 a gallon
    over the past year, many policymakers are advocating a rise in the
    federal gas tax. Earlier this year House minority leader Nancy Pelosi
    argued that motorists might not even notice the hike. ``If there's ever
    going to be an opportunity to raise the gas tax, the time when gas
    prices are so low--oil prices are so low--is the time to do it,'' she
    stated.

        This seems to be the argument that if OPEC can't keep prices high,
    the Feds will. But there's a good reason why polling stands
    overwhelming against raising the 18.3 cents a gallon federal gas tax.
    It hurts the finances of the middle class. The best rule of thumb is
    that every penny rise in gas prices at the pump takes about $1.5
    billion out of the wallets of consumers. So a 10 or 20 cent gas tax
    will take about $15 to $30 billion from consumers. That's a massive
    negative stimulus to the economy at a time of stagnant wages for a
    decade in America.

        By the way, the fall in the gas price increases federal revenues
    because people drive more when the price is lower, and the per gallon
    federal gas tax collects more funds. So if anything, a fall in gas
    prices should be coupled with a fall, not a rise in the federal gas
    tax.

        Proponents of higher gas taxes point to the fact that the federal
    gas tax hasn't been raised since 1993 and hasn't kept pace with
    inflation. That's true, but the federal funding peaked at just about
    the time the 42,000 national interstate highway system was just being
    completed. So the feds need less money now than 30 years ago. No one
    argues that we should be spending today what we did in the 1960s on the
    Apollo moon landing mission.

        Moreover, States have raised their gas taxes and funding for roads
    in most areas is not inadequate. From 1984-2012, across the country,
    the pace of increase for capital expended on roads and bridges has been
    nearly triple the inflation during this period (330 percent vs. 121
    percent). And this occurred during a stretch where the Nation's
    population grew by only one-third. The common refrain from the road
    builders and civil engineers is that the infrastructure is crumbling
    and that we need to spend hundreds of billions more. Actually, as my
    Heritage colleagues have noted in recent reports:

        While the common perception is that America's infrastructure is
    ``crumbling'' and thus requires more federal expenditures, the reality
    is not nearly as bleak. Some infrastructure certainly requires
    maintenance and updating, as congestion is a major concern in many
    metropolitan areas. Indeed, the federal government provides perverse
    incentives for States to spend billions on new, unneeded projects
    instead of maintaining existing systems.

        Taken as a whole, the Nation's infrastructure performs well and is
    improving. The percentage of bridges that are structurally deficient--
    meaning that they require extensive maintenance, but are not
    necessarily unsafe--has declined from 22 percent in 1992 to 10 percent
    in 2014. Highways and roads have also improved: The Federal Highway
    Administration notes that the percentage of vehicle miles traveled on
    the National Highway System with ``good'' ride quality rose from 48
    percent in 2000 to 60 percent in 2010, while the share with
    ``acceptable'' ride quality increased from 91 percent to 93 percent.

        What is true is that America needs more roads because congestion is
    getting worse over time and this is a clear economic drain on the
    United States. By some estimates the average American worker must work
    the equivalent of an extra week a year (37 hours stuck in traffic
    congestion) due to crowded roads and highways. But that problem can
    also be solved through smart tolling and other market incentives to
    properly price use of the infrastructure during peak commuter hours to
    reduce overcrowding.

        In 21st century America, tolls are the most efficient form of user
    pays and Uber-type technologies make tolling highly efficient in terms
    of adjusting prices during peak hours to reduce congestion. By the way
    as we move into the new era of cheap, reliable, safe, and smart Google
    Cars on the roads, time delays due to congestion will be much less of a
    problem in the future.

        But the reason roads aren't being built is not that the money is
    insufficient. It is that so little of the gas tax dollars actually go
    to building and maintaining roads.

        Consider the highway spending dollars for 2015. The gas tax is
    expected to raise roughly $39 billion in 2015. Is this enough to build
    and repair needed federal roads? Yes, but it is not enough to fund
    transit projects--most of which are hugely inefficient and should never
    be funded with federal dollars and certainly shouldn't be funded by
    motorists, who, by definition, don't use the trains, and subways and
    buses.

        Under current law, the Highway Trust Fund consistently spends more
    on road and transit projects than it receives in fuel tax revenues and
    is expected to run a cumulative deficit of $180 billion over the next
    10 years if current trends continue.

        The Highway Trust Fund is divided into two accounts. The Highway
    Account is slated to disburse about 85 percent of combined spending on
    roadway infrastructure and other projects in 2015. The Mass Transit
    Account expends about 15 percent of spending (about $8 billion a year)
    and funds transit projects, such as rail, buses, and streetcars. This
    is not based on fairness or good transportation policy. It is based on
    the political clout of urban politicians in Congress who have come up
    with funding formulas that benefit their districts.

        Overall, about 25 percent of fuel tax funding is diverted to non-
    highway projects--including bike paths, trails, museums, and so on.
    These may be very worthwhile projects, but why should gas and diesel
    tax revenues fund them?

        Congress should begin addressing the highway funding shortage by
    insuring that every dollar of gas tax paid by motorists goes to
    building the roads that they make use of. That is what a ``user fee''
    is intended to do.

        The argument is made by transit advocates that transit projects
    help reduce congestion on roads and therefore benefit motorists. In
    very few cities is that the case, because outside of cities like
    Chicago, New York, Washington, DC, and San Francisco, so few Americans
    use mass transit. Moreover, often times building an extra lane of
    highway would reduce traffic congestion in rubber neck areas at one-
    tenth the cost of massive white elephant transit projects.

        Moreover, there is another massive inefficiency in the transit
    program. States and cities are paid a much higher reimbursement rate
    for capital expenditures than operations. So the incentive is to build
    gold-plated rail services with multi-billion construction costs than to
    operate buses and other van shuttle services at a fraction of the cost.
    This explains why two of the greatest rail flops of all time are being
    built today: the $70 billion high speed rail project in California and
    the Dulles Airport ``silver line'' in Virginia that is only being
    constructed because the Feds are giving billions to the State of
    Virginia. If people in the metro area had to pay for this boondoggle,
    they never would have allowed their tax dollars be so misallocated. By
    they way the project has already had four cost overruns.

        These two examples, and multiples more, explain why transportation
    funding and planning needs to be turned back to the States. Again, this
    comports with the user pays principle of transportation which we have
    strayed so far from and has encouraged wasteful spending.

        We know, by the way, that States differ dramatically in how
    efficiently they spend on roads and highways. In my book with Arthur
    Laffer, et al, called The Wealth of States, we document that California
    spends about twice as much per mile of highways built than Texas (about
    $250,000 in CA versus less than $100,000 in TX). Despite the spending
    discrepancy, Texas road conditions are ranked 23rd in the Nation and
    California's are ranked dead last. What does California get for all
    that spending? Not much. This gap between Texas and California is due
    to environmental and labor rules, among other things. States can get
    away with being inefficient if they are being subsidized by the Feds.
    They will have to get lean and efficient if they are paying for their
    own fiscal folly.

        There is another way to reduce highway construction labor costs by
    as much as 20 percent, and this is by repealing the federal Davis Bacon
    Act, which requires effectively a union ``prevailing wage'' be paid on
    federal construction projects.
                      no to a federal infrastructure bank
        One idea kicking up steam is the notion of an infrastructure bank
    to fund road, transit, green energy and other brick-and-mortar
    ``shovel-ready projects.'' The idea is that over time this could raise
    about $150 billion for federal infrastructure projects.

        One typical plan, sponsored by Rep. John Delaney of Maryland, would
    create an infrastructure bank funded with $50 billion, leveraged to
    backstop 50-year bonds that would finance billions in new
    transportation projects.

        The Obama administration has a similar plan to create a bank funded
    by $150 billion of repatriated taxes on overseas profits of U.S.
    multinationals. The $150 billion would collateralize tens of billions
    of dollars of long-term loans from private investors that would fund up
    to $100 billion of new projects each year.

        The White House says that this plan could nearly double funding for
    highway and transit projects with this magical stash of funds. The
    supposed selling point: After the initial funding, taxpayers wouldn't
    have to put up a dime; it would all be paid for with private dollars
    collected.

        Except for the fine print. The full faith and credit of the U.S.
    Government would back these loans. If the bank experiences financial
    stress, the government would be on the hook to repay the loans. As
    Ronald Reagan would say: ``Well, there they go again.''

        This was exactly the financing mechanism that propped up Fannie Mae
    with its scam arrangement of 100 percent taxpayer guarantees on
    subprime mortgages. Obama's budget chief once wrote that the chances of
    a Fannie Mae default were close to one in a million. It was supposed to
    be free money for housing--until it wasn't.

        Now, $150 billion in losses later, we know that Fannie and its
    sister organization Freddie Mac required one of the most expensive
    taxpayer bailouts in American history. This is anything but a model
    worth imitating.

        A close inspection of many of these infrastructure bank proposals
    indicates that rather than investments being based on sound financial
    justifications, politics will play a major role.

        The infrastructure bank is to take into account factors including
    reduction in carbon emissions and income inequality, job training for
    low-income workers, energy efficiency, expanded renewable energy and
    requirements that iron, steel and other inputs be produced in the
    United States.

        The feds already provide a giant subsidy for local infrastructure
    projects via the tax exemption on municipal bonds. It lowers the
    interest rates that cities and States must pay on their infrastructure
    bonds. Rates in the muni market have fallen sharply, from 5.41 percent
    in 2011 to 3.6 percent last month--the lowest borrowing costs in nearly
    half a century.
                              a better way forward
        Rather than raise the federal gas tax, a better policy would be to
    phase down the federal tax and let states pay for their own road
    projects. The interstate highway system was completed 30 years ago and
    there is no more need for a national tax at 18.34 cents a gallon to
    fund bridges and high speed rail projects to nowhere. Turning back
    transportation projects to the states will ensure that gas tax money is
    used for the highest value added projects.

        Under one current proposal, over the course of 5 years, the federal
    fuel tax rates would decrease, from 18.3 cents per gallon to 3.7 cents
    per gallon (gasoline) and from 24.3 cents per gallon to 5.0 cents per
    gallon (diesel). At the same time, federal programs more appropriately
    run by states and cities, such as subway, bus, and bicycle programs,
    would end. Authority and accountability would return to states and
    localities, giving them incentives to fund projects according to local
    priorities, not those of Washington.

        States would decide whether to increase state fuel taxes by the
    amount the federal fuel taxes decreased, such that motorists would see
    no change at the gas pump. Or they could raise additional funds or
    pursue other revenue-generating mechanisms--user fees or taxes--to meet
    the level of transportation revenue they deem necessary to carry out
    their priorities. In general, states should maintain the ``user pays,
    user benefits'' concept and should not raise unrelated taxes, such as a
    generic sales tax, to fund transportation projects.

        One last point when it comes to our ``infrastructure crisis.'' I
    can't help noting that it is many of the same politicians, starting
    with President Barack Obama, who keep clamoring for more infrastructure
    spending to create jobs and make America economically sounder, who also
    oppose the Keystone XL pipeline. This is a project that could create
    well more than 10,000 jobs, that would increase American energy
    exports, and would increase U.S. National security--and would not cost
    taxpayers a dime--and many in Congress and in the White House oppose
    it. We ought to do the cheap and easy infrastructure projects first.

                                     ______

                     Prepared Statement of Hon. Ron Wyden,
                           a U.S. Senator From Oregon
        America's transportation arteries give life to America's economy.
    Now, they need major surgery, but instead, the patient is bleeding out.
    And short-term funding Band-Aids won't help without a solid long-term
    plan in place to solve the crisis.

        My bottom line is that you can't have a big-league economy with
    little-league infrastructure. But the way Congress has limped from one
    short-term funding patch to the next more than 30 times is
    unquestionably a little-league strategy.

        The stop-and-go approach without a viable long-term funding source
    lowers our sights in terms of what our transportation system can do. It
    forces states and federal agencies into making little plans--barely
    keeping up with the potholes and falling far behind on new railways,
    ports, and highways.

        Oregonians are driving across bridges that are structurally
    deficient or functionally obsolete. They're swerving around ruts on
    mountain passes that threaten to cause dangerous accidents. They're
    sitting in traffic jams, burning through gas and wasting time.

        The infrastructure crisis hurts our businesses and discourages
    investment in Oregon and across the land. China invests more than four
    times the amount the U.S. does in infrastructure. Europe invests twice
    as much as the U.S. The fact is, the costs associated with
    transportation and infrastructure are always a part of the calculus
    when a company is deciding where to invest and who to hire.

        One recent report from the American Society of Civil Engineers said
    that the U.S. needs to invest $3.7 trillion in infrastructure by 2020--
    and $1.7 trillion in transportation infrastructure alone--just to reach
    ``good condition.'' Another series of short-term patches won't meet
    that bar. And in the meantime, the same report found that Oregonians
    spend more than $650 million a year on auto repairs and other costs
    because roads and highways are crumbling.

        It's my view that funding a transportation network is right up
    there with maintaining a fair judicial system and a strong national
    defense among the most basic and necessary functions of government.
    There is a bipartisan understanding that our transportation system
    needs major investments--you hear the same messages from Democrats and
    Republicans on this issue.

        So Congress and this committee have a responsibility to find a
    pathway that leads to a long-term funding source. I hope today's
    hearing reinforces the enormous need to accomplish that goal and helps
    us move closer to a solution.

        Next week, the committee is going to continue its consideration of
    this crucial topic in a hearing on how to get private dollars off the
    sidelines and into the game on infrastructure. Several weeks ago,
    Senator Hoeven and I introduced the Move America Act to kick-start the
    use of effective financing tools to help solve this crisis. I strongly
    believe Move America is going to be a big part of what gets our
    infrastructure back up to the big-leagues, and I look forward to
    continuing the discussion next week.
                                     ______

                                 Communications

                                  ----------

                            Testimony by Kurt Nagle

                               President and CEO

                American Association of Port Authorities (AAPA)

                    Dead End, No Turn Around, Danger Ahead:

                  Challenges to the Future of Highway Funding

                            Senate Finance Committee

                            Thursday, June 18, 2015

    Chairman Hatch and Ranking Member Wyden, thank you for holding this
    important hearing on the long-term financing of the highway trust fund.
    How we fund our infrastructure is a conversation that Congress and the
    administration must have and AAPA looks forward to being engaged in
    this conversation, especially from a freight perspective. Thank you
    both for your leadership on this issue.

    AAPA is the unified and collective voice of the seaport industry in the
    Americas. AAPA empowers port authorities, maritime industry partners
    and service providers to serve their global customers and create
    economic and social value for their communities. Our activities,
    resources and partnerships connect, inform and unify seaport leaders
    and maritime professionals in all segments of the industry around the
    western hemisphere. This testimony is on behalf of our U.S. members.
    AAPA is also the Chair of the Freight Stakeholder Coalition, which is a
    unique coalition of 19 national stakeholders comprised of system users,
    planners and builders, which has provided comments on policy and
    funding on the Transportation Reauthorization Bill since 1992.

    The next surface transportation authorization is an opportunity to
    provide long-term, sustainable funding and to build upon MAP-21, which
    recognized the linkage between goods movement and economic
    competitiveness. However, AAPA believes it is time to match this new
    emphasis on freight by not only ensuring both long-term Highway Trust
    Fund solvency but also adding new and additional non-HTF funding
    dedicated to prioritizing projects that optimize and integrate the
    Nation's freight transportation system.

    The federal government must lead long-term efforts designed to further
    America's competitive advantage by advancing projects of regional and
    national significance as well as first and last mile projects that
    reduce congestion, enhance goods movement, improve the environment and
    create jobs. If we are committed to the modernization of our nation's
    freight transportation system, it must accommodate projected growth in
    manufacturing and trade in years ahead or risk the U.S. being surpassed
    by foreign competitors.

    One of the biggest challenges our industry sees today--and looking
    toward the future--is the state of port related infrastructure, and how
    we as a nation make the necessary investments in that critical
    infrastructure. There are sizable investment needs at port facilities
    and the connecting infrastructure on the land and waterside.

    The Highway Trust Fund can be a vital resource for funding freight
    projects, such as first and last mile projects that connect the ports
    with the surface transportation system as well as the Congestion
    Mitigation and Air Quality Program (CMAQ), which provides funding for
    air quality projects. Port connector projects are also eligible for the
    Surface Transportation Program (STP) and the Projects of National and
    Regional Significance (PNRS) program which address large choke points
    on our freight network.

    Earlier this year, AAPA asked our members to look ahead 10 years and
    identify the key landside infrastructure investments that need to be
    made. With 95% of our U.S. port members responding, The State of
    Freight survey results identified $28.9 billion of project investments.
    A copy of this report has been submitted for the record. Specifically,
    AAPA members identified 34 Projects of National and Regional
    Significance totaling $19.5 billion.

    Additionally, MAP-21 required the USDOT to encourage states to develop
    comprehensive immediate and long-term freight planning and investment
    plans, and to collaborate with individual states, Metropolitan Planning
    Organizations (MPOs) and Freight Advisory Committees. In addition to
    comprehensive freight plans, states were also encouraged to establish
    freight advisory committees.

    Ports are already engaging in the planning process so there is a blue
    print in place on how to fund freight projects.

       71 percent of U.S. member ports participated in the development of
            its statewide freight plan.

       63 percent of U.S. member ports are working directly with its
            region's MPO or Council of Governments (COG) in the development
            and planning of a freight project that is either underway or
            has recently been completed.

    However, fixing the highway trust fund does not fix our freight
    network. The movement of freight is intermodal, meaning that it
    predominantly involves both rail and truck. These two modes do not
    necessarily exist in harmony under the current HTF structure.

    For our country to build and sustain our infrastructure we must have an
    intermodal program that provides direct funding for freight. Our
    freight infrastructure needs, demands and challenges have become much
    more dynamic since 1993, the last time the gasoline user fee was
    increased.

    Think of how much our economy, our population and how we conduct
    business has changed in the past 22 years. The growth and integration
    of the Internet into everyday shopping has dramatically changed how we
    make purchases and how it is delivered through distribution type
    businesses such as AMAZON and others. These new business models have
    placed an incredible amount of stress on our already aging
    infrastructure.

    For example, our population has grown by 23 percent (or 60 million)
    since 1993, meaning more freight customers and more demand on our
    infrastructure. Additionally, in 1993, 20.4 million TEU entered the
    country and moved on our rail and highways. By 2014 that number has
    more than doubled to 46.4 million TEUs. And the total tonnage of
    freight that moves through our ports and around our country has
    increased by 46.2 percent since 1993 to a total of 880,841 metric tons
    in 2014. That is a lot of wear and tear on our infrastructure that is
    also supporting the everyday trips of commuters, shopper and tourists
    around the country.

    This demand on our infrastructure is only going to increase. Today,
    international trade through seaports accounts for over a quarter of the
    U.S. economy--and is projected to reach 60% by 2030. At the center of
    trade and transportation are America's seaports, which handle
    approximately $6 billion worth of import and export goods daily,
    generate over 23 million jobs, and provide more than $320 billion in
    tax revenues.

    To address the immediate and long term freight infrastructure
    challenges, AAPA recently endorsed the concept of a 1 percent waybill
    fee as an equitable approach to provide long-term funding for freight.
    This was included in legislation, H.R. 1308, Economy in Motion: The
    National Multimodal and Sustainable Freight Infrastructure Act,
    introduced by Representatives Alan Lowenthal (D-CA), Dana Rohrabacher
    (R-CA) and Mark Meadows (R-NC) and 11 other cosponsors. We urge the
    Committee to carefully look at this bill and how it can fund freight.

    To help plan and make sustainable investments in a national freight
    network, AAPA has suggested several approaches:

        (1)  Provide direct funding for freight projects,

        (2)  Create a freight fund that provides formula funds to States as
    well as a discretionary grant program so that adequate funding can be
    distributed; and

        (3)  Provide a sustainable funding source for the freight network.
    AAPA recently endorsed the concept of a 1 percent waybill fee as an
    equitable approach to provide long-term funding for freight.

    AAPA is happy to see that Congress and the administration recognize the
    value of improving our freight network. Whether we will be successful
    will very much depend on the Senate Finance Committee finding
    increased, sustainable funding sources for the highway trust fund and
    other mechanisms to fund multi modal freight improvements.

    AAPA believes a strong case is being made for direct funding toward our
    freight network and that freight starts and ends with our seaports. We
    look forward to working with the Committee as you move a sustainable
    funding package for the Highway Trust Fund and for our Freight Network
    forward this summer.

                                     ______

                American Association of Port Authorities (AAPA)

                          Port Surface Transportation
                             Infrastructure Survey

                              The State of Freight

                                 April 21, 2015

                                  Version 1.2

    1 in 3 u.s. ports needs at least $100 million in intermodal upgrades to
                     handle projected 2025 freight volumes

                               Executive Summary

    In Peter Zeihan's acclaimed 2014 book, ``The Accidental Superpower,''
    he cites the overwhelming freight transportation advantage the United
    States has over other trading nations in its system of ports and
    waterways. He argues that America has more miles of navigable waterways
    than any other nation, together with an enviable coastal geography of
    naturally deep harbors, barrier islands and indentations that are
    unmatched for seaport development anywhere in the world.

    Unfortunately, due to insufficient investment in its freight
    transportation infrastructure, every day America is losing some of the
    goods movement advantage asserted in Mr. Zeihan's book.

    Seaports are the backbone of a thriving 21st century global economy.
    Yet, a nation's freight transportation system is only as good as its
    underlying infrastructure. In the American Association of Port
    Authorities' (AAPA) 2015 Surface Transportation Infrastructure Survey--
    The State of Freight, results indicate that the Nation's unsurpassed
    goods movement network needs immediate and significant investment in
    the arteries that carry freight to and from its seaports. Without that
    investment, the American economy, the jobs it produces and the
    international competitiveness it offers will erode and suffer, creating
    predictable and oftentimes severe hardships to the individuals who live
    and businesses that operate within its borders.

    In 2013 alone, some 1.3 billion metric tons of imported and exported
    cargo, worth nearly $1.75 trillion, moved through America's seaports,
    while an estimated 900 million metric tons of domestic cargo with a
    market value of over $400 billion was also handled through these
    international gateways.

    Port-related infrastructure connects American farmers, manufacturers
    and consumers to the world marketplace and is facilitating the increase
    of American exports that are essential to the nation's sustained
    economic growth. In 2007, Martin Associates, of Lancaster, PA, reported
    that U.S. port activity was responsible for about 13.3 million American
    jobs and $212.4 billion in federal, state and local tax revenue. Martin
    Associates' 2015 nationwide porteconomic impacts update study shows the
    benefits of America's seaports having risen sharply over the
    intervening years, now responsible for 23.1 million U.S. jobs and
    $321.1 billion in Federal, State and local tax revenue. According to
    the study, marine cargo activity at U.S. deep-water ports also
    generated $4.6 trillion in total economic activity, or roughly 26
    percent of the Nation's economy in 2014, compared to $3.2 trillion in
    combined economic activity associated with U.S. deep-water ports in
    2007, or roughly 20 percent of the Nation's GDP at the time.

            ``Enhancing connections between highway and rail systems and
            port infrastructure will be a key part of ensuring the first
            and last mile of transportation infrastructure supports growing
            demand.''

            U.S. Senator John Thune (R-SD)
            Chairman, Senate Committee on Commerce, Science and
            Transportation

    Despite the importance to the economy, freight investments are
    disadvantaged in the current transportation planning and funding
    process. Freight projects face competition from non-freight projects
    for public funds and community support. Although passenger and freight
    movements must coexist on America's transportation network, these are
    two distinctly different stakeholder constituencies.

    Because there's no clear definition of what constitutes ``freight
    projects'' in the federal government lexicon, there's been a lack of
    coordination among federal and state government entities and private
    sector stakeholders. This has resulted in a shortage of public funds to
    plan and invest in the nation's freight network and address the key
    freight chokepoints that impact both passenger and freight
    constituencies.

    Due to their significant role in driving commerce, public seaports have
    the experience to help grow the economy, create jobs and promote an
    efficient, safe and environmentally sustainable freight network. As in
    any other successful operation, every port has a business plan for its
    long-term success to identify markets, leverage assets and prioritize
    and sustain its capital investments. Similarly, if America wants its
    transportation system to achieve long-lasting and sustainable success,
    it must implement a national freight plan to develop, sustain and grow
    its advantages for moving goods.

    The results of AAPA's infrastructure survey reinforce one of the
    industry's key messages, ``Seaports Deliver Prosperity.'' The survey
    also illustrates the significant steps public ports are making and have
    made in working with the planning community in developing and investing
    in freight projects. This has been particularly evident since passage
    of the 2012 Moving Ahead for Progress in the 21st Century Act (MAP-21),
    which laid out a clear and aggressive vision on how America plans and
    coordinates a national freight plan through collaboration with the
    individual states.

    Additionally, this survey helps define the role ports are continuing to
    play in developing innovative Public Private Partnerships (P3s) with
    the nation's business sector, and facilitating additional resources
    into the process.

    This survey focuses on seaports--critical gateways in the U.S. freight
    network through which more than 99 percent of America's overseas trade
    must pass. While there are other components of the freight network that
    must be addressed, the impact of vital seaport ``first and last mile''
    connectors on the country'sregional and national transportation
    infrastructure cannot be overstated. Ports are national models of
    effective intermodalism and are the very definition of critical
    infrastructure.

            From 2007-2014 the annual impact of America's seaports
            increased:
            43 percent to $4.6 trillion
            in total U.S. economic
            value                         74 percent to 23.1 million U.S.
                                          jobs
            51 percent to $321.1
            billion in Federal, State
            and local tax revenue         100 percent to $1.5 billion in
                                          personal wages and salaries

                        Survey Purpose and Participation

    The purpose of AAPA's 2015 Port Surface Freight Infrastructure Survey
    is to quantify the baseline need for investment in port infrastructure
    connecting the United States' deep-draft seaports to the rest of the
    nation's freight transportation system. The survey results reflect
    responses to questions asked of AAPA's 83 U.S. member public ports in
    the 6 months leading up to the publication of this report. With a 95
    percent response rate, the survey represents nearly all of the top U.S.
    seaports on the Atlantic, Pacific and gulf coasts, and along the Great
    Lakes.

    The survey seeks to illustrate the critical nature of connection points
    between seaports and the national surface transportation system,
    including highway connectors and on-dock rail. It's at these critical
    connection and transfer points that the efficiency of moving freight
    through seaports and to and from the interior of the country can be
    maximized. These connection and transfer points for goods are the
    foundation of America's freight network.

    The freight network is vast and evolving. It's a living grid that
    infuses an economic lifeline throughout the country; from small towns
    to major metropolitan regions, and farming districts to technology
    centers like Silicon Valley. At its heart are America's seaports, which
    handle an overwhelming majority of the nearly $6 billion worth of
    products that move to and from overseas markets every day. For the
    network to work properly, it must seamlessly connect to commerce
    centers in every community, state and territory, as well as to an ever-
    growing and vibrant inland waterway system that is unparalleled
    worldwide.

            ``Every type of transportation plays an important role in our
            national transportation network, but maritime and waterborne
            transportation in particular serves as our country's connection
            to the world economy.''

            U.S. Representative Bill Shuster (R-PA)
            Chairman, House Committee on Transportation and Infrastructure

            Analysis of Surface Transportation Connectors With Ports

    It's been two decades since the United States addressed its surface
    transportation connectors. In 1995, the National Highway System (NHS)
    Designation Act, directed the Secretary of the U.S. Department of
    Transportation (USDOT) to develop a list of NHS intermodal connectors.
    With the input of state departments of transportation, the list was
    completed in 1998. In 2000, USDOT reported to Congress on the state of
    NHS Intermodal Freight Connectors. USDOT identified significant
    deficiencies in U.S. freight connectors and estimated the cost of them
    to be $2.6 billion.

    Between 2000 and 2013, the volume of containers shipped through U.S.
    ports grew by approximately 50 percent, from 30.4 million to 44.6
    million 20-foot equivalent units (TEUs), adding further strain to port
    highway and rail connectors. The population in U.S. metropolitan areas
    also grew by 33 million people (14 percent) over the same period, which
    created a related increase in the demand for goods.

    In the AAPA survey, respondents were asked what they anticipated the
    minimum cost would be over the next decade (through 2025) to upgrade
    the intermodal connections at their port so it could efficiently handle
    all of their projected inbound and outbound cargo.
    Key Survey Results Included:
    Nearly 80 percent of AAPA U.S. ports surveyed said they anticipate a
    minimum $10 million investment being needed in their port's intermodal
    connectors through 2025, while 30 percent anticipate at least $100
    million will be needed.

       These intermodal connectors, often referred to as the ``first and
            last mile'' of the freight transportation network, account for
            roughly 1,200 of the 57,000 miles in the national highway
            system. Many of these connectors are in various states of
            disrepair and face further deterioration, particularly as trade
            volumes continue to grow. Like links in a chain, these
            transportation connections with America's seaports are critical
            to the overall freight network, and they are particularly
            vulnerable in large, congested metropolitan communities where
            commuters and freight share the same system. As the United
            States. takes a closer look at planning and investing in its
            freight grid, intermodal access points must be prioritized.

    Looking further at intermodal connectors, the AAPA survey asked
    respondents how much has congestion on these connectors over the past
    decade impacted their port's productivity.

    One-third of respondents said congestion on their port's intermodal
    connectors over the past 10 years has caused port productivity to
    decline by 25 percent or more.

       MAP-21 made incremental steps in providing resources for improving
            intermodal connectors. Surface Transportation Program (STP)
            funds are now eligible for surface transportation
            infrastructure improvements in port terminals for direct
            intermodal interchange, transfer and port access. However, the
            competition for these funds is intense, as states have 27 other
            eligible funding activities in which to use these Federal
            funds.

       Among AAPA survey respondents, 33 percent said their port has
            applied for STP funds during the last 2 years. However, AAPA
            has also heard from ports that low success rates in securing
            funding has made it difficult for them to make long-term
            commitments for infrastructure projects. AAPA repeatedly hears
            from U.S. member ports that sustainable and reliable funding
            sources need to be available in order for them to invest and
            leverage funding into the connecting freight network.

              Needed and Planned Investment in the Freight Network

    In a 2012 AAPA survey, U.S. public ports and their private sector
    partners reported plans to invest more than $9 billion each year for
    the next 5 years tomaintain and improve their infrastructure. However,
    this investment is not being adequately matched by a Federal Government
    commitment to improve the corresponding connecting infrastructure. Many
    of the land-side connections to seaports are insufficient and outdated,
    negatively affecting the ports' ability to move cargo into and out of
    the U.S., and threatening our international competitiveness.
    Key Survey Results Included:
    There is an identified current need of $28.9 billion in 125 port-
    related freight network projects. These projects range from intermodal
    connectors, gateway and corridor projects, to marine highways and on-
    dock rail projects.

    Of these 125 projects, there are 46 intermodal projects totaling $7.5
    billion, and 34 Projects of National & Regional Significance totaling
    $19.5 billion. Additionally, respondents identified 35 TIGER
    (Transportation Investment Generating Economic Recovery) projects
    totaling $1.9 billion.

      Since 2009 TIGER Funding Has Leveraged $700 Million for the Freight
                                    Network

       Over the past 6 years, the Maritime Administration (MARAD) has
            coordinated 39 maritime TIGER projects, worth $500 million in
            federal funds.

       About $700 million in additional freight rail and federal TIGER
            projects have been awarded that also move maritime freight.

       TIGER is a multi-modal and multi-jurisdictional competitive grant
            program.

                 Building on the Planning Provisions of MAP-21

    The 2012 MAP-21 surface transportation legislation required the USDOT
    to encourage states to develop comprehensive immediate and long-term
    freight planning and investment plans, and to collaborate with
    individual states, Metropolitan Planning Organizations (MPOs) and
    Freight Advisory Committees.

    In addition to comprehensive freight plans, states were also encouraged
    to establish freight advisory committees. Furthermore, MPOs were
    directed to set performance targets for freight and to integrate
    freight planning performance provisions into their overall planning
    process.

    MAP-21 set into motion a useful process for communicating, planning and
    ultimately funding important freight projects. Ports are engaging in
    this process and in many ways have been leading the conversation. In
    its The State of Freight survey, AAPA asked its U.S. member ports a
    series of questions on how they are building off the MAP-21 planning
    provisions and engaging with planning the freight network.
    Key Survey Results Included:
    Sixty-three percent of survey respondents said their port is working
    directly with its region's MPO or Council of Governments (COG) in the
    development and planning of a freight project that is either underway
    or has recently been completed.

       From this response, AAPA learned that not only are two-thirds of
            its U.S. member ports engaging in the MPO planning process and
            actively including freight projects in their statewide or
            Metropolitan Transportation Improvement Program, these ports
            are also engaged in an ongoing dialogue with their regional
            planners.

       AAPA also learned from this part of the survey that the
            availability of TIGER funding has significantly driven U.S.
            public port engagement with the planning community over the
            years. Because of port eligibility for TIGER funding and
            coordination and planning requirements in the submission of
            projects, the annual TIGER process has served as a catalyst in
            bringing freight stakeholders to the table.

    Seventy-one percent of those surveyed said their port has participated
    in the development of its statewide freight plan.

       According to the Federal Highway Administration's (FHWA) Office of
            Freight Management and Operations, 42 states have worked with
            FHWA or are in various stages of development of their state
            freight plans. While many of these state freight plans are not
            yet MAP-21 compliant, the conversation on freight between
            states, stakeholders and the federal government is continuing.

    Sixty-four percent of surveyed ports are members of a local freight
    advisory committee.

       MAP-21 encouraged the creation of local freight advisory committees
            to weigh in on the development of local and state freight
            plans. These freight advisories typically have a broad scope of
            membership, much like the National Freight Advisory Committee
            that is housed in the U.S. Department of Transportation. This
            is a place where the private sector continues to weigh in on
            the freight planning and funding process, which has been
            described as chambers of commerce for freight.

       An offshoot of this process has been a growing engagement and
            strong interest and understanding between ports, the private
            sector, and local and federal partners, in the development of
            creative Public-Private Partnership (P3) projects.

                       Public-Private Partnerships (P3s)

    The ability to facilitate business through port entry and exit gates,
    and the ability to manage transportation logistics, make public ports
    excellent laboratories for P3-financed projects impacting the freight
    network.

    However, several federal financing tools that could be considered a
    good fit for ports have not had measurable impacts. Only five of the
    AAPA U.S. ports surveyed have engaged in the federal Railroad
    Rehabilitation and Improvement Financing (RRIF) program, which is
    surprisingly low, given the overwhelming need and focus that ports
    indicated they had for on-dock rail projects. In follow-up questions on
    the RRIF program, ports expressed a sense of frustration navigating the
    program, and cited the need for a capital grants program to match up
    with RRIF loans to assist in facilitating and leveraging private sector
    capital.

    The Transportation Infrastructure Finance and Innovation Act (TIFIA)
    program is another example of a financing program underutilized by
    AAPA's U.S. member ports.
    Key Survey Results Included:
    Eight percent of the survey respondents reported having utilized a
    TIFIA loan for a port-related project.

       While freight rail and intermodal transfer center projects are
            eligible under TIFIA, many ports have reported having
            experienced difficulty with how USDOT interpreted their TIFIA
            applications, concluding that USDOT doesn't encourage port-
            supported TIFIA projects.

    Thirty-three percent reported using, or planning to use, P3s; 13
    percent identified using or planning to use Private Activity Bonds
    (PABs); and 62 percent indicated they were using or planning to use
    another financing source.

       The significant use by U.S. ports of P3 financing suggests there is
            additional opportunity to rein in and leverage private-sector
            resources in building projects that impact the freight network.

       In late 2014, the USDOT Build America Transportation Investment
            Center (BATIC) put out a call for projects and more than 25
            U.S. ports submitted P3 proposals.

                                  On-Dock Rail

    For many ports, on-dock rail (rail track which is located immediately
    next to the dock front) offers a vital link to efficiently move goods
    directly between ships and trains to get the goods to America's
    heartland and major distribution centers. In referencing on-dock rail,
    Bill Johnson, the former port director for Florida's PortMiami,
    testified on January 28, 2015, before the Senate Commerce Committee,
    saying, ``Without interconnectivity, you cannot connect your port to
    America or the global economy.''
    Key Survey Results Included:
    Seventy-three percent of AAPA U.S. member ports have on-dock rail,
    while most others have rail tracks within terminals near docks, which
    is often referred to as near-dock rail.

       However, U.S. ports' apparent rail infrastructure strength is
            misleading. Many port on-dock and near-dock rail systems are
            out-of-date and need to be significantly enhanced and
            reinforced, as well as integrated with new technology to
            accommodate rising shipping volumes.

       Having up-to-date on-dock and near-dock rail able to accommodate
            all the discretionary cargo that must be moved to and from a
            port's hinterland is a big priority for U.S. seaports. The need
            is so urgent that several ports have purchased rail lines to
            ensure access to their existing freight network and for
            business development. Based on the survey responses, a majority
            of ports are engaged in upgrading and/or expanding their on-
            dock rail systems and have cited the need for Federal resources
            in assisting with on-dock rail investments.

       Even though improving port rail infrastructure is a priority for
            most ports, only 13 percent of survey respondents reported
            having applied for or are planning to use the RRIF program to
            pay for their projects. This may be due to what has been
            reported as a difficult application process to navigate. In the
            AAPA survey, respondents expressed a desire to revamp the RRIF
            program to make it easier to finance on-dock rail and other
            freight transportation infrastructure projects. They also
            indicated a desire that the RRIF program provide a capital
            grants aspect to work in tandem with its financing program.

               Other Federal Options for Financing Port-Related
                           Infrastructure Development

    In addition to facilitating the movement of cargo, seaports are also
    stakeholders and partners in the communities in which they operate. In
    the U.S., public ports directly generate or influence the creation of
    millions of jobs, are environmental stewards and play a vibrant
    socioeconomic role in the communities they serve. While the condition
    of the air, land and water surrounding these public ports is important
    to those who work and do business in the respective communities, it's
    equally as important to those who work or do business at the ports
    themselves.

    In addition to infrastructure investments, ports partner with the
    Federal Government to fund programs that reduce diesel emissions and
    create economic opportunities through partnerships with the Economic
    Development Administration (EDA). To illustrate, the final question in
    AAPA's survey asked respondents if their port had ever applied for or
    received funding from Diesel Emission Reduction Act (DERA) grants,
    Congestion Mitigation and Air Quality Improvement program grants
    (CMAQ), or the Surface Transportation Program (STP) or Economic
    Development Administration (EDA) grants.
    Key Survey Results Included:
    Fifty-seven percent of the AAPA U.S. member ports surveyed have applied
    through the U.S. Environmental Protection Agency for DERA funding, and
    43 percent have applied for CMAQ funding to pay for reducing emissions
    and congestion while improving air quality in and around their ports.

    Forty-five percent have applied through the U.S. Department of Commerce
    for EDA grants by partnering with a regional academic institution and a
    local government authority, while 33 percent have applied for Federal
    highway STP funding to improve their port's intermodal connections.

                                   Conclusion

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    .epsAmerica's freight network is vast and evolving. It's a living grid
    and economic lifeline for the country; from small towns to major
    metropolitan areas, from farming regions to technology centers.

    At its heart are America's seaports, which handle approximately $6
    billion worth of goods to and from overseas markets every day. These
    goods come in all shapes and sizes. Apparel and consumer electronics
    are shipped in standardized steel containers. Cars and trucks are
    driven on and off ships. Farm harvests are conveyed into the hulls of
    vessels. Liquids are moved by pipeline. Gaseous products are shipped in
    pressurized tanks. Project cargoes, like wind turbines and electrical
    generators, require special handling. These different cargo types
    require different transport modes to get them from shore to ship, and
    ship to shore. For the freight network to operate smoothly and
    efficiently, it must seamlessly connect commerce centers in every
    community, state and territory.

    As indicated in AAPA's 2015 The State of Freight survey, investment in
    America's port connection infrastructure is an urgent national
    priority. There is a path forward. This survey documents and
    illustrates the freight planning successes that resulted from the TIGER
    application process. Survey results show how MAP-21 built upon TIGER's
    targeted investments with the various State freight plans and with
    ongoing input of the individual States' freight advisory committees.

    The survey also, for the first time, documents from the ports'
    perspective the requisite capital investments that are needed to
    maintain and enhance a 21st century freight network. These investments
    include ``first and last mile'' connector and gateway projects that,
    when viewed collectively, represent a strategic investment in the
    national transportation system, the national economy, as well as all of
    the individual enterprises and people who make the nation great.

    This survey is a strong first step towards identifying the critical
    infrastructure needs of America's seaports, however more must be done.
    AAPA will continue to gather input from the industry and work with our
    partners to ensure that investing in our Nation's freight
    transportation system is a national priority. A reliable and efficient
    transportation system will guarantee that seaports continue to deliver
    prosperity for all Americans.

                American Association of Port Authorities (AAPA)

            1010 Duke Street
            Alexandria, VA 22314-3589     703.684.5700 Fax: 703.684.6321
                                          www.aapa-ports.org
                                     ______

                   American Association of State Highway and
                       Transportation Officials (AASHTO)

                          The Voice of Transportation

                          STATEMENT FOR THE RECORD BY

                           The Honorable John F. Cox

              President, American Association of State Highway and

                           Transportation Officials;

                 Director, Wyoming Department of Transportation

                                   regarding

      DEAD END, NO TURN AROUND, DANGER AHEAD: CHALLENGES TO THE FUTURE OF
                                HIGHWAY FUNDING

                                   before the

                          Committee on Finance of the

                              United States Senate

                                       on

                                 June 18, 2015

       American Association of State Highway and Transportation Officials

                   444 North Capitol Street, N.W., Suite 249

                              Washington, DC 20001

                                  202-624-5800

                             www.transportation.org

                                info@sashto.org

    INTRODUCTION
    Chairman Hatch, Ranking Member Wyden, and Members of the Committee,
    thank you for the opportunity to provide input on the need to identify
    a long-term, sustainable revenue solution for the Federal Highway Trust
    Fund. My name is John Cox, and I serve as President of the American
    Association of State Highway and Transportation Officials (AASHTO), and
    as Director of the Wyoming Department of Transportation (WYDOT). It is
    my honor to provide this Statement for the Record on behalf of AASHTO,
    which represents the State departments of transportation (State DOTs)
    of all 50 States, Washington, D.C., and Puerto Rico.

    For almost 60 years, the Highway Trust Fund (HTF) provided stable,
    reliable, and substantial highway and transit funding. However, over
    the past 7 years this has not been the case. Since 2008, almost $62
    billion have been transferred from the General Fund to the HTF to keep
    it solvent. Recently--and retreading a path that we all have walked
    down before--the U.S. Department of Transportation (USDOT) announced
    that the Highway Account of the HTF will likely run out of money later
    this summer. If this is allowed to happen, States may not be reimbursed
    for work they have already paid for. In addition, failure to ensure the
    solvency of the HTF will force States to drastically reduce the
    obligation of new Federal highway funds in Fiscal Year 2016.

    Almost half of capital investments made by States on our Nation's
    roads, bridges, and transit systems are supported by the HTF. Without
    this strong Federal-State partnership, State DOTs will not be able to
    play their part in building and maintaining the national transportation
    network on which our economy relies to be competitive in the global
    marketplace.
    FAILURE TO REIMBURSE STATES FOR PRIOR OBLIGATIONS
    The Federal-aid Highway Program currently provides about $38 billion a
    year to State DOTs for important road and bridge projects across the
    country. These funds are derived from contract authority, a unique form
    of Federal budgetary authority well-suited for infrastructure projects
    that require a multi-year construction timeline. It is critical to note
    that the dollars obligated under this program represent the Federal
    Government's legal commitment and promise to pay--or more accurately--
    reimburse the States for the Federal share of a project's eligible
    costs.

    Under this reimbursement framework, States only receive funding from
    the Federal Highway Administration (FHWA) when work is completed on a
    project and the State submits a request for reimbursement. States
    typically receive reimbursement electronically from FHWA the same day
    payments to the contractor are made.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    It is currently estimated by the USDOT and Department of the Treasury
    that the Highway Account of the HTF is likely to run out of cash by
    early September of this year. Prior to reaching this point of
    insolvency, FHWA will be forced to institute emergency cash management
    procedures in order to slow down reimbursements to States for costs
    already incurred on highway and transit projects.

    As Congress was faced with the same HTF insolvency crisis last summer,
    FHWA announced that under their proposed emergency cash management plan
    at the time, States' reimbursements would be capped at a drastically
    reduced amount relative to the full amount owed. This cap would have
    been determined by the ever-dwindling amount of cash in the HTF
    accessible by FHWA twice a month. Under this situation where FHWA
    cannot cover 100 percent of the bills received, States would have been
    left to provide the cash cushion--by whatever means necessary such as
    short-term borrowing, standby lines of credit, reliance on the state's
    general fund--for payments already made. Furthermore, FHWA incurs
    interest liability if a State pays out its own funds for Federal
    assistance program purposes, which would only exacerbate the cash
    shortfall in the HTF. Given the urgency of this situation, Congress
    passed the Highway and Transportation Funding Act, which was enacted on
    August 8, 2014, to provide $10.8 billion to the HTF.

    Because States count on prompt payment from the Federal Government to
    be able manage cash flow and pay contractors for completed work, any
    delay in reimbursement from FHWA will cause a significant disruption in
    all States. And in turn, contractors that rely on prompt payment from
    the State would be unable to pay their employees and suppliers. As you
    can imagine, such a devastating scenario will send shockwaves
    throughout the transportation community and all other industries
    supported by Federal infrastructure investment.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    DEVASTATING IMPACT TO STATES OF A HIGHWAY TRUST FUND SHORTFALL IN FY
            2016
    Even if FHWA is able to keep the Highway Account solvent by delaying
    reimbursements to States this summer, it will not address the
    underlying structural problem. The Congressional Budget Office (CBO)
    estimates that yearly HTF receipts will be $17 billion less than HTF
    spending annually over the next 10 years (FY 2016-2025). In order to
    keep the HTF solven beyond this fiscal year, AASHTO estimates that
    States will have to significantly reduce new Federal highway funding in
    fiscal year 2016--going from $40 billion to $4 billion. Even with
    virtually no new highway funding in fiscal year 2016, there remains a
    possibility that FHWA will still have to alter its reimbursement
    procedures in fiscal year 2016 to be able to pay for prior-year
    obligations.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Historically, Federal highway funding has accounted for approximately
    45 percent of what State DOTs spend on highway and bridge capital
    improvements. This means a significant portion of much-needed highway
    and transit projects--projects that underpin economic development and
    improve the quality of life--in every community and Congressional
    district will either be delayed or cancelled outright. Such cutbacks on
    contract lettings would mean missed opportunities to pare down the
    backlog of investment needs, while causing a negative domino effect on
    construction industry employment exactly when it is starting to rebound
    after being one of the hardest hit segments in the recent recession.
    Furthermore, ramping up and down construction activities--including
    equipment and labor resource management--due to the instability of the
    Federal program would represent an extremely wasteful exercise and
    impose heavy opportunity costs for the entire transportation industry
    and the nation as a whole.
    ADDITIONAL REVENUES NEEDED JUST TO MAINTAIN CURRENT INVESTMENT LEVELS
    As a major disruption to the HTF remains on the horizon, the
    Congressionally chartered National Surface Transportation Policy and
    Revenue Study Commission projected annual Federal capital investment
    needs at $225 billion for the next 50 years. When compared to the
    current funding level of about $90 billion, there is a significant
    investment deficit in surface transportation infrastructure. In order
    to sustain the long tradition of robust national investment in
    transportation, we must ensure the HTF's looming cash shortfall is
    addressed with solutions that enable sustainable program funding not
    just beyond this summer or fiscal year 2016, but for the long term.

    While the HTF continues to derive about 90 percent of its revenues from
    taxes on motor fuels, these taxes are facing an increasingly
    unsustainable long-term future, therefore placing the viability of the
    HTF in question. Motor fuel taxes at the Federal level were last
    increased to the current rates of 18.4 cents per gallon for gasoline
    and 24.4 cents for diesel 22 years ago in 1993. As a static excise tax
    levied per gallon, taxes on motor fuel have lost a significant share of
    its purchasing power. Compared to the Consumer Price Index, the gas tax
    had lost 39 percent of its purchasing power by 2014, and is expected to
    lose more than half of its value--or 52 percent--by 2024. This loss of
    purchasing power is unusual considering the increase in nominal cost of
    virtually all other aspects of the economy.

      Exhibit 4. Sample of Nominal Prices Relative to Federal Gas Tax, 1993
                                    and 2010
    ------------------------------------------------------------------------
                UNIT/
     ITEM    DESCRIPTION         1993             2010        PERCENT CHANGE
    ------------------------------------------------------------------------
    Colleg  Average                $3,517           $9,136             160%
     e       Tuition and
     Tuiti   Required
     on      Fees
    Gas     Per Gallon              $1.12            $2.73             144%
    Movie   Average                 $4.14            $7.89              91%
     Ticke   Ticket Price
     t
    House   Median Price         $126,500         $221,800              75%
    Bread   Per Pound               $1.08            $1.76              62%
    Income  Median                $31,272          $49,167              57%
             Household
    Stamp   One First-              $0.29            $0.44              52%
             class Stamp
    Beef    Per Pound of            $1.57            $2.28              46%
             Ground Beef
    Car     Average New           $19,200          $26,850              40%
             Car
    Federa  Per Gallon             $0.184           $0.184               0%
     l Gas
     Tax
    ------------------------------------------------------------------------
    Sources: U.S. Census Bureau, U.S. Department of Transportation, U.S.
      Postal Service, U.S.Department of Commerce, U.S. Department of
      Education, National Association of Theater Owners

    Facing these structural headwinds, CBO projects the HTF in fiscal year
    2016 to incur $54 billion in outlays while raising only $40 billion in
    receipts, leading to a cash shortfall of $14 billion for its Highway
    and Mass Transit Accounts. This situation is not new, as the HTF will
    have--by the expiration of the current surface transportation program
    extension on July 31, 2015--relied on a series of General Fund
    transfers amounting to almost $62 billion since 2008 to close this gap.
    But this annual cash imbalance is expected to only get worse, and the
    HTF cannot incur a negative balance unlike the General Fund.

    This situation leads to three possible scenarios for later this year:

      1.  Provide additional General Fund transfers to the HTF in order to
            maintain the current level of highway and transit investment
            and to meet prior-year obligations;
      2.  Provide additional receipts to the HTF by adjusting existing
            revenue mechanisms or implementing new sources of revenue; or
      3.  Reduce reimbursement payments this summer and drastically reduce
            new Federal highway and transit obligations in fiscal year
            2016.

    In order to support one of the first two scenarios where current
    highway and transit funding levels are maintained or increased, there
    is no shortage of technically feasible revenue options--including user
    fees and taxes--that Congress could consider.

    Exhibit 5. Matrix of Illustrative Surface Transportation Revenue Options
    ------------------------------------------------------------------------
                                                          $ in Billions
      Existing    Illustrative                     -------------------------
       Highway       Rate or       Definition of                    Total
     Trust Fund    Percentage   Mechanism/Increase    Assumed      Forecast
       Revenue      Increase                         2014 Yield  Yield  2015-
     Mechanisms                                                      2020
    ------------------------------------------------------------------------
    Motor Fuel           15.0   cents/gal                $6.54       $41.79
     Tax--Diesel                 increase in
                                 current rate
                                 (approx. 10%
                                 increase in total
                                 rate)
    Motor Fuel           10.0   cents/gal               $13.21       $78.12
     Tax--Gas                    increase in
                                 current rate
                                 (approx. 10%
                                 increase in total
                                 rate)
    Heavy                  50%  Increase in               $0.55        $3.42
     Vehicle Use                 current revenues,
     Tax                         structure not
                                 defined
    Sales Tax--            10%  Increase in               $0.33        $2.19
     Trucks and                  current revenues,
     Trailers                    structure not
                                 defined
    Tire Tax--             10%  Increase in               $0.04        $0.23
     Trucks                      current revenues,
                                 structure not
                                 defined
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
      Potential
       Highway    Illustrative                        Assumed       Total
     Trust Fund      Rate or       Definition of     2014 Yield   Escalated
       Revenue     Percentage   Mechanism/Increase       *       Yield  2015-
     Michanisms     Increase                                        2020 *
    ------------------------------------------------------------------------
    Container           $15.00  Dollar per TEU            $0.66        $4.26
     Tax
    Customes              5.0%  Increase in/              $1.80       $11.66
     Revenues                    reallocation of
                                 current revenues,
                                 structure not
                                 defined
    Drivers              $5.00  Dollar annually           $1.08        $6.98
     License
     Surcharge
    Freight               0.5%  Percent of gross          $3.07       $19.90
     Bill--Truck                 freight revenues
     Only                        (primary
                                 shipments only)
    Freight               0.5%  Percent of gross          $3.80       $24.60
     Bill--All                   freight revenues
     Modes                       (primary
                                 shipments only)
    Freight              10.0   cents/ton of             $1.17        $7.54
     Charge--Ton                 domestic
     (Truck                      shipments
     Only)
    Freight         10.0 cents   cents/ton of             $1.44        $9.29
     Charge--Ton                 domestic
     (All Modes)                 shipments
    Freight         0.10 cents   cents/ton-mile of        $1.41        $9.15
     Charge--Ton-                domestic
     Mile (Truck                 shipments
     Only)
    Freight         0.10 cents   cents/ton-mile of        $3.48       $22.52
     Charge--Ton-                domestic
     Mile (All                   shipments
     Modes)
    Harbor               25.0%  Increase in/              $0.43        $2.79
     Maintenance                 reallocation of
     Tax                         current revenues,
                                 structure not
                                 defined
    Imported Oil         $2.50  Dollar/barrel             $5.76       $37.28
     Tax
    Income Tax--          1.0%  Increase in/              $2.79       $18.06
     Business                    reallocation of
                                 current revenues,
                                 structure not
                                 defined
    Income Tax--          0.5%  Increase in/              $6.70       $43.36
     Personal                    reallocation of
                                 current revenues,
                                 structure not
                                 defined
    Motor Fuel               -   cents/gal excise             -        $5.22
     Tax                         tax
     Indexing to
     CPI--Diesel
    Motor Fuel               -   cents/gal excise             -       $10.87
     Tax                         tax
     Indexing to
     CPI--Gas
    ------------------------------------------------------------------------

                   Exhibit 6. Matrix of Illustrative Surface Transportation Revenue Options, Continued
    ----------------------------------------------------------------------------------------------------------------

    ----------------------------------------------------------------------------------------------------------------
    Oil, Gas, and Minerals Receipts            25.0%   Increase in/reallocation of current       $2.20       $14.25
                                                        revenues, structure not defined
    Registration Fee--Electric LDVs          $100.00   Dollar annually                           $0.01        $0.06
    Registration Fee--Hybrid LDVs             $50.00   Dollar annually                           $0.17        $1.12
    Registration Fee--Light Duty              $15.00   Dollar annually                           $3.57       $23.11
     Vehicles
    Registration Fee--Trucks                 $150.00   Dollar annually                           $1.63       $10.54
    Registration Fee--All Vehicles            $20.00   Dollar annually                           $4.68       $32.21
    Sales Tax--Auto-related Parts &             1.0%   Percent of sales                          $2.32       $15.04
     Services
    Sales Tax--Bicycles                         1.0%   Percent of sales                          $0.06        $0.38
    Sales Tax--Diesel                           7.6%   Percent of sales (excl. excise            $9.65       $62.50
                                                        taxes)
    Sales Tax--Gas                              5.6%   Percent of sales (excl. excise           $24.05      $155.66
                                                        taxes)
    Sales Tax--New Light Duty Vehicles          1.0%   Percent of sales                          $2.41       $15.61
    Sales Tax--New and Used Light Duty          1.0%   Percent of sales                          $3.46       $22.40
     Vehicles
    Tire Tax--Bicycles                         $2.50   Dollar per bicycle tire                   $0.08        $0.53
    Tire Tax--Light Duty Vehicles               1.0%   Of sales of LDV tire                      $0.33        $2.12
    Transit Passenger Miles Traveled Fee        1.5    cents/passenger mile traveled on         $0.84        $5.45
                                                        all transit modes
    Vehicle Miles Traveled Fee--Light           1.0    cents/LDV vehicle mile traveled on      $27.12      $175.58
     Duty Vehicles                                      all roads
    Vehicle Miles Traveled Fee--Trucks          4.0    cents/truck vehicle mile traveled       $10.93       $70.73
                                                        on all roads
    Vehicle Miles Traveled Fee--All                -    cents/vehicle mile traveled on all      $38.05      $246.31
     Vehicles                                           roads
    ----------------------------------------------------------------------------------------------------------------

    On the other hand, if no new revenues can be found for the HTF and the
    third scenario prevails, State DOTs will be left to face two dire
    consequences that will severely undermine much-needed transportation
    investments throughout the nation: potentially significant delays on
    Federal reimbursements owed to States for costs already incurred, and a
    virtual elimination of new Federal funding commitments in fiscal year
    2016.
    CONCLUSION
    There is ample documented evidence that shows infrastructure investment
    is critical for long-term economic growth, increasing productivity,
    employment, household income, and exports. Conversely, without
    prioritizing our nation's infrastructure needs, deteriorating
    conditions can produce a severe drag on the overall economy. In light
    of new capacity and upkeep needs for every State in the country, the
    current trajectory of the HTF--the backbone of Federal surface
    transportation program--is simply unsustainable as it will have
    insufficient resources to meet all of its obligations later this
    summer, resulting in steadily accumulating shortfalls.

    Whichever revenue tools are utilized, at a minimum, it is crucial to
    identify solutions that will sustain the MAP-21 level of surface
    transportation investment in real terms. Given the devastating impact
    that potential delays on Federal reimbursements to State DOTs combined
    with a virtual elimination of Federal surface transportation
    obligations in fiscal year 2016 can have on the economy and
    construction industry employment, we look forward to assisting you and
    the rest of your Senate colleagues in finding and implementing a viable
    set of revenue solutions to the HTF not only for later this year, but
    for the long term.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                     ______

                American Council of Engineering Companies (ACEC)

                            100 Years of Excellence

                            Statement for the Record

                        U.S. Senate Committee on Finance

             Hearing on Challenges to the Future of Highway Funding

                            Thursday, June 18, 2015

    Chairman Hatch, Ranking Member Wyden, and Members of the Committee:

    On behalf of the American Council of Engineering Companies (ACEC)--the
    voice of America's engineering industry--thank you for holding this
    hearing today on options for providing long-term funding certainty for
    federal surface transportation programs. There are few more important
    topics that this committee will address this year, because federal
    investment in transportation infrastructure plays an essential role in
    protecting public health and safety, promoting commerce, and keeping
    America economically competitive.

    As you know, nearly $63 billion has been transferred into the Highway
    Trust Fund since 2008 because of the failure to address systemic
    funding shortfalls with real revenue solutions. Absent Congressional
    action, the balance of the Trust Fund will soon be depleted again,
    imperiling more state and local projects with continued uncertainty.
    More than $1 billion in planned improvements have already been
    cancelled or delayed because of the uncertainty over future federal
    contributions, and many more projects are sure to be shelved as this
    problem persists. These projects will only get more expensive due to
    the delay.

    Engineering is a leading indicator of economic performance,
    particularly in the building and development sectors. When state and
    local transportation agencies can't develop long-term funding programs,
    our firms can't hire engineers or make equipment purchases necessary
    for planning, designing, and delivering those projects. When our firms
    aren't working on pre-construction activities, those projects can't
    move on to construction, which means fewer construction workers
    working, fewer machines being built and sold, less economic activity
    being generated, and ultimately, goods not getting to market and U.S.
    businesses not being competitive.

    According to the ACEC Engineering Business Index quarterly survey of
    engineering firm CEOs (www.acec.org/publications/engineering-business-
    index/), nearly one in five respondents (19 percent) expect the
    transportation on market to worsen over the next year. Only 40 percent
    anticipate that public transportation markets will improve. In the Fall
    2014 EBI survey, three in four respondents (77 percent) expressed doubt
    that the U.S. transportation infrastructure will regain its status as a
    world leader. This disheartening pessimism bodes poorly for the
    prospects of broader domestic economic growth, and it is firmly rooted
    in Congressional failure to enact sustainable capital investments.

    We recognize the need to look for new ways to fund road, bridge, and
    transit projects because of the long-term challenges posed by the rise
    in alternative-fueled vehicles and increased fuel efficiency. We have
    endorsed a range of options, including mileage-based user fees,
    widespread tolling, new freight charges, and revenues from increased
    domestic energy production. Numerous blue ribbon commissions have
    explored these options in depth, and they should all be on the table in
    your deliberations.

    While they all have merit, the reality is that none of these options is
    a near-term solution for funding a 6-year bill.

    The simplest and most effective action Congress can take to stabilize
    the Highway Trust Fund is increasing and indexing federal gas and
    diesel taxes. These user fees have been the basis of the federal-aid
    program for decades, but failure to adjust the rates since 1993 has
    diminished their purchasing power by 40 percent and led to the fiscal
    crisis of the Trust Fund that we face today. A modest increase in motor
    fuels charges--a measure endorsed by highway users and the trucking
    industry representing those paying into the system--is a relatively
    small price to pay for improving safety, enhancing mobility, and
    ensuring American competitiveness.

    The alternative is to continue on the same path of short-term patches,
    which is fiscally irresponsible, relying on government borrowing and
    budget gimmicks.

    Continued instability and underinvestment in transportation
    infrastructure will only hamper economic growth. Deteriorating roads
    and bridges and worsening congestion have raised the price of doing
    business through increased maintenance costs, wasted fuel and delayed
    shipments. Last year, our economy was crippled by $121 billion in
    congestion costs, or $818 per U.S. commuter, and an additional $230
    billion in economic costs from accidents. By contrast, every dollar
    invested in highway and transit development generates between $4-8 in
    economic output.

    It is past time for Congress to advance a sustainable, long-term
    solution to the Highway Trust Fund, beginning with an increase in
    existing user fees that help pave the way for alternative solutions
    down the road. Our industry and our economy and our citizens cannot
    wait for a combination of unrelated tax changes that may or may not
    materialize later this year. Congress must act now, starting with
    action in this committee. Predictable and growing revenue sources,
    particularly user fees, will give state and local agencies the funding
    certainty they need to plan and deliver infrastructure investments that
    foster economic growth and enhance our quality of life.

    ACEC members--numbering more than 5,000 firms representing more than
    500,000 employees throughout the country--are engaged in a wide range
    of engineering works that propel the nation's economy and enhance and
    safeguard America's quality of life. The Council and its members stand
    ready to assist this committee in advancing long-term solutions to the
    infrastructure crisis facing our country.

                                     ______

                                 AGC of America

                 THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA

                       Quality People. Quality Projects.

                                  Statement of

                 The Associated General Contractors of America

                                Presented to the

                          Senate Committee on Finance

                                on the topic of

                The Challenges to the Future of Highway Funding

                                 June 18, 2015

    The Associated General Contractors of America (AGC) is the largest and
    oldest national construction trade association in the United States.
    AGC represents more than 26,000 firms, including America's leading
    general contractors and specialty-contracting firms. Many of the
    nation's service providers and suppliers are associated with AGC
    through a nationwide network of chapters. AGC contractors are engaged
    in the construction of the nation's commercial buildings, shopping
    centers, factories, warehouses, highways, bridges, tunnels, airports,
    waterworks facilities, waste treatment facilities, dams, water
    conservation projects, defense facilities, multi-family housing
    projects, site preparation/utilities installation for housing
    development, and more.
                 the associated general contractors of america

     2300 Wilson Boulevard, Suite 300  Arlington, VA 22201  Phone: (703)
                         548-3118  FAX: (703) 837-5407

    Introduction
    Mr. Chairman and Members of the Committee, AGC represents more than
    26,000 firms, including over 6,500 of America's leading general
    contractors, and over 9,000 specialty-contracting firms. More than
    10,500 service providers and suppliers are also associated with AGC,
    all through a nationwide network of chapters. These firms, both union
    and open shop, engage in the construction of buildings, shopping
    centers, factories, industrial facilities, warehouses, highways,
    bridges, tunnels, airports, water works facilities, waste treatment
    facilities, dams, water conservation projects, defense facilities,
    multi-family housing projects, municipal utilities, and other
    improvements to real property. Most are small and closely held
    businesses.

    Since the creation of the Interstate Highway System in 1956, the
    Highway Trust Fund has been supported by revenue collected from users.
    This ``pay-as-you-go'' system has served America well, allowing States
    to plan, construct and improve America's surface transportation
    infrastructure. AGC has long-supported maintaining the user-fee model
    for providing Highway Trust Fund revenue--including taxes on gasoline
    and diesel fuel--and encourages Congress to act immediately to provide
    the revenue necessary to fill the Highway Trust Fund revenue gap we
    will face this summer and beyond. User fees and taxes have not been
    increased in over 20 years. Since 2008, the revenue going into the
    Highway Trust Fund has fallen short of what is needed to address
    America's infrastructure needs and keep funding at existing levels.
    This has resulted in the Highway Trust Fund receiving over $63 billion
    in transfers from the general fund simply to meet its obligations.
    Immediate Highway Trust Fund Shortfall
    According to the Congressional Budget Office (CBO) the Highway Trust
    Fund will be unable to meet all of its obligations in July or August.
    CBO also estimates that with no change in estimated receipts into the
    Highway Trust Fund, in 2016, all of the revenue credited to the fund
    will be needed to meet obligations made before that year. Simply put,
    without additional revenue the trust fund will be unable to support any
    new Federal obligations in 2016, resulting in a 100 percent cut to new
    highway and transit funding. In order to avoid such draconian cuts and
    simply maintain current funding levels, $16 billion in additional
    revenue either through a gas tax increase or other user related fees or
    a transfer from the general fund will be necessary. According to CBO,
    the gap between trust fund receipts and obligations beyond 2016 is $11
    to $18 billion annually.
    Need for Certainty
    Because of the current state of trust fund finances, Congress must take
    steps to maintain certainty in program continuity. The construction
    industry makes decisions about investments in new equipment and in
    retaining and training a workforce based on its best projection about
    where the market will be over the long term. Without the knowledge that
    a continuous and growing market is on the horizon, contractors will not
    make the investments necessary to carry out this program's objectives.
    This is particularly true for small businesses, which typically have
    less operating capital to invest, thus are more risk-adverse with their
    capital. This trait is also magnified by the economic conditions, which
    make risk reduction a company's top priority. This hurts the program as
    much as it does the industry. Efficiency and productivity increases
    when contractors can project a steady future market in which to work.
    This helps lower costs, and allows for a better constructed project
    because new equipment and improved technology improves the final
    project.

    The stop gap funding measures since 2008 have caused uncertainty in the
    transportation construction market place. Congress's inability to make
    the difficult decisions and provide real, growing and sustainable
    revenue for the Highway Trust Fund has resulted in states throughout
    the county delaying or cancelling much needed transportation
    construction projects. AGC members from Georgia to Wyoming, Tennessee
    and South Dakota among others are seeing theirstate departments of
    transportation let fewer and fewer jobs. Nearly $2 billion in vital
    transportation construction projects has been delayed or cancelled
    because Congress will not act and fix the Highway Trust Fund.
    Federal Role
    Not only has Congress failed to act on addressing the solvency of the
    Highway Trust Fund, some want to strip away most Federal funding for
    surface transportation projects, essentially eliminating the Federal
    Government's constitutionally mandated role in promoting interstate
    commerce (commonly known as devolution). Legislative proposals such as
    the Transportation Enhancement Act (TEA) would reduce funding for the
    federal-aid highway program by more than 80 percent, with no
    consideration of the impact on state and local governments or private
    industry. It also calls for the elimination of the Federal transit
    program, taking more than $8 billion from state and local public
    transportation agencies, which rely on federal funds for more than 43
    percent of their capital spending.

    While TEA purports to retain a federal role in maintaining the
    Interstate System, according to the U.S. Department of Transportation
    (U.S. DOT), Interstates require at least $17 billion in annual
    investment to simply sustain current levels of maintenance, and more
    than $33 billion per year to improve system conditions. Furthermore,
    the National Highway System, which carries 55 percent of total vehicle
    miles traveled and 97 percent of truck miles, also requires an annual
    investment of $75 billion, according to U.S. DOT. TEA doesn't
    ``empower'' states; it burdens them with 90 percent of the fiscal
    responsibility for supporting highways that the federal government
    currently helps to maintain. It would also have a devastating impact on
    public transportation systems that help to alleviate highway
    congestion, reduce emissions and provide critical transportation
    options to underserved populations.

    A further burden on states lies in the amount of revenue that they
    would have to raise to replace the absence of federal transportation
    funding. On average federal dollars are responsible for 52 percent of
    states capital budgets for transportation. If states replaced the lost
    revenue with an increase in their fuel taxes, on average their gas
    taxes would have to increase by roughly 23 cents by 2020 and some
    states would have to raise their taxes by more than 30 cents just to
    maintain the current level of funding.

    TEA and other ``devolution'' proposals do not bring any new money to
    the table so they are not a solution to the long-term transportation
    needs of our county. Congress must continue to reject such proposals
    and instead work in a bipartisan, bicameral way to enact a long-term
    sustainable revenue source for the Highway Trust Fund.
    Motor Fuels Tax
    AGC believes that there is no easy solution for addressing our
    transportation investment deficit. The level of investment provided by
    the Highway Trust Fund should be increased to address mounting needs.
    An increase in revenue is necessary just to keep up with inflation
    additional funding is also needed to address the backlog of
    transportation investment needs. Numerous authoritative reports have
    come to the conclusion that, for the foreseeable future, the Federal
    motor fuels tax is the best method for funding transportation
    infrastructure investment and that the motor fuels tax needs to be
    increased. SAFETEA-LU established two national commissions to look at
    the future of the Federal transportation programs and to make
    recommendations on paying for these needs into the future. Both
    Commissions were appointed with bi-partisan membership and included
    transportation experts and individuals representing businesses and
    other users of the system.

    In 2011, the Simpson Bowles Commission recommended a 15-cent per gallon
    gas and diesel tax increase plus inflation. In addition to Simpson-
    Bowles, Congressman Early Blumenauer (D-OR) has introduced legislation
    (H.R. 680) that would increase the gas tax by 15 cents over 3 years (it
    currently has 32 cosponsors) , while Congressman Jim Renacci (R-OH) and
    Congressman Bill Pascrell (D-NJ) have a bill (H.R. 846) that would pay
    for the next surface transportation authorization with indexing the
    current gas and diesel taxes to inflation and subsequently increasing
    them by an amount that would maintain current finding levels if
    Congress failed to address the long-term solvency of the Highway Trust
    Fund (31 cosponsors). AGC supports all three of the above proposals.
    AGC Recommendations
    Recognizing the need to look at all viable options to fund the highway
    trust fund, AGC along with our partners in the Transportation
    Construction Coalition (TCC) have been advocating for over a year that
    Congress look at other revenue options--that maintain the user-pays
    model--that would be viable. This is our all of the above approach.

    The chart below (and attached at the end) shows the $102 billion
    shortfall from 2015-2020 between the revenue going into the Highway
    Trust Fund and projected outlays of the fund assuming current funding
    levels plus inflationary increases. The TCC is proposing a combination
    of new and existing user fees currently being collected at the Federal
    and state level as options to the 6-year shortfall and create a basis
    for much needed future growth. In addition, we look beyond 2020 and
    provide the next generation of revenue options to fund growth that
    addresses the needs of our transportation network.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The proposed revenue options include:

        Dedicating 15 percent of Custom Duties currently collected to the
            Highway Trust Fund--The U.S. has recognized the connection
            between infrastructure investment and international commerce
            since the Lighthouse Act of 1789 during the first Congress.
            Customs duties are imposed at varying rates on various imported
            goods passing through U.S. international gateways and currently
            go to the General Fund of the U.S. Treasury. A number of
            interest groups as well as the SAFETEA-LU policy commission
            have suggested that given the role transportation
            infrastructure plays in facilitating the import of goods, a
            portion of current customs duties should be allocated to
            support transportation investment.

        $5 Driver License Fee--The annual driver's license fee would be a
            federal surcharge on current state license fees. All states
            charge a fee which in some cases simply covers the cost of
            administering the licensing programs. In many states however,
            license fees also are used as a source of funding for
            transportation or other purposes. Currently 48 states have a
            registration fee and all but a handful use the proceeds for
            road improvement projects. This fee, as with others, should be
            indexed to CPI for inflation.

        $5 Light Duty Tire Tax--Similar to the existing heavy vehicle tire
            fee, this fee would apply to tires that do not exceed maximum
            capacity of 3,500 pounds. This would be a national tire tax on
            both new cars and replacement tires. This fee, as with others,
            should indexed to CPI for inflation.

        Increase Heavy Vehicle Use Tax--Currently this tax is levied on
            all trucks 55,000 pounds Gross Vehicle Weight (GVW) or greater.
            The tax rate is $100 plus $22 for each 1,000 pounds of GVW in
            excess of 55,000 up to a maximum annual fee of $550 (thus all
            trucks with GVW greater than 75,000 pounds pay the maximum).

        $10 Light Duty Registration Fee--All states impose annual vehicles
            registration and related fees, and at least half the states
            raise more than a quarter of their dedicated transportation
            revenues through this mechanism. The structure of the
            registration fee varies widely, from a flat per vehicle fee to
            a schedule of rates based on factors such as vehicle type,
            weight, age, horsepower, and value. This increase in would
            apply a Federal surcharge to state registration fees. We
            propose that this and all other fees are indexed to CPI.

        10 Cent Diesel Tax Increase--Increasing the tax on diesel only is
            modeled after the inland water ways trust fund proposals that
            was included the ABLE Act which was signed into law last
            December. The barge operators convinced Members of Congress to
            increase the fuel tax that they pay to fund infrastructure
            investment.

        Index Diesel and Gas Tax--When these user fees were last increased
            in 1993 they did not include any adjustments for inflations. If
            you measure the federal gas tax rate today relative to road
            construction costs, the tax has lost 38 percent of its value
            since 1993.

        Oil Leasing on Federal Lands--Expanding oil and gas drilling on
            federal lands and in the Outer Continental Shelf and dedicating
            the royalties to the Highway Trust.

        Deemed Repatriation--Some members of Congress have proposed to tax
            the profits of U.S. corporations on earnings made outside of
            the United States. Several different ways have been suggested
            on how to accomplish this, including a ``tax holiday.'' This
            proposal is for ``deemed repatriation,'' taxing corporate
            profit made outside the U.S. at an 8.75 percent rate,
            regardless of whether the profits are returned to the U.S.

    Again, if Congress continues to fail to increase the user fees for
    gasoline and diesel fuel, they should look to these options as
    alternatives that would maintain the traditional user pays model for
    our federal transportation programs.
    Conclusion
    AGC believes that the federal government should double-down on its
    infrastructure investment, not reduce it or shift the responsibility to
    the states. The long-term benefits from transportation investment are
    well documented. Every dollar invested in Highway Trust Fund programs
    returns 74 cents in tax revenue and adds $1.80 to $2.00 to Gross
    Domestic Product (GDP). The ``user fee'' principle is well respected
    and easily understood. The Highway Trust Fund concept of fiscal
    responsibility served the country well for 50 years until the Congress
    decided it was more acceptable to take money from the general fund than
    increase the user fee to cover the annual expenditures from the Highway
    Trust Fund. The United States has face the reality that they have been
    under investing in our transportation systems for far too long and the
    impact is now being felt in every state and in most towns. With the
    interstate system beyond capacity and design life, this underinvestment
    is costing U.S. businesses and individual's time and money. Providing
    continued support for traditional funding mechanisms and finding new
    user based options is necessary to address this dire situation.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                  Explanation of Shortfall and Revenue Options

    Shortfall--The 2015-2020 shortfall represents the discrepancies between
    the revenue going into the HTF and the projected outlays of the trust
    fund assuming current funding levels plus inflationary increases. The
    Congressional Budget Office projects that without Congressional action
    the HTF will be unable to meet all of its obligations in 2015 and will
    be unable to support any new projects in fiscal year 2016.

    Revenue Options--TCC is proposing a combination of new and existing
    user fees currently being collected at the federal and state level as
    options to fill the 6-year HTF shortfall and create a basis for future
    growth. States that are currently using various fees for transportation
    revenue include:

        48 States w/ Vehicle Registration, License or Title Fees
              CA, DC, GA--do not have any such fees
        37 States w/ Vehicle or Truck Weight Fees
              DE, DC, FL, GA, ID, IN, IA, MA, MI, NE, OK,
                PA, RI, SC, WV--do not have any such fees
        23 States w/a Vehicle Sales Tax
              AK, AZ, CT, FL, HI, IL, KY, MO, MN, MO, MT,
                NE, NV, NJ, NM, NY, NC, NO, SO, UT, VA, VT, WV
    Explanation of Revenue Options
    (EXISTING) Customs Duties--Customs duties are imposed at varying rates
    on various imported goods passing through U.S. international gateways
    and currently go to the General Fund of the U.S. Treasury. A number of
    interest groups as well as the SAFETEA-LU policy commission have
    suggested that given the role transportation infrastructure plays in
    facilitating the import of goods, a portion of current customs duties
    should be allocated to support transportation investment.

    (NEW) Drivers License Fee--The annual driver's license fee would be a
    federal surcharge on current state license fees. All states charge a
    fee which in some cases simply covers the cost of administering the
    licensing programs. In many states however, license fees also are used
    as a source of funding for transportation or other purposes. Currently
    48 states have a registration fee and all but a handful use the
    proceeds for road improvement projects. This fee, as with others,
    should be indexed to CPI for inflation.

    (NEW) Light Duty Tire Tax--Similar to the existing heavy vehicle tire
    fee, this fee would apply to tires that do not exceed maximum capacity
    of 3,500 pounds. This would be a national tire tax on both new cars and
    replacement tires. This fee, as with others, should indexed to CPI for
    inflation.

    (EXISTING) Increase Heavy Vehicle Use Tax--Currently this tax is levied
    on all trucks 55,000 pounds Gross Vehicle Weight (GVW) or greater. The
    tax rate is $100 plus $22 for each 1,000 pounds of GVW in excess of
    55,000 up to a maximum annual fee of $550 (thus all trucks with GVW
    greater than 75,000 pounds pay the maximum).

    (EXISTING) Heavy Duty Truck Tire Tax--Applies to tires with a maximum
    load rated over 3,500 pounds. The current tax is 9.45 cents for every
    10 pounds of maximum capacity that exceeds the 3,500 threshold. The
    maximum was last increased in 1982 and was actually lowered in 1984.
    This fee, as with others, should indexed to CPI for inflation.

    (NEW) Vehicle Registration Fee--All states impose annual vehicles
    registration and related fees, and at least half the states raise more
    than a quarter of their dedicated transportation revenues through this
    mechanism. The structure of the registration fee varies widely, from a
    flat per vehicle fee to a schedule of rates based on factors such as
    vehicle type, weight, age, horsepower, and value. This increase in
    would apply a Federal surcharge to state registration fees. We propose
    that this and all other fees are indexed to CPI.

    (EXISTING) Diesel Fuel Tax Increase--Increasing the tax on diesel only
    is modeled after the inland water ways trust fund proposals that were
    included in the House draft for tax reform, the president's budget and
    the Senate Finance committee extenders package. The barge operators
    have convinced members of Congress to increase the fuel tax that they
    pay to fund infrastructure investment.

    (NEW) Deemed Repatriation--Some members of Congress have proposed to
    tax the profits of U.S. corporations on earnings made outside of the
    United States. Several different ways have been suggested on how to
    accomplish this, including a ``tax holiday.'' This proposal is for
    ``deemed repatriation,'' taxing corporate profit made outside the U.S.
    at an 8.75 percent rate, regardless of whether the profits are returned
    to the U.S.

                                     ______

                        American Highway Users Alliance
               Testimony for the Record by Gregory Cohen, P.E.,
                               President and CEO
                       Hearing on the Highway Trust Fund
                              Committee on Finance
                              United States Senate

    The American Highway Users Alliance (The HwyUsers) is a non-profit
    coalition that represents AAA motoring clubs, trucking and bus
    companies, the RV and motorcycle industries, and a diverse range of
    companies and associations that fund the Highway Trust Fund through
    user taxes. Our members represent millions of motorists and employers
    who want our roads to be safe, efficient, and reliable.

    Although we represent road users, we strongly support the principle
    that users should pay their own way for infrastructure improvements. In
    return for fully funding the Highway Trust Fund, road users deserve to
    benefit directly from guaranteed investments in roads and bridges
    through multi-year highway bills. This type of system has traditionally
    enabled the United States to outperform competitors by efficiently
    moving logistics over our vast network of toll-free Interstate
    highways. It is hard to imagine how much poorer our country would be
    without the investments of the past generation into modern roads.

    The Federal role in road funding and the user-pays/user-benefits
    principle has been an important, principled approach to investment. The
    conservative user-fee concept dates back as early as 1776, when British
    philosopher and political scientist Adam Smith endorsed national
    funding of roads in The Wealth of Nations, provided that users pay
    their costs.

    From 1956 to 2008, the Highway Trust Fund was exclusively funded with
    user taxes. Since 2008, deficits have repeatedly threatened the
    solvency of the fund. Congress has responded by voting time and again
    to prevent highway funding cuts. At the same time, Congress has failed
    to find a fiscally sustainable solution to the revenue shortfall. Over
    $60 billion in transfers from the General Fund of the Treasury has kept
    highway funding flat--preventing cuts but also creating doubts as to
    the ability of Washington to pass a long-term highway bill that can
    fund the major highway and bridge projects critical to public safety,
    economic growth, freight reliability, and congestion relief. Without a
    sustainable solution, State transportation departments can't plan and
    implement the most important projects.

    As Congress debates a path forward to funding a long-term 6-year
    highway bill, we would be grateful for almost any source of funding to
    reverse the decline in our road conditions. But Congress should do more
    than prevent cuts; it should fairly raise enough revenue to make
    significant inroads in the backlog of national highway and bridge
    needs.

    We urge Congress to renew their historic support for the user fee
    approach to restore a sustainable Highway Trust Fund. We urge
    policymakers in other Committees to ensure that the programs are
    transparent, environmental reviews are streamlined, and wasteful
    diversions are minimized or eliminated. If Congress is to raise the
    funds to sustain a national highway program, the spending out of that
    fund must be focused on addressing our major national highway needs. We
    urge Members to consider the findings of two separate Congressionally-
    chartered commissioned that studied these issues over the past decade
    and develop a long-term financial sustainability model of growing the
    trust fund with user-based revenue.

    In closing, what is currently occurring would certainly have
    embarrassed Presidents Lincoln, Eisenhower, and Reagan--all of whom
    envisioned and supported a major federal role for transportation
    infrastructure. It is time for a bold, brave and bipartisan solution
    and this Congress can certainly get it done.

    The members and staff of The Highway Users look forward to working with
    Members of Congress to restore and grow the Highway Trust Fund and urge
    immediate action to enact a long-term highway bill this year. Thank you
    for the opportunity to submit these comments into the record.
                                     ______

               AMERICAN PUBLIC TRANSPORTATION ASSOCIATION (APTA)

                              MICHAEL P. MELANIPHY

                               PRESIDENT AND CEO

                             STATEMENT SUBMITTED TO

                        THE SENATE COMMITTEE ON FINANCE

           Hearing titled ``Dead End, No Turn Around, Danger Ahead:
                 Challenges to the Future of Highway Funding''

                                 June 18, 2015

        Mr. Chairman and members of the Committee, thank you for this
    opportunity to submit written testimony on ideas to provide a
    sustainable long-term solution to the highway trust fund shortfall.
    Public transportation systems across the country form an interconnected
    system of national significance that links our regions, urban and
    suburban centers, and rural communities. This integrated network of
    public transportation services is an essential component of our
    nation's overall transportation system. Public transportation provides
    mobility that significantly contributes to national goals for global
    economic competitiveness, congestion mitigation, energy conservation,
    environmental sustainability, and emergency preparedness. APTA urges
    the Committee to increase the dedicated revenues that go into the
    Highway Trust Fund, so that Congress can pass a surface transportation
    bill that provides predictable funding growth under a multi-year
    authorization bill.

                                   ABOUT APTA

        The American Public Transportation Association (APTA) is a
    nonprofit, international association of nearly 1,500 public and private
    member organizations, including transit systems and commuter, intercity
    and high-speed rail operators; planning, design, construction, and
    finance firms; product and service providers; academic institutions;
    transit associations and state departments of transportation. APTA
    members serve the public interest by providing safe, efficient, and
    economical public transportation services and products. More than 90
    percent of the people using public transportation in the United States
    and Canada are served by APTA member systems. In accordance with the
    National Infrastructure Protection Plan, APTA has been recognized by
    the Department of Homeland Security as serving in the capacity of the
    Mass Transit Sector Coordinating Council (SCC).

                                    OVERVIEW

        Public transportation exists in all 50 states and the District of
    Columbia and U.S. territories. The nation's public transportation
    systems are an integral part of the nation's surface transportation
    system. Transit provides an alternative way to get to jobs, education,
    healthcare and social activities in every community, it improves the
    efficiency of the existing roadway system in metro areas by reducing
    the number of cars on the road and the resulting traffic congestion.
    Less congestion reduces costs for businesses that transport goods and
    consumers who buy those goods. Public transportation is important to
    communities of all sizes, from large metropolitan regions to small
    cities and rural communities. Less urban states and smaller cities
    depend on the Federal transit program to pay for a larger share of
    their transit capital investments than more urban areas, and they also
    rely on federal funds to pay for an important share of the costs
    associated with providing service.

        To meet the demands of our nation's aging infrastructure network,
    growing urban population, and changing travel and commuting patterns, a
    renewed long-term federal commitment to public transportation is
    essential. Currently, system needs far surpass resources from all
    levels of government. At the federal level, fuel taxes dedicated to the
    Mass Transit Account of the Highway Trust Fund, last raised in 1993,
    have lost more than 37 percent of their purchasing power. APTA urges
    the Committee to increase the dedicated revenues that go into the
    Highway Trust Fund, so that Congress can pass a surface transportation
    bill that provides for the growth of predictable federal funding under
    a multi-year authorization bill.

        Since the expiration of TEA-21 in 2003, we have now had 25 short-
    term extensions, lasting a little more than 4 years authorization under
    SAFETEA-LU, and a bit more than 2 years under MAP-21. More recently,
    federal transit funding has grown only minimally, from $10.231 billion
    in fiscal year 2009 to $10.692 billion in fiscal year 2014. The
    uncertainty of recent federal authorizing laws and lack of predictable
    funding of the federal transit program have made it nearly impossible
    for the industry to keep the system in a state of good repair, replace
    the aging infrastructure and fleets, and address the growing demand for
    service. Short-term authorizations increase project costs and decrease
    certainty for long-term planning.

        While growing communities compete for limited funds to build a
    variety of new fixed guideway systems (BRT, light rail, trolley, heavy
    rail and commuter rail), and transit ridership continues to grow, the
    deterioration of our systems adversely impacts both efficiency and
    safety. The U.S. DOT now estimates that we have an $88 billion backlog
    in the state of good repair of public transportation capital investment
    needs. And this backlog doesn't even include the annual cost of
    maintaining the current system, like replacing aging buses, rail cars,
    vans, buildings, bridges and stations; the cost of building new
    capacity; and the more than $3 billion in costs to install positive
    train control systems at the nation's commuter railroads.

        While spending for public transportation is paid mostly by fares
    that riders pay, as well as state and local funding, the federal
    government is an essential partner in this process. While federal
    funding supports 19.2% of all spending on public transportation, 44.4%
    of all capital spending for transit comes from the federal government.
    However, according to the CBO, the decline in real spending on
    transportation infrastructure has occurred at all levels of government,
    but it has been the greatest at the federal level. Yet, federal funding
    is critical as it helps to ensure that locally-derived benefits are
    fully integrated into the national multimodal transportation network
    that is so essential to ensuring U.S. competitiveness in our global
    economy.

        These are some of the reasons that APTA has urged Congress to enact
    a long-term authorization bill that grows federal funding for public
    transportation. We strongly support the preservation of the federal
    transit program, and we support an increase in the dedicated revenues
    that go into the Highway Trust Fund for both the Mass Transit and
    Highway Accounts. It is estimated that more than $90 billion in new
    revenues is needed just to maintain current public transportation and
    highway programs, and APTA strongly believes that there is a need to
    grow current federal investment levels for transit. We need a revenue
    stream that supports growth of the federal programs, as flat funding at
    current levels will not permit transit to adequately address the
    growing backlog of capital needs or the growing demand for transit
    service. It should come as no surprise that we strongly oppose efforts
    to devolve the federal transit or highway programs tothe states. Public
    transportation is an essential part of the overall surface
    transportation system, and given our growing population and increasing
    congestion on our roadways that program is more important than ever.

        We know transit ridership is growing, we know the nation's
    population is expected to grow significantly, and we believe that the
    demand for public transportation service in our communities will
    continue to grow. Nationally, public transportation ridership continues
    to set record levels. In 2014, people took a record 10.8 billion trips
    on public transportation--the highest annual ridership number in 58
    years. Some public transit systems experienced all-time record high
    ridership last year. This record ridership didn't just happen in large
    cities. It also happened in small and medium size communities. In fact,
    some of the biggest gains came in towns with less than 100,000 people
    with ridership growth of double the national average. This record
    growth in ridership occurred even when gas prices declined by 42.9
    cents in the fourth quarter. From 1995-2014 public transit ridership
    increased by 39 percent, almost double the population growth, which was
    21 percent. The estimated growth of vehicle miles traveled was 25
    percent. This proves that once people start riding public transit, they
    discover that there are benefits over and above saving money.

        Our failure as a nation to adequately invest in this essential
    element of our surface transportation system will only cost the nation
    more in the long run. Conversely, investment in public transportation
    will help support a healthy, growing economy, facilitating the
    efficient movement of goods and people, and stimulating economic
    development in communities served by vibrant public transportation
    systems.

        One only needs to ride a train or bus during the morning commute to
    recognize the growing demand, and to experience firsthand the strains
    that that demand is placing on systems. The demand and support for
    public transportation is also reflected at the ballot box. Last year,
    69 percent of ballot initiatives seeking taxpayer support for transit
    investment were approved by voters. Clearly, citizens are willing to
    pay for improved transit service. These local ballot initiatives
    confirm the stability of the local partnership, but they are not a
    substitute for the federal partnership.

                        RETURN ON THE FEDERAL INVESTMENT

        For every dollar we invest in public transportation, we generate
    about $4 in economic returns. And $1 billion in federal transit
    investment fosters productivity gains that create or sustain 50,000
    jobs. It is important to note that 73% of federal transit capital funds
    flow through the private sector. In fact, much of the bus and rail
    equipment is manufactured in rural areas and provides high wage jobs in
    those communities. For example, bus original equipment manufacturers
    have plants located in Alabama, North Dakota, Kansas, Minnesota, South
    Carolina, California and upstate New York. Rail Cars are manufactured
    in places like Nebraska, Idaho, Illinois, and Pennsylvania. Components
    and subcomponents are being manufactured all across this country. As
    these investment metrics make clear, local and regional transportation
    improvements yield national benefits.

        On a very fundamental level, federal transportation funding keeps
    this economic engine running, as transit agencies can only plan and
    advance large, multi-year capital projects when they can be confident
    the resources will be there when they are ready to break ground.

                                 APTA PROPOSAL

        To ensure the reliable, long-term funding best suited to
    infrastructure investment, APTA urges Congress to enact a 6-year, $100
    billion authorization for the federal transit program that includes
    robust funding to grow the program from $10.7 billion in the current
    year to $22.2 billion in 2021. Revenues into the Highway Trust Fund
    (HTF) must increase to support this much needed growth.

        Additionally, we see this moment in time as an ideal opportunity to
    establish a dedicated revenue stream for intercity passenger rail,
    separate from the revenues required for the Highway Trust Fund and Mass
    Transit Account. Like public transit, intercity passenger rail is
    experiencing ridership growth and increased demands for public service
    in corridors throughout the country. We have asked that Congress
    provide $50 billion over the next 6 years to facilitate the development
    of a national high-speed and intercity passenger rail system.

        APTA's surface transportation authorization recommendations are
    based on needs identified in eight categories of equipment and
    facilities funded under the current federal program. They are based on
    the need for 6-year investment from all sources--fares, local, state,
    and federal--of $245 billion. APTA's investment requirements include
    the cost of bus replacements, demand response vehicles, rail vehicles,
    state-of-good-repair spending, New Starts and core capacity projects,
    and other costs. And they reflect investment requirements in states,
    cities and communities across the country.

        APTA recommends that Congress take the necessary steps to restore,
    maintain and increase the purchasing power of the federal motor fuels
    user fee to support a significant increase in the federal investment
    for the public transportation program. In addition, in order to meet
    the full range of funding needs, APTA supports the use of other
    financing strategies to meet the investment goals.

        First and foremost, funding must be sufficient to address the
    capital investment needs dictated by the nation's population growth,
    economic and personal mobility needs (including the reduction of
    traffic congestion), environmental and sustainability needs, and of our
    aging population. While meeting our capital expansion needs, funding
    must also be sufficient to address issues of state of good repair
    across so many of our aging public transportation systems nationwide.

        It is important to note that there are differences between funding
    and financing when it comes to transportation infrastructure projects.
    Funding options are those that generate revenue streams and financing
    options leverage revenue streams. Financing options are programs or
    instruments that leverage revenue streams as a way to move many
    infrastructure projects forward, especially significantly large and
    expensive projects. Without adequate funding sources, states and local
    governments cannot take full advantage of the financing tools
    available. Additionally, financing options may not be practical or
    available for every infrastructure project.

        Unfortunately, current revenues going into the Highway Trust Fund
    are $15-16 billion short of what is needed annually just to fund
    current transit and highway programs. Since the expiration of the
    SAFETEA-LU authorizing law in 2009, federal funding has grown by less
    than one-half percent while demand for transit service has grown and
    the cost of restoring the existing systems to a state of good repair
    has grown to $88 billion.

        Second, it is imperative that the funding for transportation
    investment be stable and reliable, whether they be from federal, state,
    or local sources, or from public transportation-generated revenues or
    public-private partnerships. Major transit capital investments often
    require advance planning and multi-year construction programs.

        Third, it is critical that the transportation finance legislation
    developed by this Committee recognize that not all financing mechanisms
    and revenue generators work at the same level of efficiency and
    effectiveness for all modes. Our proposal recommends legislation that
    would promote the development of revenue generated from traditional
    financing sources like municipal bonds to innovative financing
    mechanisms, such as public private partnerships, tolling and congestion
    pricing to supplement current revenue streams. However, infrastructure
    banks, municipal bonds, private activity bonds, and loan programs such
    as Transportation Infrastructure and Finance Act program (TIFIA) and
    the Railroad Innovation and Improvement Financing Program (RRIIF) that
    require payback will not sustain an ongoing transit program. They can
    help public-private partnerships work, but transit public-private
    partnerships are not a revenue source but rather a management tool.

        We want to emphasize that the certainty and predictability of the
    dedicated funding within the Mass Transit Account of the Highway Trust
    Fund, and channeled through the Federal Transit Program, has truly
    served the needs of the public transportation industry, and allowed
    agency finance professionals to take advantage of and leverage a
    multitude of financing arrangements.

        For many years the federal gas tax has supported the national
    program and served effectively as a user fee. While trends and market
    forces suggest that the gas tax is not the growing revenue source that
    it once was, it remains a viable source that can be collected
    efficiently and without creating any new federal bureaucracy in the
    short run. The most sustainable, forward-looking and outcome-
    oriented approach may be a vehicle miles traveled (VMT) fee, but
    because the systems, methods and infrastructure to implement such a
    national system are years away, the augmented gas tax could be the
    bridge to an ongoing national VMT fee. While APTA has put forward these
    ideas on how to raise revenues for the Highway Trust Fund, we are open
    to any mechanism that provides a predictable source of funding for
    these important investments.

                                   CONCLUSION

        Mr. Chairman and members of the Committee, I thank you for this
    opportunity to share our views as you move forward on this next
    authorization of surface transportation programs and urge the Committee
    to support the Federal Transit Program with a 6-year investment level
    for transit projects of at least $100 billion. The next program will
    absolutely require a wide range of funding options, but for the
    immediate future, we feel strongly that the base program must restore
    and increase the purchasing power of the Federal Motor Fuels User Tax
    while we concurrently move with a true sense of urgency to develop and
    implement a national transportation future funding model that is both
    economically and environmentally sustainable. We need to have funding
    predictability, both for our agencies and our private sector partners.

        Thank you for allowing us to provide testimony on these critical
    issues. We look forward to working with you and the members of the
    Committee as you work to develop this next critical authorization bill.
                                     ______

                   American Society of Civil Engineers (ASCE)

                          101 Constitution Ave., N.W.

                                 Suite 373 East

                             Washington, D.C. 20001

                             Phone: (202) 789-7850

                              Fax: (202) 789-7859

                                  www.asce.org

                            Statement for the Record

                                       On

                   ``Dead End, No Turn Around, Danger Ahead:
                 Challenges to the Future of Highway Funding''

                              United States Senate

                              Committee on Finance

                                 June 18, 2015

    Introduction
    The American Society of Civil Engineers (ASCE) \1\ commends the Senate
    Finance Committee for holding this hearing on the importance of
    transportation infrastructure as a priority and the urgency surrounding
    the need to fix the Federal Highway Trust Fund (HTF) and enact a multi-
    year, robust surface transportation authorization bill. The current
    surface transportation law, Moving Ahead for Progress in the 21st
    Century Act (MAP-21), expired on September 30, 2014 and the program is
    now operating under a second temporary extension which expires on July
    31, 2015. Due to the limited funds available in the HTF, any program
    authorization beyond July must be accompanied with additional revenue
    for the fund. ASCE believes that a more permanent, long-term fix for
    the HTF is in order--one that provides dedicated, sustainable revenue
    that can grow the program and not add to the nation's deficit.
    ---------------------------------------------------------------------------
        \1\ ASCE was founded in 1852 and is the country's oldest national
    civil engineering organization. It represents more than 146,000 civil
    engineers individually in private practice, government, industry, and
    academia who are dedicated to the advancement of the science and
    profession of civil engineering. ASCE is a non-profit educational and
    professional society organized under Part 1.501(c)(3) of the Internal
    Revenue Code. www.asce.org.

    Multi-month program extensions hurt the ability of states and local
    agencies to shape long-term transportation plans and deliver large
    multi-year projects. Extensions and funding patches also create
    instability for designers and builders who cannot properly anticipate
    their contracting schedules or hiring needs. In 2015, Arkansas,
    Georgia, Tennessee, Utah and Wyoming have indicated that federal
    uncertainty is affecting their ability to deliver projects on their
    state priority list. Congress should act by July 31, 2015 to secure a
    long-term funding solution. Hopefully today's hearing will further
    underscore this need to act and highlight what the impact of federal
    inaction truly means to users of the system.
    An Aging Infrastructure System
    Our infrastructure is the foundation on which the national economy
    depends, yet it is taken for granted by most Americans. While the
    Interstate Highway System is a shining example of a focused national
    vision for the state's infrastructure, an expanding population and a
    growing economy requires these aging infrastructure systems to keep
    pace. Deteriorating and aging infrastructure is not only an
    inconvenience, it financially impacts our families, local communities,
    and our National economy.

    While revenue for the HTF continues to fall short of authorized
    spending levels, the current lack of infrastructure investment has also
    weakened our state's surface transportation system with a documented
    loss to the economy. Our inability to keep our infrastructure efficient
    undermines the U.S. competitiveness and economic strength.

    ASCE's 2013 Report Card for America's Infrastructure \2\ graded the
    state's infrastructure a ``D+'' based on 16 categories and found that
    the state needs to invest approximately $3.6 trillion by 2020 to
    maintain the national infrastructure in good condition. The $3.6
    trillion figure is the total needs funding amount across all
    infrastructure sectors, with federal, state and local transportation
    shortfall being $1.7 trillion. The following are the grades and the
    investment needs by 2020 for the surface transportation area:
    ---------------------------------------------------------------------------
        \2\ www.infrastructurereportcard.org.

    ---------------------------------------------------------------------------
        Bridges received a grade of C+;

        Transit received a D; and

        Roads received a grade of D.

    Establishing a sound financial foundation for future surface
    transportation preservation and improvement must be an essential part
    of a reauthorization package. The current spending of $91 billion per
    year, from all levels of government, for highway capital improvements
    is well below the estimated $170 billion needed annually to improve
    conditions.

    The Federal Transit Administration (FTA) estimates a maintenance
    backlog of nearly $78 billion needed to bring all transit systems up to
    a state of good repair. With funding as the cornerstone of any attempt
    to authorize the state's surface transportation programs, it is
    imperative that a variety of funding issues be advanced as part of an
    overall strategy.
    The Cost of Inaction
    In an effort to demonstrate the importance of infrastructure investment
    to the state's economy, ASCE released a series of economic studies that
    aimed to answer a critical question: What does a ``D+'' infrastructure
    grade mean for America's economy and what is the return on investment
    we can expect to see with increased funding? In 2011, ASCE released a
    study that measured the potential impacts to the economy in 2020 and
    2040 if the nation merely maintained current levels of surface
    transportation investments. It is important to note that should
    Congress produce a multi-year authorization bill that fails to increase
    funding levels, the year 2020 economic impact results of this study
    will become reality.

    The study, Failure to Act: the Economic Impact of Current Investment
    Trends in Surface Transportation Infrastructure,\3\ found that if
    investments in surface transportation are not made, families will have
    a lower standard of living, businesses will be paying more and
    producing less, and our state will lose ground in a global economy. The
    state's deteriorating surface transportation system will cost the
    American economy more than 876,000 jobs in 2020, and suppress the
    growth of the country's GDP by $897 billion by 2020 and ultimately,
    Americans will also get paid less. While the economy will lose jobs
    overall, those who are able to find work will find their paychecks cut
    because of the ripple effects that will occur through the economy.
    ---------------------------------------------------------------------------
        \3\ www.asce.org/failuretoact.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Failure to Act also shows that failing infrastructure will drive the
    cost of doing business up by adding $430 billion to transportation
    costs by 2020. Firms will spend more to ship goods, and the raw
    materials they buy will cost more due to increased transportation
    costs. Productivity costs will also fall, with businesses
    underperforming by $240 billion by 2020; this in turn will drive up the
    costs of goods. As a result, U.S. exports will fall by $28 billion,
    including 79 of 93 tradable commodities. Ten sectors of the U.S.
    economy account for more than half of this unprecedented loss in export
    value--among them key manufacturing sectors like machinery, medical
    devices, and communications equipment. As a contrast, most of America's
    major economic competitors in Europe and Asia have already invested in
    and are reaping the benefits of improved competitiveness from their
    ---------------------------------------------------------------------------
    infrastructure systems.

    Therefore, by improving the state's deteriorating surface
    transportation infrastructure systems both economic and job creation
    opportunities will be enhanced.
    A Federal Responsibility
    After General George Washington and his troops defeated the British in
    1783, the nation was faced with a dilemma: The current governing
    document, the Articles of Confederation was not equipped to outline the
    rules that would govern the new United States. In order to better
    provide for the general welfare of the country by fostering trade,
    commerce and goods movement, the founding fathers made a strong
    commitment that there was to be a clear federal role in infrastructure
    development and transportation mobility. They underscored this, in
    part, by adding to Article 1, Section 8 the language that, ``The
    Congress shall have power . . . to . . . establish . . . post roads.''

    In addition to the historical and constitutional context, there remains
    a practical reality to continued support for the federal surface
    transportation programs. Imagine what would happen if the federal
    government were to relinquish its responsibility in the blink of an
    eye. That action would represent one of the single largest unfunded
    mandates--nearly $50 billion a year that the federal government has
    ever placed on states and localities. This would seem to go against the
    Unfunded Mandates Reform Act passed in 1995 that aimed to curb the
    practice of imposing unfunded federal mandates on states and local
    governments.

    Absent a federal partner the National Highway System would still need
    to be preserved; roads, bridges and new transit systems built. Every
    state would have to work quickly to enact, on average, an immediate 24
    cent per gallon gasoline tax increase or else risk having their entire
    transportation network fall further into disrepair. ASCE strongly
    opposes efforts to devolve the federal surface transportation program.
    That's an unnecessary risk that our economy, the public, and States and
    localities should not have to entertain. A robust, multi-year surface
    transportation bill is necessary to improve the system and deliver
    projects that require budget certainty.
    Need for Robust, Long-Term Funding
    Since the creation of the Interstate Highway System in 1956, the HTF
    has been supported by revenue collected from road users. This ``pay-as-
    you-go'' system has served the nation well over the past half a
    century, allowing states to plan, construct, and improve the surface
    transportation network. Additionally, the reliable stream of user-
    supplied revenue has been critical to the legislative process, because
    it has enabled Congress to guarantee the availability of multi-year
    funding to states.

    The federal gas tax was last changed in 1993--over 20 years, creating a
    revenue shortfall in the HTF that increases each year. Currently, the
    HTF is allocating more than the revenues it receives, with the trust
    fund allocating $15 billion more than raised in 2014 alone. The
    Congressional Budget Office recently projected that the 6-year
    cumulative gap in the HTF will grow to approximately $90 billion by
    2020.

    The traditional basis of HTF funding, motor fuel user fees, have not
    been raised since 1993, yet every year demands on the system grow and
    the purchasing power of those 1993-dollars further degrades. As a
    result, current levels of highway and transit investment cannot be
    maintained solely with HTF resources. Over the last 6 years, Congress
    has had to dedicate approximately $60 billion from general fund
    revenues to shore-up the HTF. When the choices are either to cut
    funding, raid the general fund, or raise additional revenue, there are
    no easy options. It's time for Congress to lead the way on a solution
    to fix the HTF.

    ASCE supports a reliable, long-term, sustained user fee approach to
    building, maintaining and improving the state's highways and transit
    systems and believes that all funding and financing options should be
    considered by Congress. We recently endorsed House legislation that
    would raise the federal fuels tax by 15 cents per gallon over the
    course of a 3 year period. In recent years the Simpson-Bowles
    Commission \4\ and the National Surface Transportation Infrastructure
    Financing Commission,\5\ among others, have come to the conclusion that
    additional user-based revenue is needed, with each suggesting an
    increase in the federal motor fuels tax. While the motor fuels tax
    remains the best long-term solution to solving the HTF shortfall in a
    fiscally responsible, deficit neutral way, a full range of options must
    be considered within the context of reauthorization, either within or
    outside of any broader tax reform package.
    ---------------------------------------------------------------------------
        \4\ http://momentoftruthproject.org/report/recommendations.
        \5\ http://financecommission.dot.gov/.

    It is important to fix the inability of the fuels tax rate to maintain
    its purchasing strength because it is not indexed to economic
    indicators like the Consumer Price Index (CPI). An indexing of this
    sort is done with other government revenues and would allow the gas tax
    to remain strong despite the rising costs of steel, other building
    materials and worker pay. If adjusted to the projected CPI over the
    next 10 years, the current fuels tax would raise \6\ an additional
    $27.5 billion, which is enough to plug the HTF shortfall for about 2
    years. ASCE recommends raising the motor fuels tax by 25 cents per
    gallon and indexing for inflation to help meet our state's near-term
    surface transportation needs.
    ---------------------------------------------------------------------------
        \6\ http://renacci.house.gov/index.cfm/2015/4/bipartisan-group-of-
    lawmakers-introduce-long-term-solution-to-address-highway-trust-fund
    ---------------------------------------------------------------------------
    Facilitating Access to Private Capital
    Innovative financing tools can greatly accelerate infrastructure
    development and can have a powerful economic stimulus effect compared
    to conventional methods, but need to be coupled with approaches that
    provide dedicated funding to the HTF. It should be noted, however, that
    innovative financing should not be viewed as an alternative to funding.
    In fact, many times P3s are dependent upon securing public support on
    user fees like tolling.

    ASCE supports innovative financing programs and the use of public-
    private partnerships (P3s) and advocates making programs available to
    all states and localities. Additionally, the federal government should
    make every effort assist public asset owners to engage in P3s and also
    facilitate engagement with private investors who are oftentimes in
    search of clear, accurate asset and project data that can help inform
    their infrastructure investment strategies.

    Programs like Transportation Infrastructure Finance and Innovation Act
    (TIFIA), bonds, national and state infrastructure banks, and other
    innovative solutions like the President's Qualified Public
    Infrastructure Bonds (QPIBS) are attractive products to both the public
    and private sector to fill the state's infrastructure investment gap.
    In this sense, it would be helpful to see an even greater engagement by
    the private sector in the funding debate, and the need for additional
    public sector revenues, in order to make the most out of private
    financing opportunities.
    Next Steps: Long-Term Revenue Mechanism
    ASCE supports the need to address the issue of future sources of
    revenue for surface transportation funding. Congress should allow for
    the exploration of the feasibility of the most promising funding
    options that will ensure the long-term viability of the HTF. In
    particular, a mileage-based system for funding our state's surface
    transportation systems needs further study, and the recommendation of
    the National Surface Transportation Infrastructure Financing
    Commission\7\ calling for a transition to a mileage-based user fee
    system must be considered. A federal effort to support further state
    and local pilot testing of these options, as a follow-up to the ongoing
    work being conducted in Oregon, should be supported. This
    experimentation at the state and community level will be critical in
    determining how to generate future HTF revenue as the state's
    dependence on gasoline as a fuel source for automobiles is reduced.
    ---------------------------------------------------------------------------
        \7\ http://financecommission.dot.gov/
    ---------------------------------------------------------------------------
    Conclusion
    Surface transportation infrastructure is the critical engine supporting
    the nation's economy, national security, and public safety. To compete
    in the global economy, improve our quality of life and raise our
    standard of living, we must successfully rebuild America's surface
    transportation infrastructure for the 21st century. Faced with that
    task, Congress must continue to fund surface transportation projects
    and should approve a long-term, sustainable HTF revenue solution to
    complement MAP-21 policy reforms before the law expires on July 31,
    2015. This long overdue combination would maximize the ability of
    federal resources to build and maintain a national surface
    transportation network that boosts economic competitiveness and job
    creation.
                                     ______

                              State of California

                                  edmund g. brown jr., governor

    LUCETTA DUNN, CHAIR

    BOB ALVARADO, VICE CHAIR

    SENATOR JIM BEALL, EX OFFICIO

    ASSEMBLY MEMBER JIM FRAZIER, EX OFFICIO

    WILL KEMPTON, EXECUTIVE DIRECTOR

                      CALIFORNIA TRANSPORTATION COMMISSION

                              1120 N STREET, MS-52

                              SACRAMENTO, CA 95814

                                P.O. BOX 942873

                           SACRAMENTO. CA 94273-0001

                               FAX (916) 653-2134

                                 (916) 654-4245

                             http://www.catc.ca.gov

    July 1, 2015

    Senate Committee on Finance
    Attn. Editorial and Document Section
    Rm. SD-219
    Dirksen Senate Office Building
    Washington, DC 20510-6200

    RE:     United States Senate Committee on Finance, Committee Hearing
                Thursday, June 18, 2015, 10:00 AM--Dead End, No Turn
                Around, Danger Ahead: Challenges to the Future of Highway
                Funding

    As the state agency responsible for programming and allocating
    transportation dollars, the California Transportation Commission
    encourages Congress to take action to address a long-term funding
    solution for the nation's transportation system. Federal funding for
    transportation is a crucial component in the process of maintaining our
    mobility and ensuring a robust national economy. As a result,
    Congressional consideration of the future of transportation funding is
    critical.

    Investments to preserve our transportation system have not kept pace
    with demand, and the current method of funding the Highway Trust Fund
    through excise taxes is no longer keeping up with the cost of
    maintaining, operating, and expanding the nation's vast transportation
    network. In real terms, funding has diminished while the demand and the
    cost to maintain and operate the transportation system have soared. To
    effectively address this pending transportation funding crisis,
    immediate and long-range sustainable solutions are required. A solution
    should be implemented in the near-term to stabilize transportation
    funding while a long-term mechanism is secured.

    Excise taxes are paid based on fuel consumption, not direct usage of
    the transportation system. As fuel consumption continues to decline due
    to improved and more fuel-efficient vehicles, and as consumers turn to
    alternative fueled vehicles; the relationship between fuel consumption
    and costs imposed on the transportation system will continue to
    deteriorate. A road usage charge, also known as a mileage based user
    fee or a vehicle miles traveled fee, refers to a fee based on the
    number of miles a vehicle travels over a given time period. A road
    charge is considered to be a more effective option for funding
    transportationinfrastructure than excise taxes since it directly
    charges users prices that reflect the full cost of the transportation
    services provided.

    Along with several other states, California is taking an aggressive
    stance to address this chronic transportation funding shortfall by
    investigating the potential of a pay as-you-go road charge in-lieu of
    the traditional fuel-based excise tax. In 2014, California legislation
    was enacted to establish a Road Charge Technical Advisory Committee to
    design a road charge demonstration program in our state. Development
    and implementation of a road charge pilot program requires a
    collaborative development and deployment process to address privacy,
    technology, administrative and other public concerns while ensuring the
    ultimate success of a new funding mechanism.

    We strongly support efforts to develop a bipartisan plan to stabilize
    and enhance the Highway Trust Fund's current revenue stream this year
    and in subsequent years. We believe Congress must also consider the
    next generation of surface transportation revenue mechanisms now, to be
    in a stronger position in future surface transportation authorization
    debates. As such, we request the next Surface Transportation
    Reauthorization bill include provisions to help states undertake the
    research and development activities necessary to implement a new
    mechanism for collecting transportation revenues based on user fees
    reflective of the full cost of transportation services provided.

                    Sincerely,

    LUCY DUNN                           ROBERT ALVARADO
    Chair                               Vice-Chair
    California Transportation
    Commission                          California Transportation
                                        Commission

    cc:     Commissioners, California Transportation Commission: Jim Beall,
                Chair, Senate Committee on Transportation and Housing; Jim
                Frazier, Chair, Assembly Committee on Transportation; Brian
                Kelly, Secretary, California State Transportation Agency;
                Malcolm Dougherty, Director, California Department of
                Transportation

                                     ______

                  Concrete Reinforcing Steel Institute (CRSI)

         933 North Plum Grove Road | Schaumburg, IL 60173-4758 | Tel.
                                847.517.1200 |
                        Fax 847.517.1206 | www.crsi.org

    June 17, 2015

    The Honorable Orrin G. Hatch
    Chairman
    Committee on Finance
    U.S. Senate
    Washington, D.C.

    Re: Hearing June 18, 2015, Dead End, No Turn Around, Danger Ahead:
    Challenges to the Future of Highway Funding

    Dear Chairman Hatch and Members of the Committee on Finance:

    I write on behalf of the Concrete Reinforcing Steel Institute, one of
    our nation's oldest technical institutes and a Standards Developing
    Organization (SDO). The CRSI is recognized as the authoritative
    resource for steel reinforced concrete construction. Members include
    some of the country's largest steel mills, fabricators, material
    suppliers and placers of steel reinforcing bars and related products.
    Our Professional members are involved in the research, design, and
    construction of structures and pavements. Together, they form the
    backbone of the steel reinforced concrete industry spanning our Nation
    that relies heavily on surface transportation.

    As Chairman of CRSI, I am responsible for the well being of the
    Institute, and to keep apprised of public policy impacts to our
    industry. Lack of a long-term transportation authorization at
    sufficient levels of funding impacts not only our industry, but also
    every business that relies on a well built and maintained
    transportation system, and disadvantages the country as a whole. As
    members of Congress, you have the responsibility of providing Federal
    funding for our Nation's surface transportation system.

    We believe that the solution to funding is to maintain a user-fee-based
    Highway Trust Fund with increased levels of investment. We thank you
    for your attention and urge Congress to pass legislation on this model
    this year.

    Finance and support for our surface transportation systems is based on
    a per-gallon tax unchanged since 1993. Few of us in the private sector
    are operating with 22 year old systems or funding mechanisms. No
    American business or a state Department of Transportation is working
    with the same W-2 numbers from 1993; no business small or large is
    using the same trucks or machinery from 22 years ago. Our organization
    and practically every interest from the National Association of
    Manufacturers to the AFL-CIO recognize the need for an increase in
    infrastructure investment, and we are willing to pay for an increase in
    the Federal gas fee. We know that you recognize that a safe, efficient
    system of transport and transit is essential to our economic strength.
    Tools, personnel and equipment used to make and deliver products
    require periodic investment--highways and transit are no different.

    The user fee assessed at the pump is paid by those who use fuel in
    proportion to that use. It is a sensible system. Granted, with the
    improvement in fuel efficiency and other contemporary developments,
    Congress will in the future need to address other funding mechanisms to
    meet our infrastructure spending needs. For now we believe the current
    system is fair and functional.

    Many states have raised their fuel fees because they recognize their
    residents and industries are willing to support a higher level of
    investment. Leaders in these states have demonstrated they know that a
    vibrant economy requires investment. This has been the tradition of our
    Federal transportation program since it's founding--citizens willing to
    pay.

    We have patched, extended, delayed and dallied for far too many months.
    The country needs a serious, 6-year highway authorization bill with
    funding beyond the clearly inadequate current levels. We need a
    sustainable funding stream, not obscure ``pay-fors'' to offset spending
    or to take revenue from the General Treasury. Highways, transit and
    bridges take years to plan and build. We cannot do the work with short-
    term funding band-aids. Congress should not think that status quo is
    good enough; it's not.

    We urge you to invest in and restore the infrastructure superiority of
    the United States. Delay will only be more costly and detrimental.

    Respectfully submitted,

    Scott D. Stevens, PE
    Chairman of the Board
    Concrete Reinforcing Steel Institute
                                     ______

                 Statement Submitted for the Record by Dean Fry
    Dead End, No Turn Around, Danger Ahead: Challenges to the Future of
    Highway Funding
    United States Senate Committee on Finance
    Thursday, June 18, 2015, 10:00 AM
    215 Dirksen Senate Office Building

    Dean Fry
    10727 Saint Matthew Lane
    Saint Ann, MO 63074

        The following is an exploration of some possible ways to fund
    transportation facilities, with my recommendations for federal funding
    at the end. Some of these should be considered extreme and undesirable,
    but are included here for illustration. Many may suit one jurisdiction
    well while be unadvisable to others. For the purposes of this article,
    Transportation District refers to any private, local, city, county, or
    state organizations with authority to build and maintain
    transportation. The advantages and disadvantages are intended to be
    illustrative and not exhaustive.

          Property owners responsible for maintaining the right of way
    bordering their property.

    Advantages: Property owners pay no taxes to the government for the
    upkeep and construction of transportation facilities but do pay for
    others to do the work or does the work themselves, no restrictions on
    the types of transportation, tends to reduce urban sprawl.
    Disadvantages: No economy of scale, undue burden on corner and other
    long frontage properties, pressure to allow property owners to toll the
    portion they are responsible for, possible differing standards and
    states of repair, no public mass transit, no public higher speed
    facilities, resistance to spending for heavier and higher capacity
    facilities especially in residential areas, limited freight movement.
    Government enforcement of minimum maintenance likely to be required and
    facilities are likely to deteriorate rapidly in hard times.
    Recommendation: Should not be used; while the apparent savings of taxes
    looks attractive, it is very possible more tax money, from a different
    tax, would be required to provide enforcement of the maintenance
    standards, not to mention the property owner is likely paying more for
    road work due to lack of economy of scale. Once neighbors agree to work
    together to keep the roads and how to pay for it, they have created
    something equivalent to a tax structure.

         Neighborhood Associations.

    Advantages: Property owners pay no taxes to the government for the
    upkeep and construction of transportation facilities but do pay an
    association fee as agreed and/or perform the work themselves, no
    restrictions on the types of transportation, tends to reduce urban
    sprawl, better economy of scale, maintenance likely to be better, may
    support on-demand transit with association owned vehicle.
    Disadvantages: Pressure to allow associations to toll the roadways for
    which they are responsible, possible differing standards and states of
    repair, facilities may deteriorate rapidly in hard times, no public
    higher speed facilities, resistance to spending for heavier and higher
    capacity facilities especially in residential areas, likely limited
    freight movement, may be poor connections between associations.
    Recommendation: Could work very well for some residential
    neighborhoods, which would strengthen them; could work well within a
    commercial district with businesses of similar market reach. The
    businesses may want to partially provide the higher capacity travelways
    through the neighboring residential neighborhoods. Combining
    associations into cooperative districts could reduce some of the
    disadvantages and improve the advantages, funding for the cooperative
    district would come from the associations, not directly from the
    people.

          Monthly Access (Utility) Fees (similar to those used by
    communications companies).

    Advantages: Economy of scale, use for emergency services and for
    nonemergency medical transportation possible, burden to long frontage
    properties reduced, consistency of function and repair is better, does
    not treat one person as worth more than another, funds transportation
    more like a utility, which it is. Disadvantages: May be focused on
    access to the detriment of mobility, depending on the size of the
    transportation district, may be perceived as falling heavily on small
    properties and the poor, connections between transportation districts
    may be poor, may allow urban sprawl. Recommendation: Should not be used
    as a standalone funding system. Could be used to fund up to two lanes
    for each roadway, walkways, bikeways, and possibly, a fareless local
    bus like system with stops a reasonable walking distance from every
    address. If adopted, vehicle registration fees should be rescinded, and
    property taxes for roadways and services should be reduced accordingly.

         Tolls and Fares.

    Advantages: Users pay the cost of the systems, does not treat one
    person as more important than another, provides for robust limited
    access transportation, tends to reduce urban sprawl. Disadvantages:
    Difficult to apply to walkways, places with numerous access points, and
    residential neighborhoods; may be perceived as falling-more heavily on
    the poor; connections to other transportation districts could be choke
    points; traffic on some portions may be insufficient to toll or fare at
    a reasonable rate. Recommendation: Should not be used as a standalone
    funding system. Works best if all limited access type systems are
    tolled or fared.

         Property taxes (traditional method for funding local roadways).

    Advantages: The collection of property taxes is well understood,
    distributes the tax burden fairly evenly based on property values, good
    transportation systems tend to increase property values. Disadvantages:
    Property values can experience significant fluctuations, making
    forecasting the revenue less predictable than other taxes, poor people
    may own relatively high value properties and rich people may own
    relatively low value properties, does not account for traffic
    generation. Recommendation: Should continue to move away from using
    this tax in a standalone system. A property tax with limitations is
    still a viable method of funding transportation. In good years, a
    percentage of the increase in property tax revenue from 1 year to the
    next, due to valuation increases, could be set aside for transportation
    expansion to encourage continued growth and soften some downturns.

         Fuel Excise Tax (used primarily to fund higher mobility
    roadways).

    Advantages: Well understood taxing system, user tax, can be used to
    discourage use of carbon based fuels. Disadvantages: Does not account
    for weight or gas mileage of the vehicle, not a true user tax; not
    easily justifiable for non-roadway use even when drivers are
    benefitted, induces urban sprawl, greenhouse concerns, some needed
    roads cannot be maintained based on traffic counts for that road. The
    history of this tax provides a lesson on how a seemingly progressive
    tax can become regressive. Recommendation: Excise taxes still have some
    value for funding transportation, but should be depended on less and
    less moving into the future. Nevertheless, since the trucking industry
    already supports a tax increase, the diesel tax could be immediately
    raised to an amount the trucking industry is agreeable to.

         Vehicle Miles Traveled Fee (could be used for all roadways).

    Advantages: Truer user fee that can account for the weight of the
    vehicle, can be discounted for older vehicle that the poorer are more
    likely to drive, applies evenly to alternately fueled vehicles, can be
    tracked by GPS, odometer reading at registration, or other method if
    available, can make use of the fuel tax or regular estimated billing to
    avoid yearly lump sum payments. Disadvantages: Privacy concerns with
    tracking, not easily justifiable for non-roadway use even when drivers
    are benefitted, may induce urban sprawl, may be political pressure to
    match the funding with the portion of roadway related to its
    collection, some needed roads cannot be maintained based on traffic
    counts for that road. Recommendation: Should not be used as a
    standalone funding system. The VMT fee is a more accurate and fair
    system than the Fuel Excise Tax and could be implemented as soon as
    privacy issues can be resolved. However, many commercial vehicles
    already carry GPS systems and the privacy concerns are less. The
    development of VMT fees for commercial vehicles should fast track, with
    the lessons learned then being applied as VMT fees for private vehicles
    develop.

         Commuter Miles Tax (Based on distance from primary home to work
    location).

    Advantages: User tax, may be used for any type of transportation, fits
    easily with improving congestion and bottlenecks, uses well understood
    payroll deduction to assess, can be limited to a maximum amount for
    lower tax brackets, can be indexed at higher rates for greater miles to
    locations within defined urban areas, may reduce sprawl, can be used in
    combination with a Fuel Excise Tax decrease, revenues increase as the
    number of jobs increase. Disadvantages: Little known concept with
    unknown resistance, payroll deduction may make the tax more noticeable
    even though not greater, would likely not provide adequate funding for
    many rural roads. Recommendation: Should not be used as a standalone
    tax; should be phased in until the amount collected is consistent with
    and covers the number of commuter miles traveled while the Fuel Excise
    Tax is reduced accordingly.

          Commercial Income Tax (Transportation is necessary for business
    to do business).

    Advantages: May be used for any type of transportation and can better
    provide for freight. Corporate Taxes are well understood. It is within
    the interests of the business community to draw people to their
    businesses and to reduce the costs of goods and services, which good
    transportation does. The tax could be considered more as an investment
    rather than a tax if done right. Disadvantages: Conflicting interests
    may affect project priority, especially when funding is down.
    Recommendation: Set aside a percentage of corporate income taxes for
    transportation use in keeping with the desire to grow the economy.

         Repatriation.

    Advantages: Provides a large one-time source of funds with relatively
    little pain due to the current large amounts of money parked overseas.
    At a more normal level, repatriation could provide a steady source of
    funding for ports, airports, and border crossings, and their associated
    facilities. Recommendation: Use the large one-time funds to repair,
    rehabilitate, rebuild, and expand as necessary all bridges and tunnels,
    road or railroad, that cross state lines, and then to do the same with
    bridges of tunnels of longer than 2,000 feet regardless of location.
    The remainder of this funding could then be used to make mass transit
    more competitive against automobile traffic, ideally, with automated
    vehicle-on-demand transit. Use the normal flow of repatriated funds to
    provide infrastructure and support for international trade.

        The first five of these funding methods should not be used at the
    federal level, but there should be no law or regulation at the federal
    level to restrict or inhibit the used of these funding options at the
    local level.

        According to the best figures I could find, commuter travel is
    about a third of all miles traveled. A rate of $0.01 per mile will
    generate about $10 billion per year and would be about $1.60 per week
    for the average commuter. Transportation studies would require
    obtaining the most effective mix of transportation forms to fund for
    construction and operation.

        The commercial and industrial community should be challenged
    through the Chamber of Commerce and other such organizations to
    consider how they would pay for transportation systems, like they were
    making an investment to improve their bottom line. They should be
    challenged to propose self-taxing funding options and amounts in such a
    way as to be reasonably fair to all the businesses, and that can be
    essentially rubber-stamped by Congress. They should be challenged with
    how to improve highways, waterways, railways, airways, and all their
    associated infrastructure and interconnections.

        Final recommendations for federal level transportation funding:

       Change and combine the differing trust funds to a Transportation
            Trust Fund, and require the best option for a transportation
            project among types as well as location and size for the
            preferred alternative.

       Over a 6 year period, phase in a commuter distance tax to a rate of
            $0.03 per mile, limited to a fixed amount per year for lower
            income people; phase in a commercial vehicle miles traveled tax
            at rates consistent with the weight of the vehicle; phase out
            the fuel excise tax; and phase out or reduce fares on mass
            transit systems, depending on amenities. Do not impose a VMT on
            personal vehicles. Also, increase the commuter distance tax
            rate for those who commute more than 20 miles and 30 miles to
            $0.035 and $0.04 respectively. Since a tax deduction is allowed
            for personal vehicles used for business, the regulations can be
            changed to allow the IRS to subtract the commercial vehicle
            miles traveled tax from the normal deduction and place that
            amount in the trust fund. These changes will keep the present
            total collections about the same while providing future growth
            as the number of jobs increases. It will also be a more
            progressive tax structure. These taxes are more sustainable
            that what is done now and fit well with the types-of-projects
            funded with federal dollars.

       Challenge business and industry to find $20 billion in ``self-
            taxing'' to add to the trust fund at the federal level, and
            phasing that up to $50 billion over 6 years. The regulations
            should allow this funding to continue to grow as the economy
            grows.

       Use repatriation to fund certain ``mega projects'' that will not be
            done without a very large source of funding. Reduce the
            overseas tax rate to something more reasonable so the money
            parked overseas comes back in a reasonable amount of time.
            Discount that rate by 5% to bring funds back more quickly for a
            short length of time. Let the tax be voluntary, but if it is to
            be more than a 5% discount, then it should be mandatory. In the
            future, use all the repatriation funding for infrastructure and
            services that support international trade.

    All of these taxes are sustainable because they are used to build up
    the base from which they come, unlike the fuel excise tax.

                                     ______

                      Great Lakes Metro Chambers Coalition

    June 16, 2015

    The Honorable Orrin G. Hatch
    Chairman
    Committee on Finance
    219 Dirksen Senate Office Building
    Washington, DC 20510

    Dear Chairman Hatch:

    The following statement of Ed Wolking, Jr., Executive Director, Great
    Lakes Metro Chambers Coalition is provided for the record of the
    Committee's June 18, 2015 hearing on long-term financing of the Highway
    Trust Fund. I am also the Executive Vice President, Detroit Regional
    Chamber, One Woodward Avenue, Suite 1900, Detroit, MI 48226.

    Transportation infrastructure is critically important to a thriving
    Great Lakes regional economy. Modern, effective, multi-modal,
    integrated transportation infrastructure systems create good jobs,
    support the unique needs of inland metropolitan regions, and facilitate
    international trade and exports. They are the platform for the highly
    integrated regional supply chains which have made the Great Lakes and
    Midwest one of the world's top manufacturing centers. The critical
    connector in our supply chain systems--what gives them their great
    flexibility and adaptability--is our highway and bridge systems. Their
    continued maintenance and development are essential to the performance
    of our regional and national economy.

    The future of Great Lakes manufacturing depends on resolving the long
    term surface transportation funding issue. American prosperity is
    closely linked to the ability to move goods and materials seamlessly
    within the Great Lakes region, which produces 35% of U.S. manufacturing
    output, provides 42% of U.S. manufacturing jobs, and accounts for 28%
    of U.S. exports. In the Midwest, the nation's industrial core, a single
    disruption in a ``just in time'' supply chain component due to
    inadequate infrastructure can impact results throughout the entire
    chain.

    The Great Lakes Metro Chambers Coalition urges the House Ways and Means
    Committees to develop a sustainable funding solution that will provide
    adequate Federal resources for the maintenance and development of our
    Nation's surface transportation systems. The Coalition is deeply
    concerned about the rapidly approaching surface transportation
    reauthorization cliff, as well as the projected tremendous shortfall in
    Federal Highway Trust Fund revenues over the long haul as motor
    vehicles become far more efficient and motor fuel tax revenues become
    much less predictable. The need for significant progress on
    infrastructure is urgent.

    Historically, increased user fees have been the prescription for
    projected revenue shortages in the Federal Highway Trust Fund. The
    Coalition believes that fees from users should remain the basis for
    funding our nation's transportation infrastructure. However, we
    recognize that to meet the. funding challenges in the near term, the
    Congress may need to look to a broader range of revenue sources and
    that user fees may be just one of the options. The Coalition is
    therefore prepared to support other responsible options, such as
    repatriation of foreign taxes, which could provide significant near
    term and medium term relief.

    As Congress grapples with this issue that is so important to our
    nation's future, we encourage legislators to also provide flexible
    options for the states that can supplement federal resources and help
    provide a greater impact in catching up and keeping up with our
    infrastructure needs. One of those options is tolling on interstate
    highway systems and federal aid highways. Tolling can supplement motor
    fuel revenues in providing resources to maintain and develop heavily
    used corridors. It is already used on a number of key arteries in our
    region and has helped immeasurably in keeping them in good condition.
    Its technology is well-developed and now allows for efficient movement
    and minimal congestion.

    The Great Lakes Metro Chambers Coalition urges the Congress to allow
    states the option to use tolling on interstate systems and federal aid
    highways in heavily travelled corridors. Tolling can supplement the use
    of other funding streams, reduce some of the pressure on federal
    resources, and help states and localities address many of their serious
    problems with roads that feed into and support the interstate highway
    system. Tolling is also consistent with the Coalition's strongly held
    belief that user fees are the best sources of sustainable funding
    resources for transportation corridors.

    Congressional action is essential to secure the trade corridors that
    get the region's manufactured and agricultural goods and commodities to
    market. Providing adequate, stable and predictable resources will
    eliminate the barriers which have combined to delay rebuilding our
    nation's infrastructure. The Coalition will support your leadership on
    this vital issue.

    Sincerely,

    Ed Wolking, Jr.
    Executive Director
    Great Lakes Metro Chambers Coalition
    Contributing Chambers of Commerce:

    Ann Arbor/Ypsilanti Regional Chamber of Commerce
    Allegheny Conference
    Battle Creek Area Chamber of Commerce
    Buffalo Niagara Partnership
    Canton Regional Chamber of Commerce
    Chicagoland Chamber of Commerce
    Cincinnati USA Regional Chamber
    Columbus Chamber of Commerce
    Dayton Area Chamber of Commerce
    Detroit Regional Chamber
    Duluth Chamber of Commerce
    Erie Regional Chamber and Growth Partnership
    Fox Cities Chamber of Commerce and Industry
    Grand Rapids Area Chamber of Commerce
    Greater Akron Chamber of Commerce
    Greater Cleveland Partnership
    Greater Des Moines Partnership
    Greater Indianapolis Chamber of Commerce
    Greater Louisville Inc.--The Metro Chamber of Commerce
    Greater Niagara Chamber of Commerce
    Greater Pittsburgh Chamber of Commerce
    Lancaster Chamber of Commerce and Industry
    Lansing Regional Chamber of Commerce
    Metropolitan Milwaukee Association of Commerce
    Michigan West Coast Chamber of Commerce
    Minneapolis Regional Chamber of Commerce
    Muskegon Lakeshore Chamber of Commerce
    Northern Kentucky Chamber of Commerce
    Northern Michigan Chamber Alliance
    Plattsburgh North Country Chamber of Commerce
    Quad Cities Chamber
    Rockford Chamber of Commerce
    Saint Paul Area Chamber of Commerce
    Southwest Michigan First
    Toledo Regional Chamber of Commerce
    Traverse City Area Chamber of Commerce
    Youngstown/Warren Regional Chamber of Commerce
                                     ______

                            Highway Materials Group

                                      ACAA

                               ACPA www.acpa.org

                    Associated Equipment Distributors (AED)

                  Association of Equipment Manufacturers (AEM)

                  Concrete Reinforcing Steel Institute (CRSI)

                  National Asphalt Pavement Association (NAPA)

               National Ready Mixed Concrete Association (NRMCA)

              National Stone, Sand and Gravel Association (NSSGA)

                       Portland Cement Association (PCA)

                            Comments for the Record

                                submitted to the

                   United States Senate Committee on Finance

                    Dead End, No Turn Around, Danger Ahead:

                  Challenges to the Future of Highway Funding

                                 June 18, 2015

    Dear Chairman Hatch, Ranking Member Wyden, and esteemed members of the
    Finance Committee:

    On behalf of the Highway Materials Group, we submit the following
    statement. The Highway Materials Group is composed of nine
    organizations that provide the materials that are essential to road and
    highway construction and the equipment manufacturers and distributors
    that move those materials. The group includes the American Coal Ash
    Association, American Concrete Pavement Association; Associated
    Equipment Distributors; Association of Equipment Manufacturers;
    Concrete Reinforcing Steel Institute; National Asphalt Pavement
    Association; National Ready Mixed Concrete Association; National Stone,
    Sand & Gravel Association; and the Portland Cement Association.
    Together, these nine trade associations represent thousands of
    companies that provide hundreds of thousands of direct highway
    construction jobs.

    We are united around the common issue of a long-term, Federal-aid
    Highway authorization bill that both increases highway investments, and
    addresses the Highway Trust Fund with durable solutions that both
    stabilize and increase highway investments now and for the long term.

    Since 2008, the mantra of ``doing more with less'' has had grave
    implications for the transportation-construction industry, State
    transportation agencies, and the system of highways and bridges that
    every citizen depends upon for personal mobility, commodity flows,
    safety, and security in times when our system is tested in natural
    disasters and other emergencies.

    We recognize the vast number of issues Congress must address. Investing
    in America's infrastructure should be a top priority for lawmakers.
    However, 33 extensions over the past 6 years and an unknown number of
    delays in transportation funding are causing not only the nation's
    system of highways and bridges to fall further into disrepair, but is
    crippling the ability of our economy to grow and prosper.

    The American Society of Civil Engineers (ASCE) rates our overall
    infrastructure between poor and mediocre. Within ASCE's analysis, they
    report 1 in 9 of the nation's bridges are structurally deficient and 42
    percent of urban highways are congested and cost the economy $101
    billion in wasted time and fuel each year.

    Our industries and our customers in the public sector have an extremely
    difficult time planning for the future, and there is great concern that
    without a firm commitment from Congress, backed by bold and decisive
    steps to fix the Highway Trust Fund and authorize a 6-year
    transportation program, the nation's surface transportation
    infrastructure will fall further behind in terms of rehabilitation,
    repair, preservation and expansion.

    The Highway Materials Group has four basic principles that we urge the
    Committee to consider. They include the following:

    Transportation Infrastructure is the Backbone of America's Economic
    Prosperity--America's economic vitality and ability to compete in the
    global marketplace depends on an integrated national, intermodal
    surface transportation network that reliably moves goods and people to
    maximize global competitiveness, quality of life, and economic
    prosperity for all citizens. Unfortunately, the investments needed to
    maintain and expand the highway system have been inadequate. As a
    result, America is ill-prepared to meet the competitive demands of the
    global economy. To ensure economic prosperity and global
    competitiveness, the nation needs to invest in multi-modal
    transportation infrastructure systems that not only keep pace with
    today's businesses and industries, but also that will allow for the
    healthy expansion in the future.

    The Federal Government Must Remain Committed and Involved--Maintaining
    a vital, national infrastructure has been a federal responsibility
    since the founding of the Republic. Congress is tasked with
    establishing ``post roads,'' pre-cursors of today's national highway
    system, and regulating commerce among the states and with other
    nations. Commerce is the lifeblood of our Nation's economy, and
    America's transportation infrastructure is its circulatory system. This
    network of roads and transportation structures--built by Americans
    employed in well-paying jobs that cannot be exported--is essential for
    the economic growth, safety, security, freedom of mobility, and quality
    of life benefiting every American. We oppose efforts to transfer this
    responsibility to the states as an unfunded federal mandate.

    We Support a User-Fee Based Funding Solution--In order to overcome the
    highway funding gap, we support the adoption of any user-fee based
    funding options and innovative finance tools to provide federal and
    state transportation departments with the funding they need to make
    critical investments in our transportation infrastructure. It is our
    contention that a user fee based funding approach, such as a motor fuel
    based user fee, is the most rational and easily implementable funding
    solution available in the short to medium term. Our position is
    consistent with that of President Ronald Reagan, who in 1982 noted:
    ``Good tax policy decrees that wherever possible a fee for a service
    should be assigned against those who directly benefit from that
    service. Our highways were built largely with such a user fee--the
    gasoline tax. I think it makes sense to follow that principle in
    restoring them to the condition we all want them to be in.'' Moreover,
    we believe that continued extensions are not a solution, and is in fact
    the lease fiscally conservative approach to address this challenge.

    Timeliness and Long-term Authorization Are Essential--The longer
    Congress delays in making the investments necessary to our highways,
    roads and bridges, the more difficult and expensive it will be for our
    nation to finance this critical and necessary endeavor. At a time when
    cost is paramount, Congress must act now. Timely enactment of a 6 year
    authorization bill is critical for state transportation departments to
    plan and budget for projects and for our industry to make critical
    business decisions.

    In closing, Congress should embrace the opportunity to invest in
    America's infrastructure. It is the only way our economy will be
    positioned for success in a vibrant and growing global economy. America
    has the strongest economy in the world thanks to the investments made
    by a previous generation of American leaders who understood the value
    of infrastructure, and recognized that investing in roads and bridges
    is the best path toward prosperity for our great Nation. Many of
    America's critical highways and bridges have reached the end of the
    design life and must be rebuilt. Every day we delay making the
    necessary investments in our infrastructure exacerbates an already
    critical situation.

    We thank the Committee for holding this important hearing on the long
    term health of the Highway Trust Fund. We urge Congress to address the
    critical highway needs of the country and enact the revenue necessary
    to fund a multi-year surface transportation authorization now.
                                     ______

                INSTITUTE ON TAXATION AND ECONOMIC POLICY (ITEP)

                                   __________
                Informing the debate over tax policy nationwide
                                   __________

                Adding Sustainability to the Highway Trust Fund

                 Testimony for the Senate Committee on Finance
                           For the hearing entitled:
                   ``Dead End, No Turn Around, Danger Ahead:
                 Challenges to the Future of Highway Funding''
                         Carl Davis, Research Director
                Institute on Taxation and Economic Policy (ITEP)
                                 June 18, 2015

    The Federal Highway Trust Fund (HTF) is the single most important
    mechanism for funding maintenance and improvements to the nation's
    transportation infrastructure. Absent Congressional action, however,
    the HTF will face insolvency at the end of July. Unfortunately, despite
    the critical importance of infrastructure to the U.S. economy, the
    condition of the HTF has been allowed to deteriorate to the point that
    imminent insolvency has become entirely normal.

    Since 2008, Congress has dealt with recurring shortfalls in the HTF
    through a series of short-term patches that have collectively
    transferred $65 billion in outside funding to the account. While these
    transfers have played an important role in funding the nation's
    transportation network, they also represent a failure to deal with the
    root cause of these recurring shortfalls: an outdated and poorly
    designed gasoline tax.

    Increasing and reforming the gas tax could adequately and sustainably
    fund the HTF for decades to come. New funding sources such as a vehicle
    miles traveled tax (VMT tax), on the other hand, hold some long-term
    promise but cannot address the fund's current shortfall and are not
    necessarily a panacea for the HTF's revenue sustainability problem.
    Finally, other high profile funding options such as repatriation
    holiday or deemed repatriation of corporate profits are problematic
    from a tax policy perspective, and entirely unsustainable as revenue
    raising options.
    Gas Tax Design is Flawed but Fixable
    The HTF is currently facing insolvency because the federal gas tax is
    poorly designed. On October 1st, the nation's 18.4 cent per gallon
    federal gas tax rate will become 22 years old. As a result, drivers
    have been paying roughly $3 in federal gas taxes on every tank of gas
    they have bought over the last two decades. But as drivers'
    contributions have stagnated, the cost of asphalt, steel, and machinery
    has risen by roughly 60 percent.\1\ This growing disconnect between the
    cost of the roads that drivers use, and the price they pay to use them,
    has played a large role in causing HTF revenues to consistently fall
    short of infrastructure needs.
    ---------------------------------------------------------------------------
        \1\ This covers the 1993-2013 period in order to be consistent with
    the fuel-efficiency figures cited below. To be clear, this does not
    suggest that construction costs have grown in an unprecedented or
    unexpected way. Prices in the broader economy, as measured by the
    Consumer Price Index, rose by 61 percent over this same period.

    Simply put, the 18.4 cent federal gas tax rate is outdated. Federal
    funding for the nation's transportation infrastructure would be on a
    much more sustainable course if the rate had been allowed to rise
    alongside inflation in the same manner that numerous income tax
    provisions did over this time period (e.g., personal exemptions,
    ---------------------------------------------------------------------------
    standard deductions, tax brackets, and the Earned Income Tax Credit).

    But a lack of planning for inflation is not the only challenge facing
    the federal gas tax. According to the Federal Highway Administration,
    the average fuel-efficiency of a passenger vehicle on America's
    roadways has increased by roughly 12 percent over the last two
    decades--from 19.3 to 21.6 miles per gallon.\2\ For a vehicle with a 15
    gallon gas tank, this means that the average driver is able to wear
    down the roadways with 35 extra miles of driving before they have to
    stop, refuel, and pay anything in gas taxes. The result has been
    reduced gas tax collections, and less revenue with which to maintain
    and improve the nation's transportation network.
    ---------------------------------------------------------------------------
        \2\ See Table VM-1 from the Federal Highway Administration's
    Highway Statistics series. 1993 data for ``passenger cars'' and ``2-
    axle, 4-tire trucks'' are available at: http://www.fhwa.dot.gov/ohim/
    1994/section5/vm-1.pdf and 2013 data for ``all light duty vehicles''
    are available at http://www.fhwa.dot.gov/policyinformation/statistics/
    2013/vm1.cfm.

    In late 2013, ITEP examined the impact of both inflation and fuel-
    efficiency growth in significant detail and concluded that inflation
    has, by far, played the larger role in contributing to the HTF funding
    ---------------------------------------------------------------------------
    shortfalls of recent years:

            Over three-fourths (78 percent) of the current gasoline tax
            revenue shortfall is a result of Congress' failure to plan for
            inevitable growth in the cost of building and maintaining the
            nation's infrastructure. The remainder (22 percent) is due to
            improvements in vehicle fuel-efficiency.\3\
    ---------------------------------------------------------------------------
        \3\ Institute on Taxation and Economic Policy. ``A Federal Gas Tax
    for the Future.'' September 22, 2013. Available at: http://itep.org/
    itep_reports/2013/09/a-federal-gas-tax-for-the-future.php.

    This does not need to be the case. Immediately increasing the gas tax
    and allowing the rate to rise each year alongside a formula that
    considers both inflation and fuel-efficiency gains would put the HTF on
    a sustainable course for decades to come. Had this reform been
    implemented in the late 1990s, there would be no question as to the
    HTF's solvency as the fund would have ran a surplus in every subsequent
    year, thereby facilitating as much as $215 billion in additional
    transportation investments. Today, the cost to drivers associated with
    this reform would be roughly 11 cents per gallon in additional gas
    taxes--an amount equal to less than $5 per month for the average
    driver.\4\
    ---------------------------------------------------------------------------
        \4\ Ibid.
    ---------------------------------------------------------------------------
    Diverse Group of States Shows the Way Forward
    While federal gas tax increases and reforms have long been viewed as
    politically impossible, the progress being made in the states shows
    that there is a practical way forward. Since February 2013, 16
    politically and geographically diverse states stretching from Idaho to
    Massachusetts have enacted meaningful gas tax increases or reforms.\5\
    ---------------------------------------------------------------------------
        \5\ Davis, Carl. ``Sweet Sixteen: States Continue to Take On Gas
    Tax Reform.'' Tax Justice Blog. May 20, 2015. Available at:
        http://www.taxjusticeblog.org/archive/2015/05/
    sweet_sixteen_states_continue.php.

    Partially as a result of these changes, there are now 19 states that
    levy a reformed, variable-rate gas tax where the tax rate can
    automatically grow over time alongside factors such as inflation, gas
    prices, or fuel-efficiency.\6\ Some states, such as Florida and North
    Carolina, have used these smarter, variable-rate structures for a
    number of years. Others, such as Pennsylvania and Utah, are more recent
    additions to this group.
    ---------------------------------------------------------------------------
        \6\ Institute on Taxation and Economic Policy. ``Most Americans
    Live in States with Variable-Rate Gasoline Taxes.'' May 20, 2015.
    Available at: http://itep.org/itep_reports/2015/02/most-americans-live-
    in-states-with-variable-rate-gas-taxes-1.php.

    But of all the states with variable-rate gas taxes, Georgia is arguably
    the leader. In May 2015, Governor Nathan Deal signed a reform that
    addresses both of the major challenges to the sustainability of the
    state's gas tax. In addition to a flat, one-time increase in the tax,
    Georgia's gas tax rate will now be allowed to rise each year to keep
    pace with both inflation and vehicle fuel-efficiency gains. While the
    inflation component of this formula is not unusual (similar formulas
    exist in Florida, Maryland, Rhode Island, and Utah), the fuel-
    efficiency inflator is the first of its kind.
    Issues With Vehicle Miles Traveled Taxes
    As electric and highly efficient vehicles have grown in popularity,
    increased attention has been paid to proposals that would transition
    the nation's system of transportation finance away from taxes on motor
    fuel and toward taxes directly on the number of miles driven. On July
    1, Oregon will take a significant first step in this direction by
    allowing 5,000 volunteer drivers to permanently exempt themselves from
    the state's gasoline tax in exchange for paying a 1.5 cent tax on each
    mile that they drive.\7\ While this experiment is a welcome example of
    forward thinking, there are at least three important caveats to keep in
    mind.
    ---------------------------------------------------------------------------
        \7\ See Senate Bill 810 of Oregon's 2013 Regular Session.
    Additional information on the program is available at http://
    www.myorego.org/.

    First, VMT taxes are not a solution to the immediate funding challenges
    facing the HTF, or to the broader infrastructure funding needs that
    exist right now. Recent opinion polling shows that VMT taxes are
    unpopular among the American people, though this may change as people
    become more familiar with these types of taxes.\8\ Moreover, installing
    the devices needed to track and report vehicle mileage is a costly and
    time consuming endeavor that could take years or even decades to fully
    implement, depending on whether efforts are made to retrofit current
    vehicles with the technology.
    ---------------------------------------------------------------------------
        \8\ Agrawal, Asha Weinstein and Hilary Nixon. ``How Do Americans
    Feel About Taxes and Fees to Fund Transportation?'' Mineta
    Transportation Institute. April 2015. Available at: http://
    transweb.sjsu.edu/PDFs/research/1428-tax-survey-2015-top-line-
    results.pdf.

    Second, even if a VMT tax could be implemented immediately, these types
    of taxes are not inherently better than gas taxes at weathering the
    gradual effects of inflation on their purchasing power. Oregon's flat
    VMT tax of 1.5 cents per mile, for example, is exactly as vulnerable to
    inflation as the state's flat gas tax of 30 cents per gallon. As we
    ---------------------------------------------------------------------------
    explained in a recent report on this subject:

            Transitioning from a pay-per-gallon gas tax to a pay-per-mile
            VMT tax will not necessarily put federal and state
            transportation revenues on a sustainable course. If the tax
            rate levied under a VMT tax is not allowed to grow alongside
            the inflation rate, revenues will quickly begin to lag behind
            the cost of building and maintaining the nation's
            infrastructure-much as gas tax revenues have for decades.
            Lawmakers interested in adequately funding transportation on an
            ongoing basis should immediately index their gas tax rates to
            inflation, and should be aware that such indexing will also be
            needed under any VMT tax they might enact.\9\
    ---------------------------------------------------------------------------
        \9\ Institute on Taxation and Economic Policy. ``Pay-Per-Mile Tax
    is Only a Partial Fix.'' May 28, 2014. Available at: http://itep.org/
    itep_reports/2014/05/pay-per-mile-tax-is-only-a-partial-fix.php.

    Third and finally, many VMT tax proposals come with worrisome
    environmental implications. Oregon's upcoming experiment, for example,
    is expected to be very popular among owners of fuel-inefficient cars
    who purchase larger volumes of gasoline (and pay higher gas taxes)
    relative to their neighbors. Paying by the mile, rather than by the
    gallon, will be of such great benefit to these drivers that lawmakers
    put a firm cap on the number of inefficient cars allowed into the
    experiment (only 1,500 slots are reserved for vehicles rated at 17
    miles per gallon or less). Hybrid and electric vehicle owners, by
    contrast, will fare quite poorly under this program. The Oregon
    Department of Transportation calculates that a Toyota Prius owner could
    see their taxes rise by as much as $117 per year under this tax.\10\
    While some of this disparity could be alleviated by reducing the tax
    rate for vehicles that get better gas mileage, this option has not been
    a central part of most VMT tax discussions thus far.
    ---------------------------------------------------------------------------
        \10\ Oregon Department of Transportation. ``How does the road usage
    charge compare with paying the fuel tax?'' May 2015. Available at:
        http://www.myorego.org/wp-content/uploads/2015/05/
    orego_odot_cost_comparison.png.
    ---------------------------------------------------------------------------
    Repatriation: An Ineffective Band-Aid
    Rather than deal with the gas tax flaws at the heart of the HTF's
    current shortfall, some lawmakers have proposed patching the HTF with
    either a voluntary or mandatory tax on profits held offshore by
    corporations. These proposals would reward and encourage offshore tax
    avoidance, while at best only providing a temporary fix to the gap in
    funding.

    The most problematic proposal in this category is known as a
    repatriation holiday. Under a repatriation holiday, multinational
    corporations could voluntarily bring back profits held offshore by
    paying tax on those profits at a rate much lower than the 35 percent
    rate they would normally owe (one such proposal would set the
    repatriation rate as low as 6.5 percent).

    But repatriation holidays are not a sustainable funding source for the
    HTF because they would actually lose revenue in the medium and long
    term. In fact, the Joint Committee on Taxation (JCT) found that a
    repatriation holiday could cost as much as $96 billion in just 10
    years.\11\ This is because the holiday would encourage companies to
    hoard even more of their future profits in offshore tax havens in
    anticipation of another holiday, and because much of the money
    repatriated under a holiday would have been eventually repatriated at a
    higher tax rate if the holiday were not enacted.
    ---------------------------------------------------------------------------
        \11\ Barthold, Thomas A. Letter to Senator Orrin Hatch. Joint
    Committee on Taxation. June 6, 2014. Available at: http://
    www.hatch.senate.gov/public/_cache/files/1b24c4cf-6005-4a4e-bab7-
    3d9e3820c509/JCT%206-6-14.pdf.

    Aside from a voluntary repatriation holiday, consideration has also
    been given to enacting a mandatory, or deemed, repatriation tax on
    corporate profits held offshore. For example, President Barrack Obama
    has proposed paying for infrastructure with a 14 percent mandatory tax
    on unrepatriated profits as part of a broad corporate tax reform that
    would include a 19 percent minimum tax on foreign profits moving
    ---------------------------------------------------------------------------
    forward.

    As with a voluntary repatriation holiday, however, this form of
    mandatory repatriation would reward companies for their current
    offshore tax dodging with a special lower rate, and would incentivize
    companies to shift more of their operations offshore in order to enjoy
    the lower rate.

    In addition, while both proposals would raise revenue in the short-
    term, they are not sustainable solutions. If the HTF is simply patched
    with a repatriation tax, the fund will inevitably face insolvency yet
    again in the very near future. The result would be a quick return to
    the same debate that has been rehashed repeatedly from at least 2008 to
    the present, and a continued lack of certainty for the agencies
    responsible for maintaining and enhancing the nation's infrastructure.
    Conclusion
    The root cause of the Highway Trust Fund's looming insolvency is that
    its primary revenue source-the federal gas tax-is poorly designed.
    Specifically, the tax's stagnant and outdated rate contains no
    mechanism for growing with inflation, or for dealing with the more
    recent rise in vehicle fuel-efficiency.

    In an effort to address these same flaws in their own gas taxes, state-
    level lawmakers have increasingly been moving forward with gas tax
    increases and reforms that could serve as models for federal action on
    this issue. Rather than focusing on short-term solutions, a growing
    group of states have transitioned toward a reformed, variable-rate gas
    tax that can finance economically vital transportation investments in
    both the short and long terms.

    Unlike the gas tax, a new tax on the number of miles that drivers
    travel is not a realistic funding option in the short term. Moreover,
    this type of vehicle miles traveled tax (VMT tax) will be unsustainable
    in the long-term as well if its tax rate is calculated as a flat amount
    per mile, regardless of changes in inflation.

    Of all the proposals under consideration, repatriation is among the
    most problematic. A repatriation holiday could offer a short-term
    revenue boost but would provide no funding for transportation in the
    medium or long term, and would actually reduce federal revenues
    overall. Additionally, any repatriation plan comes with the added
    downside of encouraging corporations to conduct more of their
    operations offshore (either on paper or in reality).

    The gas tax has been the cornerstone of transportation finance for
    nearly 60 years. As the states have shown, this tax could continue to
    play this valuable role for decades to come if its rate is simply
    updated and reformed. Done correctly, the result could be an end to the
    RTF's perpetual funding crises for decades to come, and the beginning
    of hugely valuable investments in the nation's transportation
    infrastructure.
                                     ______

                    MILEAGE-BASED USER FEE ALLIANCE (MBUFA)

               1050 K Street, NW, Suite 400, Washington, DC 20001

                                 www.mbufa.org

    Contact: Barbara Rohde                                  June 18, 2015
    (202) 312-7437                                          For Immediate
    Release

                                   Statement

                          Senate Committee on Finance

             Hearing on Challenges to the Future of Highway Funding

        The Mileage-Based User Fee Alliance (MBUFA) is a national non-
    profit organization that brings together government, business,
    academic, and transportation policy leaders to conduct education and
    outreach on the potential for mileage-based user fees as an alternative
    for future funding and improved performance of the U.S. transportation
    system.

        Jim Whitty is former Vice Chair of MBUFA and the manager of Oregon
    Department of Transportation's Office of Innovative Partnership
    Programs. He has led the development and now implementation of Oregon's
    mileage-based user charge system and he made the following comment:

        ``Oregon was the first state to adopt the gas tax in 1919 and you
    could say that we were the first state to notice that it was going
    awry. In 2001, the state legislature established a task force to create
    a new revenue system for highways. The recommendation was a per-mile
    charge as the most viable alternative to the gas tax. After 14 years of
    research and pilot programs, Oregon will launch on July 1st, a road
    user charge system for 5,000 volunteers that will have three types of
    mileage reporting from three providers so that users have choices for
    what system to use. Through our pilot programs we have learned that
    providing system choice and making clear that government will not be
    tracking drivers is critical to responding to drivers' concerns about
    privacy.''

        Adrian Moore, Ph.D., is vice president for education and an MBUFA
    board member. He is also vice president of policy at Reason Foundation,
    a non-profit think tank advancing free minds and free markets. He
    served as a commissioner on the National Surface Transportation
    Infrastructure Financing Commission which was established by Congress.
    He made the following comment:

        ``The gas tax used to be a reasonably good way to pay for
    transportation. If you look into the future, you can see its weaknesses
    are growing and the strengths are shrinking. Nothing is going to change
    that. Eventually, it will quit being an effective mechanism and it's
    going to have to be replaced. The question is what is the most
    efficient and effective method to pay for transportation and
    infrastructure? And that would a fee on use of transportation
    infrastructure. User fees have many inherent advantages over taxes
    because they are related to the usage of the system. When usage goes
    up, revenue tends to go up; when usage goes down, revenue tends to go
    down. It sends signals to the system much like prices do in the market.
    On the Transportation Financing Commission we spent 2 years evaluating
    the strengths and weaknesses of every tax and every fee that we could
    think of or that anyone could suggest to us. The mechanism that stood
    out as being efficient, effective, equitable and sustainable was the
    mileage based user fee.''
                                     ______

                     National Association of Manufacturers

          Leading Innovation. Creating Opportunity. Pursuing Progress.

     733 10th Street, N.W.  Suite 700  Washington, DC 20001  P 202-637-
                                      3178
                          F 202-637-3182  www.nam.org

                                Robyn Boerstling

               Director, Transportation and Infrastructure Policy

                  Infrastructure, Legal and Regulatory Policy

                                                          June 18, 2015

    The Honorable Orrin G. Hatch        The Honorable Ron Wyden
    United States Senate                United States Senate
    Washington, DC 20510                Washington, DC 20510

    Dear Chairman Hatch and Ranking Member Wyden:

        The National Association of Manufacturers (NAM) believes increased
    funding for the nation's transportation infrastructure is a critical
    priority which will help keep manufacturing competitive and grow the
    nation's economy. Manufacturers appreciate your commitment and interest
    in securing the financial health of the Highway Trust Fund (HTF), the
    main funding mechanism for the nation's highway and transit systems.

        While competitor nations continue to ramp up investments in
    transportation infrastructure, the United States risks a continued
    slide in the opposite direction. The level of real capital investment
    in highways and roads declined 20 percent from 2003 to 2012.

        A long-term approach to funding infrastructure is needed to avoid
    uncertainty and ensure states have the ability to undertake multi-year
    and complex transportation investments such as new bridge replacements,
    improved interchanges, transit upgrades and additional capacity to
    relieve congestion that chokes our roads. Because many states do not
    have the resources or ability to keep up with the demands of aging or
    deteriorating infrastructure, the federal and state partnership is
    critical to maintain. No state in our Union would be better off on its
    own.

        Transportation funding is a productive investment but manufacturers
    urge caution when considering tax proposals that promise to provide the
    resources for transportation investments over the next several years.
    For example, stand-alone proposals to tax overseas earnings outside of
    comprehensive tax reform represent a massive retroactive tax on
    manufacturers and would impose an additional cost burden on U.S.
    companies at a time when they already face significant challenges in
    the global marketplace.

        The federal government has a fundamental role to play in investing
    in the nation's highways and transit systems to serve passenger travel,
    interstate commerce and national defense. Unlike most other government
    programs, the HTF was designed to be funded by federal fuel taxes and
    truck excise fees paid by those who use and benefit from access to our
    transportation networks. We encourage the Senate to recognize the
    importance of user fees in developing a solution to the current HTF
    funding crisis in addition to the other potential funding mechanisms,
    but also begin to develop future pathways that will lead to new
    approaches that will ensure appropriate funding levels in the years to
    come.

        Manufacturers welcome the Administration, the House and Senate
    working together to take decisive action on a multi-year funding
    solution for the HTF. We look forward to working with you and
    appreciate your consideration of this important issue.

    Sincerely,

    Robyn Boerstling

                                     ______

                        American Truck Dealers Division

                    National Automobile Dealers Association

                              8400 Westpark Drive

                                McLean, VA 22102

                               A Hearing Entitled

                   ``Dead End, No Turn Around, Danger Ahead:
                 Challenges to the Future of Highway Funding''

                      Before the Senate Finance Committee

                                 June 18, 2015

    Mr. Chairman, thank you for the opportunity to submit the comments of
    the American Truck Dealers Division (ATD) of the National Automobile
    Dealers Association (NADA), to the hearing record. NADA is a national
    trade association that represents 16,000 franchised new car and truck
    dealers and collectively employs more than one million individuals.
    NADA has almost 1,800 ATD members, which represents 82 percent of
    commercial truck dealers.

    MAP-21, the current highway authorization, will expire on July 31,
    2015. While there is bipartisan support for a long-term highway bill,
    the biggest challenge is funding the currently insolvent Highway Trust
    Fund (HTF). If Congress were to maintain the Federal surface
    transportation program at current levels, the HTF would need an
    additional $168 billion in revenue through 2025.\1\
    ---------------------------------------------------------------------------
        \1\ ``Projections of Highway Trust Fund Accounts,'' CBO March 2015
    Baseline, issued January 26, 2015. http://www.cbo.gov/sites/default/
    files/cbofiles/attachments/43884-2015-03-Highway
    TrustFund.pdf

    Currently, a 12 percent Federal excise tax (FET) on new heavy-duty
    trucks contributes revenues to the HTF. Proposals have been made to
    increase the FET as a way to raise revenue for the depleted HTF. The
    FET already depresses new truck sales and increasing this tax would
    further slow deployment of cleaner, safer, and more fuel efficient
    trucks. Congress should also consider lowering or eliminating the tax
    to address the detrimental impacts of the tax on safety, the
    ---------------------------------------------------------------------------
    environment, and the truck industry.

    The truck FET was originally imposed in 1917 to help defray the cost of
    World War I.\2\ This tax, applicable to most new highway heavy-duty
    trucks, tractors, and trailers, has risen from 3 percent of the selling
    price to 12 percent today, making it the highest percentage excise tax
    Congress levies. With the average retail price of a new heavy-duty
    truck near an all-time high of $169,000, the 12% FET costs truck
    customers roughly $20,000.
    ---------------------------------------------------------------------------
        \2\ FHWA, Federal Tax Rates on Motor Vehicles and Related Products,
    September 1999: http://www.fhwa.dot.gov/ohim/hs98/tables/fe101b.pdf. In
    recent years, some even have suggested increasing the FET. For example,
    in 2013, the Senate Finance Committee included an FET increase of 1
    percent (to 13 percent) in an ``options paper'' on infrastructure
    funding. Additionally, a Government Accountability Office report,
    ``Highway Trust Fund, Pilot Program Could Help Determine the Viability
    of Mileage Fees for Certain Vehicles,'' (December 13, 2012) concluded
    that Congress consider ``new revenues'' on commercial trucking.

    Unfortunately, the FET has the effect of discouraging businesses from
    buying new heavy-duty trucks that are safer, cleaner, and more fuel
    efficient, and encourages trucking companies to hold on to their older
    ---------------------------------------------------------------------------
    trucks longer.

    An increase in the FET would be in addition to the cost of new federal
    emissions and fuel economy mandates that are increasing the price of
    new heavy-duty trucks. For example, the Owner Operator Independent
    Drivers Associations (OOIDA) calculated the average per truck
    regulatory costs associated with the Environmental Protection Agency's
    (EPA) MY 2004-2010 truck emissions standards to be $20,000-30,000.\3\
    ---------------------------------------------------------------------------
        \3\ Scott Grenerth (professional driver and member of OOIDA),
    testimony before the House Committee on Oversight and Government Reform
    (October 12, 2011).

    Additionally, EPA has proposed a new set of commercial truck fuel
    economy/greenhouse gas rules that require fuel economy increases of up
    to 24% by 2027. The Obama administration estimates that its proposal,
    phased in between model year 2018 and 2027, will cost at least $25
    billion or some three times the estimated cost of Phase 1. According to
    a recent New York Times article, ``It is expected that the new rules
    will add $12,000 to $14,000 to the manufacturing cost of a new tractor-
    trailer. . . .'' \4\ Together, the cost of these new standards, coupled
    with associated increases in the FET, will price many truck purchasers
    out of the market.
    ---------------------------------------------------------------------------
        \4\ Aaron M. Kessler and Coral Davenport, ``E.P.A. Proposal Will
    Put Bigger Trucks on a Fuel Diet,'' The New York Times, (May 30, 2015).

    The complexity of assessing and remitting the FET is another major area
    of concern. Truck dealers spend considerable time and attention
    navigating the byzantine and complex IRS regulations associated with
    the collection of the tax. ATD continually gets questions from truck
    dealerships regarding how FET should be calculated and collected. In
    fact, ATD's guide for truck dealers on collecting and remitting the FET
    is over one hundred pages long. The many exceptions and gray areas
    related to the FET make it ripe for IRS audit and impose significant
    financial and administrative challenges for small business truck
    ---------------------------------------------------------------------------
    dealerships and customers alike to stay in compliance.

    The HTF is in desperate need of reliable and consistent funding into
    the future. The FET fails to provide certainty and in fact is a very
    volatile tax. For example, the FET generated a little over $1.4 billion
    in 2008 when truck sales took a hit during the recession.\5\ In 2013,
    on the other hand when the truck market came back $3.2 billion was
    generated for the HTF.\6\ The FET is not a user fee but a tax on a
    product. When truck sales are down the revenue into the HTF is directly
    impacted.
    ---------------------------------------------------------------------------
        \5\ FHWA, Office of Highway Policy Information, October 2007 to
    September 2008: http://www.fhwa.dot.gov/policyinformation/statistics/
    2008/fe10_2008.cfm.
        \6\ FHWA, Office of Highway Policy Information, October 2012 to
    September 2013: http://www.fhwa.dot.gov/policyinformation/statistics/
    2013/fe10.cfm.
    ---------------------------------------------------------------------------
    H. Con. Res. 33
    H. Con. Res. 33, introduced by Reps. Reid Ribble (R-WI) and Tim Walz
    (D-MN), is a bipartisan concurrent resolution that would put Congress
    on record in opposition to any increase in the FET on heavy-duty trucks
    and trailers. ATD strongly supports this bipartisan resolution which to
    date has 26 cosponsors. The following organizations have endorsed this
    concurrent resolution: American Highway Users Alliance, American Truck
    Dealers, Daimler Trucks North America, Mack Trucks, Inc., Meritor
    WABCO, NAFA Fleet Management Association, National Trailer Dealers
    Association, Navistar, NTEA--The Association for the Work Truck
    Industry, Owner Operator Independent Drivers Association, Recreation
    Vehicle Industry Association, Truck and Engine Manufacturers
    Association, Truck Renting and Leasing Association, Truck Trailer
    Manufacturers Association and Volvo Trucks North America.
    Conclusion
    ATD strongly supports an equitable long-term funding solution for the
    HTF designed to ensure that Americans travel safely on our roads and
    there is a reliable roadway system for goods to travel to market in a
    cost effective manner. ATD believes that a user fee approach is the
    fairest and most efficient way to achieve these goals. Finally,
    Congress should not only oppose any increase in the FET, since this
    excise tax contradicts government mandates for a cleaner, safer, and
    more fuel efficient truck fleet, but it should also examine the adverse
    impacts of the FET policy particularly on the nearly 7 million
    Americans employed in the trucking industry.
                                     ______

                   National Conference of State Legislatures

           The Forum for America's Ideas

       444 North Capitol Street, N.W., Suite 515, Washington, D.C.
                  20001; Tel: 202-624-5400 ? Fax: 202-737-1069

                          STATEMENT FOR THE RECORD BY

                            DELEGATE SALLY JAMESON,

                          MARYLAND HOUSE OF DELEGATES

                                      AND

                               SENATOR CAM WARD,

                                 ALABAMA SENATE

             Co-Chairs of the Natural Resources and Infrastructure
              Committee, National Conference of State Legislatures

                                ON BEHALF OF THE

                   NATIONAL CONFERENCE OF STATE LEGISLATURES

      DEAD END, NO TURN AROUND, DANGER AHEAD: CHALLENGES TO THE FUTURE OF
                                HIGHWAY FUNDING

                                     TO THE

                             COMMITTEE ON FINANCE,

                              UNITED STATES SENATE

                                 JUNE 18, 2015

        On behalf of the National Conference of State Legislatures (NCSL),
    a bipartisan organization representing the 50 state legislatures and
    the legislatures of our Nation's commonwealths, territories,
    possessions and the District of Columbia, we applaud Chairman Hatch,
    Ranking Member Wyden, and the other distinguished members of the Senate
    Finance Committee for making this hearing a priority. It represents a
    key step in examining the need for federal transportation
    infrastructure investments. It is important that all parties, including
    state legislatures, work together to ensure a safe and reliable surface
    transportation system throughout the country.

        As you know, on August 1st the highway account of the Highway Trust
    Fund (HTF) is forecast to fall below the critical $4 billion funding
    level. This will likely result in the U.S. Secretary of Transportation
    employing certain cash management strategies that could both delay or
    reduce reimbursements to states for critical surface transportation
    infrastructure projects. NCSL urges Congress to ensure the continued
    solvency of the Highway Trust Fund (HTF), while committing to adopt a
    long-term agreement on surface transportation funding as part of a
    multi-year reauthorization of the Moving Ahead for Progress in the 21st
    Century Act (MAP-21).

         Although the enactment of MAP-21 in 2012 put a brief end to the
    numerous short-term extensions that followed the expiration of the
    Safe, Accountable, Flexible, Efficient, Transportation Equity Act: A
    Legacy for Users (SAFETEA-LU) in 2009, it unfortunately appears that
    Congress is returning to this pattern. The uncertainty that pervades
    short-term extensions makes it extremely challenging for states to
    adequately plan and achieve their performance targets especially
    because many transportation infrastructure projects require a multi-
    year commitment. This uncertainty has already caused some states to
    defer projects. These delays have a harmful impact on a state's
    economy. It is difficult to overstate the negative state impacts this
    uncertainty creates.

        Despite federal inaction, over the past 2\1/2\ years, state
    legislators in more than a quarter of states, from Maryland and
    Virginia to Utah and South Dakota, have stepped forward and invested
    billions of dollars to repair and upgrade our nation's surface
    transportation assets to ensure their continued safety and viability.
    However, the significant steps taken by many states must not be
    misconstrued. NCSL is a strong supporter of the federal government's
    role in a national surface transportation system that facilitates
    interstate commerce, addresses fairly and equally the mobility needs of
    all Americans and meets our national defense needs. We would also
    stress that NCSL supports the continuation and preservation of a
    federal-aid surface transportation program that directs spending to
    national priorities while providing flexibility for states to address
    regional variations. The federal program should provide states maximum
    flexibility in deciding how to generate and leverage transportation
    revenues and how to use state and federal dollars. The ability of
    states to maintain flexibility in decision making and comply with
    environmental and other mandates depends on regulatory flexibility as
    well as adequate and reliable federal funding.

        Revenues for our transportation system continue to decline as
    vehicles become more fuel efficient and travel patterns change
    nationwide. The American Society of Civil Engineers has estimated
    America's surface transportation infrastructure faces a funding gap of
    about $94 billion a year based on current spending levels.\1\ Taking
    all of this into account, NCSL urges Congress to work closely with
    states to develop a new shared, long-term vision for financing and
    funding our nation's surface transportation systems, one that will
    enhance the nation's prosperity, the quality of life of all Americans
    and guide it beyond the Interstate Highway era into the 21st century.
    NCSL believes that Congress must:
    ---------------------------------------------------------------------------
        \1\ American Society of Civil Engineers. ``2013 Report Card for
    America's Infrastructure.'' May 2013. http://
    www.infrastructurereportcard.org/.

      Provide a short term increase in federal highway transportation
    funding, based on the current status of the Highway Trust fund, so that
    sufficient funds are available for the next authorization until a new,
    more stable long-term funding mechanism for surface transportation can
    ---------------------------------------------------------------------------
    be put in place.

      Examine innovative funding systems that capture all system users and
    encourages pilot programs in states for experimentation with
    approaches, methods and mechanisms. Any system must ensure both the
    privacy of users and provide maximum flexibility for states in the use
    of funds they receive from the HTF.

      Approve the creation of a $20 million program, with no more than $2
    million available for allocation to any one state, to support state-
    level pilot programs that explore transportation funding alternatives
    to fuel taxes.

      Migrate the Highway Trust Fund (HTF) from a gas tax to a new
    national funding stream. A federal trust fund financed by user fees,
    should be retained as the primary method of funding federal-aid surface
    transportation programs. It must provide states a sustained, reliable
    source of transportation funding.

      Make all funding and financing options available to state
    legislatures for state and federal-aid surface transportation programs.
    Statutory and regulatory barriers to state and locally-generated
    revenues should be removed, including all current federal restrictions
    on states' authorities to toll, to allow states to optimize resources
    for capacity expansion, operations and maintenance, while ensuring free
    flow of goods and people.

      Encourage and expand incentive-based programs in order to spur local
    and regional transportation innovation in full coordination with state
    authorities. A comprehensive approach would promote the use of tolling,
    congestion pricing, public transit, telecommuting, real-time traffic
    and other advanced technologies (also known as intelligent
    transportation systems), and other strategies to achieve interstate
    mobility goals through urban congestion reduction.

      Ensure states have continued flexibility to create legislative and
    programmatic frameworks for Public Private Partnerships (PPPs) and full
    authority to select and engage in PPP projects. While the level of
    private sector participation is best determined by state and local
    authorities, federal guidelines should be designed to accommodate
    private sector support, although private participation should not be a
    prerequisite for receiving federal funds.

      Continue credit-based and loan guarantee programs, including the
    Transportation Infrastructure Finance and Innovation Act (TIFIA), Grant
    Anticipation Revenue Vehicles (GARVEE), private activity bond, and
    State Infrastructure Bank (SIB) programs, in order to incentivize
    private sector investment--particularly for freight mobility by rail,
    highway and waterway--in projects sponsored by the public sector.

      Provide incentives and adequate funding for mass transit.

      Avoid the expansion of federal-local funding streams without
    appropriate coordination with state legislatures as these complicate
    state-local relationships, financial arrangements, and state match
    expectations for transportation programs.

        NCSL appreciates the opportunity to submit testimony on this
    important issue before the Committee. We respectfully request it be
    submitted for the record along with NCSL policies on surface
    transportation.
    Appendices:

    NCSL Surface Transportation Federalism Policy Directive

    NCSL Solving America's Long Term Funding Crisis Policy Resolution
                                     ______

              Statement Submitted for the Record by Kenneth Orski

    A Conservative Vision for the Future of the Highway Trust Fund

    Submitted to the Senate Committee on Finance in response to its
    invitation for written comments in connection with the hearings on
    long-term financing of the highway trust fund, June 18, 2015

    by Kenneth Orski, Editor/Publisher of Innovation NewsBriefs, a
    transportation newsletter

    10200 Riverwood Drive, Potomac, MD 20854

    tel. 301-299-1996; fax 301-299-4425

    _______________________________________________________________________

    Many states, facing repeated short-term program extensions and
    anticipating uncertain prospects for increased Congressional funding,
    have taken steps to significantly increase their transportation budgets
    this year. Their intent is to place local transportation programs on a
    more stable and predictable footing that is less subject to the
    vagaries of Congressional budgeting. Twenty-five states have taken
    steps to raise transportation revenue this year and another 16 states
    are currently in the process of doing so (for the latest summary of
    state funding initiatives see the attached appendix and the report of
    the American Road and Transportation Builders Association (ARTBA) at
    http://www.transportationinvestment.org/wp-content/uploads/2015/05/May-
    2015-State-Transportation-Funding-Initiatives-Report.pdf)

    Collectively, these measures are generating billions of additional
    dollars, enabling states to assume greater responsibility for
    maintaining local infrastructure and paying for transportation
    improvements of local benefit, such as those involved in the ``TIGER
    Grants,'' the ``Transportation Alternatives'' program and the ``Surface
    Transportation Program'' (STP). Shifting these activities and other
    expenditures of low federal priority out of the Highway Trust Fund
    could eventually bring Trust Fund spending into balance with incoming
    gas tax revenues--and fulfil one of the goals of the recently adopted
    joint Congressional Budget Resolution (See, Conference Report on
    Concurrent Resolution on the Budget for Fiscal Year 2016, April 29,
    2015). It also would restore the Trust Fund to its primary function of
    serving as a source of funds for programs that are clearly of federal
    concern or national significance--notably, maintaining and upgrading
    the Interstate Highway network and the National Highway System, fixing
    aging bridges and modernizing critical transit infrastructure.

    Most importantly, aligning Trust Fund expenditures with incoming Trust
    Fund revenue would place the Highway Trust Fund once again on a self-
    sustaining basis. It would end the need for periodic transfers of
    general funds, do away with the awkward search for legitimate offsets
    (or ``pay-fors'') and put an end to the constant lurching from one
    funding crisis to another.

    As Robert Poole pointed out in his June 17 testimony before the House
    Ways and Means Committee, a Government Accountability Office analysis
    of fiscal year 2013 Highway Trust Fund spending found that of the
    entire $50.7 billion total, only $24 billion--less than half--was spent
    directly on roads and bridges, and only $3 billion or 6 percent was
    devoted to actual construction, reconstruction or rehabilitation of
    major projects. ``To me,'' Poole said, `` this finding cries out for
    Congress to rethink and revamp how HTF monies are being used.''
    (Rethinking the Highway Trust Fund, testimony by Robert W. Poole, June
    17, 2015, quoting Report GAO-15-33, October 2014).

    Restoring fiscal soundness to the Trust Fund is not ``devolution,'' a
    concept that calls for phasing out the federal gas tax and transferring
    all authority over federal highway and transit programs to the states.
    ``I call this a judicious rebalancing of
    federal-state responsibilities for funding transportation,'' a senior
    state Republican lawmaker told reporters. ``States feel they have no
    choice but to assume more responsibility because they are not convinced
    they can rely on Congress for adequate and reliable funding. But the
    federal transportation program continues and the federal gas tax
    remains an integral part of the highway funding system. The Democrats'
    talk of devolution is just a straw man.''

    And indeed, the Congressional Budget Office projects a steady and
    predictable stream of federal gas tax receipts of $40 billion per year
    well into the future ($35 billion is credited to the Highway Account,
    $5 billion to the Transit Account, see Baseline Projections of Highway
    Trust Fund Accounts, March 2015). This should put to rest the
    misleading notion that the Highway Trust Fund is about to ``go broke,''
    become ``insolvent'' or ``run out of money.''

    A self-sustaining, stable annual $40 billion federal-aid transportation
    budget extending over a period of 6 to 10 years would go a long way
    toward restoring and improving the nation's core surface transportation
    infrastructure. As proposed in a recent paper by Steven Lockwood, an
    annual $35 billion highway budget would allow to address ``unique
    federal interest responsibilities'' such as maintaining and upgrading a
    national interconnected system of ``Highways of National Significance''
    and funding federal responsibilities for highway safety, R&D and
    federal lands roads. A $5 billion transit account would continue to
    provide funds for a program of transit investment (A Constrained
    Federal-Aid Highway Program, by Steven Lockwood, Eno Center Newsletter,
    January 2015). The ``constrained'' $40 billion program would still be
    able to provide states with certainty and continuity to pursue large
    capital intensive infrastructure projects of national significance that
    require funding over multiple years.

    (However, because of prior obligations that have not yet been
    liquidated, the transition to a self-sustaining program would need to
    be gradual. As reported by CBO's Joseph Kile at the June 18th Senate
    hearing, at the end of fiscal year 2014, $65 billion in contract
    authority had been obligated but not spent and another $6 billion was
    still available but not yet obligated, for a total of $91 billion in
    contract authority. These unliquidated obligations represent more than
    2 years' worth of tax receipts. (The Status of the Highway Trust Fund,
    testimony by Joseph Kile, June 18, 2015).

                                      ###

    The June 17-18 hearings of the House Ways and Means Committee and the
    Senate Finance Committee revealed an absence of a political consensus
    on how to pay for a long-term bill with its projected $85-90 billion
    shortfall. The majority in Congress are firmly opposed to raising the
    gas tax--most recently reaffirmed by Chairman Paul Ryan at the June 17
    hearing. (``We are not raising gas taxes, plain and simple''). At the
    same time, the Senate Republican leadership is opposed to a tax on the
    accumulated overseas corporate earnings (``. . . It is not a serious
    proposal to pay for a long-term highway bill,'' said Finance Committee
    chairman Orrin Hatch in his opening remarks at the June 18th hearing.)
    Another potential solution, a practical mileage-based road user fee, is
    ``a decade away'' Robert Poole told the committee.

    There remains the option of gradually bringing spending into balance
    with incoming fuel tax revenue. This would require progressively
    shifting funding responsibility for local transportation from the
    Highway Trust Fund to the States and localities and limiting Trust Fund
    revenues to projects and programs that are truly federal in nature.
    Such a rebalancing of the federal-state relationship would require us
    to accept a narrower concept of the federal role in transportation--but
    it would offer probably the only lasting solution to the transportation
    funding crisis.

                                      ###

    Kenneth Orski is the editor and publisher of Innovation NewsBriefs, a
    transportation newsletter now in its 26th year of publication This
    submission is in his own behalf.

    Appendix

    2015 State Transportation Funding Initiatives

    The following states have taken steps to raise transportation revenue
            this year:

    New York: Gov. Andrew Cuomo proposed $4.2 billion for transportation
    investments as he began his second term. Florida: Gov. Rick Scott
    proposed $9.9 billion for transportation (over $4 billion for roads and
    bridges) in his 2015 budget request to the state legislature. North
    Dakota: Gov. Jack Dalrymple signed into law a bill that will provide
    $450 million for state highway improvements. Another bill, known as the
    Surge Funding Bill will dedicate $1.1 billion from the state's
    Strategic Investment and Improvement Fund for critical infrastructure
    projects. Iowa: Iowa legislature approved a 10-cent per gallon gas tax
    increase The increase will allow $700 million in spending on state
    highway projects and $200 million in local projects annually. The Iowa
    House passed a $365.2 million transportation bill. Utah: The state
    legislature passed a bill that will increase the gas tax by 5 cents-
    per-gallon, add a 12 percent tax on the wholesale price of gasoline and
    permit counties to seek voter approval for a local sales tax for local
    transportation projects. South Dakota: The state legislature approved a
    fuel tax increase of 6 cents per gallon; the bill also raises vehicle
    license fees and gives local governments authority to levy their own
    road improvement fees. The measure is expected to generate over $80
    million/year for state and local programs. Montana: a bipartisan group
    of state senators introduced a bill that calls for spending $50 million
    in cash and $50 million in bond proceeds over 2 years on
    infrastructure. If state revenue receipts exceeded a certain trigger,
    the authorized amounts could rise as high as $100 million in cash and
    $100 million in bond proceeds. Ohio: The House-Senate conference
    committee approved a $7 billion transportation budget for the next 2
    years and sent the bill to the Governor. Nebraska: The Nebraska
    legislature approved a 6 cent/gallon gas tax increase over the next 4
    years, eventually expected to generate $76 million annually. Tennessee:
    Gov. Bill Haslam released a 3-year transportation program featuring
    $1.2 billion in infrastructure investments. The program reflects the
    state's commitment to remain debt-free, Haslam said. The budget ensures
    that projects already underway won't be negatively impacted by
    decisions out of Washington, he added. Mississippi: The state
    legislature voted to raise $200 million in bond financing to pay for
    transportation improvements, most of them targeted at structurally
    deficient bridges. The measure takes effect July 1st. DOT Secretary
    Melinda McGrath linked the legislature's action to lack of action by
    Congress. Idaho: the Idaho legislature passed a compromise $94.1
    million transportation bill funded with a 7-cent increase in the fuel
    tax and vehicle registration fees. Minnesota: The Minnesota legislature
    passed a $5.5 billion, 2-year bill. Georgia: Georgia Governor Nathan
    Deal signed into law a bill that will increase transportation funding
    by $900 million per year through increases in fuel taxes and vehicle
    fees. Georgia thus joins Idaho, Iowa, South Dakota and Utah to have
    increased their gas tax to generate recurring transportation revenue.
    The measure also allows local governments to increase transportation-
    related taxes. Atlanta voters approved a $188 million transportation
    infrastructure bond. Louisiana: The House Ways and Means Committee
    approved a Democratic-sponsored one-cent sales tax increase and a 10-
    cent gasoline tax increase that ``could pour billions into
    transportation improvements over the next decade.'' according to press
    reports. Kansas: A gas tax hike, possibly of 5 to 10 cents, is under
    discussion in the House committee, according to press reports. South
    Carolina: The South Carolina House approved a 10 cent/gallon (or 60
    percent) gas tax increase that will provide at least $370 million for
    transportation projects. A competing Senate bill would generate $800
    million. Pennsylvania: The state House passed a measure that will
    provide up to $2.3 billion in annual transportation funding for
    highways ($1.3 billion), transit ($500 million) and local road
    maintenance. The measure raises revenue mainly by removing a cap on the
    franchise tax paid by fuel distributors. The Senate is expected to take
    up the measure next. Vermont: Gov. Peter Shumlin signed a $616 million
    transportation bill authorizing funds for fiscal year 2016. The bill
    includes $116 million for bridges and $100 million for road
    resurfacing. California: California's Senate is considering a bill that
    would raise the state gas tax by 10 cents/gallon and increase vehicle
    sales and registration taxes. The bill is projected to generate more
    than $4 billion annually. In the lower house, Assembly Speaker Toni
    Atkins proposes to create a road user fee to raise $2 billion over 5
    years. A compromise state budget plan is yet to emerge. Washington: The
    state legislature approved and sent to the Governor a $7.6 billion
    transportation budget to keep existing transportation programs going.
    Another measure, to pay for new projects, is still being negotiated in
    the legislature. ``The current plan is the most positive movement that
    we've seen on transportation in this state for many, many years,'' said
    Sen. Joe Fain, Vice chairman of the Senate Transportation Committee.
    Texas: Gov. Greg Abbott signed three transportation-related bills that,
    in his words, provide ``a historic amount of funding'' to build roads.
    The bills include a measure that ends about $1.3 billion in diversions
    of gas tax money for non highway items and a provision for a November
    referendum to approve amending the state constitution to dedicate $2.5
    billion of the general sales tax and a portion of future motor vehicle
    sales taxes to the highway fund. The combined pieces of legislation
    provide more than $4 billion a year for transportation. Oregon: June is
    the launch of the state's new voluntary road usage charge program
    (OReGO) that proponents view as a potential transportation funding
    model for the nation, replacing the motor fuel tax. Connecticut: The
    state legislature and Gov. Dannel Malloy have reached agreement to
    provide $10 billion over the next 5 years for transportation, a $2.8
    billion increase from last year, partially funded by redirecting one-
    half cent from the state's sales tax. This would be the largest
    investment in transportation in the state's history, the Governor
    announced. North Carolina: Gov. Pat McCrory has proposed a $2.85
    billion bond initiative (Connect NC) to finance his 25-year statewide
    multimodal ``Vision for Transportation.'' The proposal includes a $1.37
    billion highway bond that would fund 27 highway construction projects
    and 176 paving projects in 64 counties throughout the state. If
    approved by the General Assembly, the bond proposal will be placed on
    the ballot in November. Massachusetts: Gov. Charlie Baker signed a $200
    million road bond bill in April 2015. State transportation officials
    proposed roughly $3 billion in capital transportation projects in
    fiscal year 2016 for highways, small airports and transit according to
    press reports. Michigan: The state House of Representatives approved a
    series of measures that would generate an extra $555 million in the
    fiscal 2015-16 budget year and rise to an estimated $1.16 billion when
    fully phased in during the 2018-19 budget year. The measures include a
    hike of 4 cents a gallon in the state diesel fuel tax, indexing all
    motor fuel taxes to inflation starting in 2016 and revenue diversion
    from the state's general fund by dedicating portions of state income
    and sales taxes to transportation. A final road funding plan still
    awaits Senate action. New Mexico: Gov. Susana Martinez signed a $294
    million infrastructure construction bill largely paid for with bonds
    and cash reserves. The measure includes more than $70 million for
    highways and $45 million for major critical road projects according to
    local press reports.

    Sources: ARTBA's Transportation Investment Advocacy Center; AASHTO
    Daily Transportation Update; T4America's survey ``State Legislation to
    Raise Additional Transportation Revenue;'' NCSL State Bill Database.
                                     ______

                        PeopleForBikes Business Network

    P.O. Box 2359 Boulder, CO 80306
    http://www.PeopleForBikes.org / 303-449-4893

        Statement for the Record By Jenn Dice, Vice President, Business
                            Network, PeopleForBikes
                        P.O. Box 2359, Boulder, CO 80306
                        Senate Finance Committee Hearing
                    Dead End, No Turn Around, Danger Ahead:
                  Challenges to the Future of Highway Funding
                                 June 18, 2015

    Chairman Hatch, Ranking Member Wyden, and Members of the Committee,
    thank you for the opportunity to provide input on the need to find a
    long-term solution to financing the Highway Trust Fund.

    PeopleForBikes Business Network represents the bicycle industry ranging
    from retailers to suppliers to manufacturers in communities across the
    country. Bicycling contributes significantly to the national, state and
    local economics. PeopleForBikes Business Network has 1,825 business
    members who depend on very modest federal investments in bike
    infrastructure to grow their businesses.

    Bicycling directly generates $81 billion annually for the United States
    economy--a figure that includes more than $10 billion in state and
    local tax revenues. More than 750,000 U.S. jobs are supported by the
    bicycling industry. Across Utah, there are 235 bicycle retailers,
    employing 1,215 people, with $198.9 million in annual sales. In Oregon,
    there are 282 bicycle retailers, employing 1,493 people, generating
    $121.6 million in annual sales.

    Bicycling means business--and this business depends on a transportation
    system that not only provides safe places to bike but also the
    efficient shipment of our product to market. For these reasons, the
    U.S. bicycle industry supports a well-funded federal transportation
    program not only because it improves bicycle infrastructure, but also
    because the shipping of our products from factory to warehouse to
    retail point of sale depends on a well-maintained and connected
    transportation system. Close to 18 million bikes are sold in the U.S.
    every year.

    Communities across the country are realizing the economic development
    potential that comes from an integrated transportation system, where
    bicycle infrastructure is just one part of their larger system to
    efficiently move goods to market and reduce congestion during the
    morning and evening commute. For example, Indianapolis cites the
    construction of the eight-mile Cultural Trail with attracting at least
    $100 million in new investment in the city. Continued federal
    investment in bicycle infrastructure is essential to helping more
    communities capitalize of bicycling to meet their transportation
    challenges.

    Commuting by bicycle has doubled since 2000, and a new study shows that
    one in four Americans rode a bicycle last year or 103 million people.
    Also, half the trips Americans take are 4 miles or less. We are seeing
    a growth in Americans who look to the bicycle for these short trips.
    For example, a trip to the grocery store that is a few miles from their
    house to pick up a few items. As more of these trips are taken by bike,
    road congestion, air pollution and parking infrastructure needs are all
    reduced. This saves our nation money.

    Finding a long-term funding solution to the Highway Trust Fund is
    critical to states and communities across the country to meet the needs
    of their transportation system, including the construction of good
    bicycle infrastructure. Without the certainty of a long-term funding
    solution many states and communities will hold back on investing in
    projects due to the lack of certainty that they will receive a
    reimbursement from the federal government for transportation projects
    that have a multiyear construction timeline.

    We look forward to working with the Committee to find a long-term
    funding solution to the Highway Trust Fund that recognizes our
    integrated transportation system.
                                     ______

                            Statement for the Record

                Hearing: Dead End, No Turn Around, Danger Ahead:

                  Challenges to the Future of Highway Funding

                              Committee on Finance

                              United States Senate

                                 June 18, 2015

    Submitted by:   The Real Estate Roundtable
                   801 Pennsylvania Ave., NW, Suite 720
                   Washington, DC 20004

                   On behalf of the following organizations:

                   Alternative and Direct Investment Securities Association
                   American Hotel and Lodging Association
                   American Resort Development Association
                   American Society of Interior Designers
                   Building Owners and Managers Association International
                   CCIM Institute
                   Institute of Real Estate Management
                   International Council of Shopping Centers
                   International Union of Painters and Allied Trades
                   Investment Program Association
                   NAIOP, Commercial Real Estate Development Association
                   National Apartment Association
                   National Association of REALTORS'
                   National Association of Real Estate Investment Trusts
                   National Multifamily Housing Council
                   The Real Estate Roundtable

        As the Senate Committee on Finance meets to consider the
    feasibility of various ideas to provide a sustainable, long-term
    solution to the shortfall in the Highway Trust Fund, the undersigned
    organizations urge the Committee to consider a simple, cost-effective
    proposal that would galvanize billions in new private capital for
    investment in U.S. transportation and infrastructure. Specifically, any
    long-term highway bill should include reforms to the Foreign Investment
    in Real Property Tax Act of 1980 (FIRPTA), such as those proposed in
    the Real Estate Investment and Jobs Act of 2015 (S. 915/H.R. 2128).

        FIRPTA is a major obstacle to mobilizing private sector capital for
    infrastructure projects. The punitive FIRPTA law subjects foreign
    investment in U.S. real estate or infrastructure to a much higher tax
    burden than applies to a foreign investor purchasing a U.S. stock or
    bond, or an investment in any other asset class. FIRPTA imposes U.S.
    tax on gain realized by a foreign investor on the disposition of an
    ``interest'' in U.S. real property, which includes infrastructure
    assets. In some cases, FIRPTA can generate a tax burden as high as 54.5
    percent. The FIRPTA regime is an anti-competitive outlier that deters
    and deflects capital to other markets. FIRPTA reform would serve as a
    strong, market-driven catalyst for the financing of much-needed
    infrastructure improvements, including upgrades to our transportation
    system.

        Meeting our infrastructure needs will require a combination of
    public and private investment, and passive foreign investors could play
    a significant role in financing public-private partnerships involving:
    ports, bridges, airports, tunnels, toll roads, light rail, freight
    rail, and other income-producing infrastructure assets. Pooled and
    syndicated capital is already being deployed in infrastructure projects
    through infrastructure funds organized as partnerships. REITs are
    another model that has been used with some success for infrastructure
    investment.\1\ Nonetheless, the United States is far behind other
    regions of the world in harnessing private investment for
    infrastructure development.\2\
    ---------------------------------------------------------------------------
        \1\ Deloitte, REITs and Infrastructure Projects (2010), available
    at: http://www2.deloitte.com/content/dam/Deloitte/mx/Documents/bienes-
    raices/REITs_infrastructure_proyects.pdf.
        \2\ OECD, Pension Funds Investment in Infrastructure: A Survey
    (2011), available at: http://www.oecd.org/sti/futures/
    infrastructureto2030/48634596.pdf.

        Foreign institutional investors--pension funds, life insurance
    companies, etc.--are ideal partners for U.S. infrastructure projects
    because they have the capital needed for large-scale projects and the
    time horizon necessary for the long-term returns associated with the
    upfront investment. Infrastructure investments are attractive to
    foreign institutional investors because they offer: stable and
    predictable income streams that exceed fixed income markets,
    diversification benefits, and a hedge against inflation. Because the
    public-private infrastructure model is more developed in other
    countries, foreign institutional investors are often more comfortable
    and experienced investing in infrastructure assets than are their U.S.
    ---------------------------------------------------------------------------
    counterparts.

        FIRPTA is a major hurdle for the foreign investor seeking to invest
    in U.S. infrastructure projects. Under current law, FIRPTA applies when
    at least 50 percent of a company's balance sheet is attributable to the
    value of real property. In 2008, the IRS issued an announcement in
    which it indicated that many of the governmental licenses and permits
    being issued in connection with the leasing of transportation assets,
    such as toll bridges, should be treated as inseparable from the
    underlying real property, and thus as U.S. real property interests
    subject to FIRPTA.\3\ In 2014, the IRS issued proposed regulations in
    the REIT area confirming that, among other things, certain inherently
    permanent structures such as microwave transmission, cell, broadcast,
    and electrical transmission towers; bridges; tunnels; roadbeds; and
    railroad tracks are real property for REIT purposes.\4\
    ---------------------------------------------------------------------------
        \3\ Internal Revenue Service, Announcement 2008-115 (December 1,
    2008), available at: http://www.irs.gov/irb/2008-48_IRB/ar18.html.
        \4\ Treas. Prop. Reg. Sec. Sec. 1.856-3; 1.856-10. The proposed
    rules were published in the Federal Register on May 14, 2014 and are
    available at:
        http://www.gpo.gov/fdsys/pkg/FR-2014-05-14/pdf/2014-11115.pdf.

        The fear of triggering FIRPTA liability is blocking inbound
    infrastructure investment. In a 2013 report, one of the big four
    accounting firms noted how FIRPTA obstructs infrastructure investment
    ---------------------------------------------------------------------------
    in the United States:

            The FIRPTA rules may be of significant relevance to non-U.S.
            persons investing in infrastructure projects because such
            investments often provide investors various rights in the
            underlying infrastructure asset. As a result of these interests
            or rights in the asset, a further issue is raised as to whether
            the investor has obtained beneficial ownership of real property
            rights to which the FIRPTA rules could apply.\5\
    ---------------------------------------------------------------------------
        \5\ PWC, Infrastructure Investing: Global Trends and Tax
    Considerations, Part 2 (2013), available at: http://www.pwc.com/us/en/
    capital-projects-infrastructure/publications/assets/infrastructure-
    investing-part2.pdf.

    The Joint Committee on Taxation has also acknowledged the effect of
    FIRPTA on foreign investors in U.S. infrastructure, ``the special U.S.
    tax rules applicable to foreign investment in U.S. real estate . . .
    may affect the U.S. tax treatment of foreign [infrastructure]
    investors. Some advisors have taken the position that the intangible
    franchise right is an interest in real property for purposes of section
    897.'' \6\
    ---------------------------------------------------------------------------
        \6\ Joint Committee on Taxation, Overview of Selected Tax
    Provisions Relating to the Financing of Surface Transportation
    Infrastructure, JCX-49-14 (May 5, 2014).

        Large private investors in transportation infrastructure cite
    FIRPTA as a principal obstacle to attracting greater foreign capital
    for infrastructure projects. According to Christopher Lee, founder and
    managing partner of Highstar Capital, an infrastructure investment
    firm, ``[t]here are many billions of dollars in overseas capital
    sitting on the sidelines because those investors are wary of the burden
    FIRPTA will have on their investments.'' \7\ Highstar Capital has
    invested more than $7.8 billion in infrastructure since its inception.
    ---------------------------------------------------------------------------
        \7\ See Christopher Lee, Let's at Least Have a Sensible Tax
    Structure When It Comes to Infrastructure, The Huffington Post,
    available at: http://www.huffingtonpost.com/christopher-h-lee/lets-at-
    least-have-a-sens_b_3112325.html.

        Because of the close connection between FIRPTA and infrastructure
    investment, the Administration has included a FIRPTA reform proposal in
    its Rebuild America infrastructure initiative and its last three budget
    ---------------------------------------------------------------------------
    submissions.

        Moreover, transportation improvements, infrastructure build-outs,
    and thousands of new jobs would flow from the commercial real estate
    investment generated by FIRPTA reform. Real estate development and
    infrastructure upgrades are inextricably linked. For example, in just
    the last month, a prominent property owner in the Northeast agreed to
    invest $220 million in improvements to Grand Central Station, one of
    the country's most important transit hubs, as part of a larger
    commercial real estate project in New York.\8\ Similar examples, on a
    smaller scale, can be found throughout the country.
    ---------------------------------------------------------------------------
        \8\ Associated Press, NYC approves skyscraper in exchange for
    transit hub work (May 27, 2015), available at: http://
    finance.yahoo.com/news/nyc-approves-skyscraper-exchange-transit-
    201204047.html.

        Last year, the Urban Land Institute (ULI) released its annual
    report on infrastructure trends and issues.\9\ According to ULI's
    survey of 250 public sector leaders in local/regional government and
    over 200 senior-level private developers, the most promising source of
    infrastructure funding over the next decade will be joint development
    or cooperation between local governments and developers. Also high on
    the list was ``negotiated exactions,'' which refers to tying
    development rights to infrastructure improvements. The report concluded
    that ``contributions from real estate are often essential components of
    the funding package for infrastructure projects.'' \10\
    ---------------------------------------------------------------------------
        \9\ Urban Land Institute, Infrastructure 2014: Shaping the
    Competitive City (2014), available at: http://uli.org/wp-content/
    uploads/ULI-Documents/Infrastructure-2014.pdf.
        \10\ Id. at 4.

        The infrastructure build-outs that accompany new development are a
    major component of real estate investment. Real estate projects finance
    transportation and other improvements through mandatory state and local
    impact fees. A 2012 study found that nationally, for a typical multi-
    family development, impact fees in excess of 6.7 percent of the
    project's value will be paid to the local government to finance the
    community's surrounding infrastructure.\11\ The same study found that
    the average developer of a 100,000 square foot retail shopping center
    in the United States will pay a local government $568,500 to improve
    nearby roads, $244,000 to improve the water and sewer system, and
    $83,700 to build up surrounding parks.
    ---------------------------------------------------------------------------
        \11\ Duncan Associates, 2012 National Impact Fee Survey (2012),
    available at: http://www.impactfees.com/publications%20pdf/
    2012_survey.pdf.

        The most recent FIRPTA reform proposal, the Real Estate Investment
    and Jobs Act of 2015 (H.R. 2128), introduced by Representatives Kevin
    Brady (R-TX) and Joseph Crowley (D-NY), includes two critical
    provisions to mobilize foreign capital for real estate and
    infrastructure investment in the United States. First, it would
    increase the ownership stake that a foreign investor can take in a
    publicly traded U.S. real estate investment trust without triggering
    FIRPTA liability and extend the provision to certain collective
    investment vehicles. Second, it would remove the tax penalty that
    FIRPTA imposes on foreign pension funds that invest in U.S. real estate
    and infrastructure. Together, these two bipartisan and noncontroversial
    changes would unlock billions of foreign capital for job-creating
    investment here at home. In less than 2 months, H.R. 2128 has already
    attracted the co-sponsorship of 31 of the 39 members of the Ways and
    ---------------------------------------------------------------------------
    Means Committee.

        The Brady-Crowley bill is nearly identical to an amendment filed by
    Senators Robert Menendez (D-NJ) and Michael Enzi (R-WY) when the Senate
    Finance Committee considered Highway Trust Fund legislation last year.
    For several years, Senators Menendez and Enzi have led the effort in
    the Senate to unlock foreign capital for investment in U.S. commercial
    real estate.

        In February, under the leadership of Senators Menendez and Enzi, as
    well as Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-
    OR), the Senate Finance Committee unanimously passed another version of
    FIRPTA reform
    (S. 915), which increases the cap on foreign ownership of U.S. publicly
    traded REITs. The full House passed a similar bill in 2010 by a vote of
    402-11.

        Over the long run, by mobilizing capital and increasing investment,

    FIRPTA reform will have a positive impact on the economy, job growth,
    and tax revenue. However, any short-term effect on the Federal budget,
    as estimated by the Joint Committee on Taxation, can be fully offset
    with noncontroversial, related revenue provisions. At the time of mark-
    up, S. 915 was financed with provisions aimed at improving tax
    compliance.

        Congress should reform outdated tax regimes such as FIRPTA and pave
    the way for market-based, privately financed infrastructure investment.
    Thank you for the Committee's consideration of our submission. If
    Senate Finance Committee staff would like to discuss this issue in
    greater detail, please contact Ryan McCormick, Vice President and
    Counsel of The Real Estate Roundtable, at (202) 639-8400 or
    rmccormick@rer.org.

        We look forward to working with the Committee to advance meaningful
    FIRPTA reform in the context of Highway Trust Fund legislation.
                                     ______

                           Tire Industry Association

                        1532 Pointer Ride Place, Suite G

                                Bowie, MD 20716

                              www.tireindustry.org

                              Dr. Roy Littlefield

                            Executive Vice President

                               Finance Committee

                                  U.S. Senate

                                 June 18, 2015

        Mr. Chairman and members of the Finance Committee, I appreciate
    this opportunity to submit comments on funding options for long term
    infrastructure funding. My name is Roy Littlefield, and I serve as the
    Executive Vice President of the Tire Industry Association (TIA), TIA is
    a national trade association representing close to 8,000 small business
    members (who operate over 20,000 small business retail outlets),
    engaged in the retail, retreading, importing, and distributing of all
    varieties of tires. TIA members have been involved in the collection of
    Federal tire excise taxes since 1918. Our industry is dependent on a
    sound highway system.

        TIA supports a long-term Federal Aid Highway bill. It is time for
    Congress to look beyond short-term patchwork funding proposals. If
    Congress tries to continue funding at current levels, it will have to
    choose among several unsavory options. While we support a long-term
    bill, we are opposed to many proposals being circulated.

        The Federal Excise Tax on tires was first levied in 1918 mainly
    because of revenue needs brought about by World War I. The Revenue Act
    of 1918 imposed a tax on both tires and tubes at the rate of 5% of the
    retail price.

        The tax was reduced after the war, and then later repealed in 1926.

        The levy was reintroduced during the Great Depression, and was
    increased in 1941 to help finance World War II.

        In 1956, the rate of the tax was raised in response to legislation
    enacted to build the interstate highway system and to create the
    Highway Trust Fund.

        The Federal-Aid Highway Act of 1956 provided for a significant
    expansion of the federal-aid highway program and authorized federal
    funding over a longer period of time so as to permit long-range
    planning. It was considered necessary to authorize the entire
    Interstate Highway program to assure orderly planning and completion of
    this network of highways throughout the United States as efficiently
    and as economically as possible. In the case of tire taxes, the act
    raised certain rates and expanded the rate structure by prescribing
    different rates for different tire types. Tires for highway vehicles
    were taxed at 8 cents per pound, other tires at 5 cents per pound,
    inner tubes at 9 cents per pound, and tread rubber at 3 cents per
    pound. Later, of course, that was raised to 5 cents per pound.

        In an effort to stimulate job creation, the Congress passed the
    Surface Transportation Assistance Act of 1982. The tire tax was
    actually hammered out late on a Friday night during a conference
    committee session.

        One of its goals (besides increased revenues for construction and
    maintenance of the Nation's highways) was a redistribution of highway
    costs between car and truck users. Accordingly, the act changed several
    of the excise taxes that fund the Highway Trust Fund. For example, the
    excise taxes on tread rubber and inner tubes were repealed as were the
    taxes on non-highway and laminated tires. A new tax structure for heavy
    tires with graduated excise tax rates dependent on tire weight was
    established. Tires which weigh less than 40 pounds were exempted from
    the excise tax so that tires for most passenger cars are no longer
    taxable. The excise tax rates on heavy tires ranged from 15 to 90 cents
    a pound according to the weight of the tire. These rates are shown in
    the following table.

      Excise Tax Rates on Tires Under the Surface Transportation Assistance
                                   Act of 1982
    ------------------------------------------------------------------------
               Weight of Tire                             Tax
    ------------------------------------------------------------------------
    0-40 lbs.                             No tax
    40-70 lbs.                             15 cents per lb. over 40 lbs.
    70-90 lbs.                            $4.50 plus 30 cents per lb. over
                                           70 lbs.
    90 lbs.-up                            $10.50 plus 50 cents per lb. over
                                           90 lbs.
    ------------------------------------------------------------------------

        Following the merger, we quickly met with RMA and worked out
    language to end the dispute.

        The American Jobs Creation Act of 2004 changed the method of taxing
    tires from the graduated weight structure of prior law to a tax based
    on the load capacity of the tire. The tax is set at the rate of 9.45
    cents for each 10 pounds of tire load capacity in excess of 3,500
    pounds. In the case of super single or bias ply tires the tax rate is
    set at 4.725 cents for each 10 pounds tire load capacity in excess of
    3,500 pounds.

        A provision included in the Energy Tax Incentives Act of 2005
    clarifies the definition of super single.

        The following chart shows the current tax rate which funds the
    Highway Trust Fund.

    ----------------------------------------------------------------------------------------------------------------
       Federal Highway-User Tax Rates--Current in Cents                   Distribution of Taxes to the     Non-HTF
    --------------------------------------------------------------------               HTF              ------------
                                                                        --------------------------------   Leaking
                                                              Tax Rate                                   Underground
                             Fuel                               (per         Highway      Mass Transit     Storage
                                                              gallon)        Account         Account      Tank Trust
                                                                                                             Fund
    ----------------------------------------------------------------------------------------------------------------
    Gasoline                                                       18.4           15.44            2.86          0.1
    Gasohol                                                        18.4           45.44            2.86          0.1
    Diesel Fuel                                                    24.4           21.44            2.86          0.1
    Liquefied Petroleum Gas                                        18.3           16.17            2.13            0
    Liquefied Natural Gas                                          24.3           22.44            1.86            0
    M85 (85 percent methanol)                                      9.25            7.72            1.43          0.1
    Compressed Natural Gas (cents per thousand cubic feet)        48.54           38.83            9.71            0
    ----------------------------------------------------------------------------------------------------------------

    ------------------------------------------------------------------------
       Nonfuel Taxes (All proceeds to
              Highway Account)
    ------------------------------------------------------------------------
    Tires                                 Maximum rated load capacity over
                                           3,500 pounds--9.45 cents per each
                                           10 pounds in excess of 3,500.
    Truck and Trailer Sales                12 percent of retailer's sales
                                           price for tractors and trucks
                                           over 33,000 pounds gross vehicle
                                           weight (GVW) and trailers over
                                           26,000 GVW.
    Heavy Vehicle Use                     Annual tax: Trucks 55,000-75,000
                                           pounds GVW, $100 plus $22 for
                                           each 1,000 pounds (or fraction
                                           thereof) in excess of 55,000
                                           pounds. Trucks over 75,000 pounds
                                           GVW, $550.
    ------------------------------------------------------------------------

        Without Congressional action, the Highway Trust Fund will soon run
    out of money. Will Congress pass another short-term bill, or will they
    fund the infrastructure at a level deemed necessary to sustain the
    system for the foreseeable future? Let's look at the range of some of
    the options being considered.
    Option #1
        Significantly raise the fuel tax. This would be the easiest option
    to administer, and would be supported by environmentalists. It would be
    opposed by most in the auto and truck industries.

        This option would not require any changes to nonfuel taxes.
    Option #2
        Moderately raise the fuel tax, reinstate the FET on passenger tires
    and retread rubber (5 cents a pound).
    Option #3
        Raise the fuel tax by a lesser amount, reinstate FET on passenger
    tires and retread rubber (5-15 cents a pound), and increase existing
    nonfuel taxes by 10% including heavy tires).
    Option #4

        Consider:

                    (1) Increased tolling
                    (2) Congestion fees
                    (3) Vehicle Miles Traveled (VMT) charges
                    (4) National Weight-Distance Tax on Truckers
                    (5) Increase private sector investment (i.e.
                    privatization of highways)
                    (6) National Infrastructure Bank
                    (7) Sales tax on oil producers at the wholesale level

        Today, revenues from the excise tax on tires provide less than 2%
    of the Highway Trust Fund receipts.

        We are taking two strong positions:

      1.  Eliminate diversion. We are approaching 30% of the funds
            collected for the Highway Trust Fund diverted for non-highway
            purposes.
      2.  Engage creatively in future highway funding. We were an early
            supporter of legislation introduced by Congressman John Delany
            (D-MD) ``The Partnership to Build America Act'' (H.R. 2084).

        The Partnership to Build America Act is a bipartisan effort to find
    new funding for roads, bridges, and transit. The Act finances $750
    billion in infrastructure investment using no appropriated funds and
    has 50 co-sponsors (25 Republicans and 25 Democrats). On January 17,
    2014, two Senators--a Republican and a Democrat, introduced a companion
    bill. Within a week, five Republican Senators and three Democratic
    Senators came out in support of the bill.

        The bill is an attempt to address two problems: how to fund
    transportation and how to entice U.S. corporations, which have stashed
    an estimated $1.45 trillion abroad, to bring that money home. Delaney's
    plan would create a $50 billion Federal fund to bankroll loans and
    leverage private investment for transportation and other
    infrastructure. The money would come from bonds bought by companies who
    want a tax break if they bring cash earned abroad back to the U.S.

        TIA's position is very clear: eliminate diversion, oppose tax
    increases, engage in creative funding and tax reform, address our
    infrastructure crisis and pass a long-term infrastructure finding bill.
    TIA, along with the highway, transit, trucking, and motorist
    communities, is committed to supporting your efforts.
                                     ______

                          Transportation Equity Caucus

                        Statement for the Hearing Record

                                 Submitted to:

                            Senate Finance Committee

                                 June 18, 2015

                                  Hearing on:

                   ``Dead End, No Turn Around, Danger Ahead:
                 Challenges to the Future of Highway Funding''

    Chair Hatch, Ranking Member Wyden, and members of the Committee:

    As members of the Transportation Equity Caucus, a diverse coalition of
    organizations promoting policies that ensure access, mobility, and
    opportunity for all, we appreciate the opportunity to submit this
    statement for the record today to express our priorities for the
    financing of the Highway Trust Fund.

    The Transportation Equity Caucus is a group of more than 100
    organizations formed by the nation's leading civil rights, community
    development, social justice, economic justice, faith-based, health,
    housing, disability, labor, tribal, women's groups and transportation
    organizations. Our goal is to drive transportation policies that
    advance economic and social equity in America.

    Transportation is a critical link to opportunity-connecting us to jobs,
    schools, housing, health care, and grocery stores. We are pleased that
    the Senate Finance Committee (Committee) recognizes the importance of
    creating a long-term plan for the financing of the Highway Trust Fund.
    In addition, we look forward to working with Congressional Leaders to
    develop and pass transportation legislation driven by the following
    principles of economic and social equity:

        Create affordable transportation options for all people.
        Ensure fair access to quality jobs, workforce development,
            and contracting opportunities in the transportation industry.
        Promote healthy, safe, and inclusive communities.
        Invest equitably and focus on results.

    Failing to provide the long-term, sustained investment in
    transportation infrastructure keeps workers out of jobs, undercuts
    long-term planning, and hinders the nation's ability to advance to a
    transportation system that provides for the needs of all its users.
    Sustained transportation investment is crucial to developing equitable
    communities, expanding employment opportunities, and boosting our
    nation's economic recovery.

    As a recent New York Times article highlighted,\1\ a lack of reliable
    and efficient transportation is often an almost insurmountable barrier
    for low-income people trying to access jobs and build better lives for
    themselves and their children. Three-fourths of low-and middle-skill
    jobs cannot be accessed by a one-way 90-minute transit commute.\2\
    Also, in a national, long-term study,\3\ researchers at Harvard found
    commute times were a crucial predictor of upward social mobility:
    families living in areas with shorter average commute times had a
    better chance of moving up the economic ladder than those living in
    areas with longer average commute times.
    ---------------------------------------------------------------------------
        \1\ Bouchard, Mikayla. ``Transportation Emerges as Crucial to
    Escaping Poverty.''
    http://www.nytimes.com/2015/05/07/upshot/transportation-emerges-as-
    crucial-to-escaping-poverty.html?abt=0002&abg=1&_r=1.
        \2\ Sources: Bureau of Labor Statistics, 2008; National Household
    Travel Survey, 2009; U.S. Department of Treasury, Community Development
    Financial Institutions Fund, 2001; and Brookings Institution, 2011.
        \3\ Chetty, R., N. Hendren, P. Kline, and E. Saez. ``Where Is the
    Land of Opportunity? The Geography of lntergenerational Mobility in the
    United States.'' The Quarterly Journal of Economics 129.4 (2014): 1553-
    623. Web.
        http://scholar.harvard.edu/files/hendren/files/mobility_geo.pdf.

    Moreover, low-income households are struggling with significant
    ---------------------------------------------------------------------------
    transportation costs:

        Low- and moderate-income households spend 42 percent of
            their total annual income on transportation, compared to
            middle-income households, who spend less than 22 percent.

        According to the U.S. Department of Treasury,
            transportation expenses for households in the bottom 90 percent
            income bracket are twice that of those in the top 10 percent
            income bracket.

    Additionally, many communities of color and low income populations face
    barriers to accessing reliable transportation. Over 22 percent of
    African Americans, 14 percent of Latino households and 45 percent of
    U.S. rental households with mobility device users have no personal
    vehicle,\4\ and 15 percent of Native Americans must travel more than
    100 miles to access basic services.
    ---------------------------------------------------------------------------
        \4\ The University of Kansas Research and Training Center on
    Independent Living, http://www.rtcil.org/rtcil/cl/documents/
    US%20Housing%20urban&rural%20tagged%20logo.pdf.

    Adequate Federal transportation investments can lay a strong foundation
    for economic growth and expand opportunity for millions of people.
    Strategic Federal investments in transportation can transform
    struggling communities, unleash untapped human potential, and promote
    local economic development to allow all people to thrive. When
    transportation funding decisions are driven by economic and social
    equity, we can build transportation system that works for everyone,
    regardless of income, race or zip code. To this end, we ask the
    ---------------------------------------------------------------------------
    Committee to:

        1.  Utilize new revenue to expand or improve mobility and access
                for underserved communities.
        2.  Ensure that any mechanisms used to finance our nation's
                transportation system (whether that be repatriation,
                increasing the gas tax, user fees, or other potential
                financing mechanisms) do not disproportionately burden low-
                income people.
        3.  Work with the House Transportation and Infrastructure Committee
                to establish criteria and align federal funding to national
                transportation outcomes such as improved mobility for
                people and goods, access, transit ridership, health and
                safety, as well as reduced household costs, carbon
                emissions, and vehicle miles traveled.

    The Transportation Equity Caucus stands ready to work with this
    committee on these outcomes. For more information, please contact the
    co-chairs of the Transportation Equity Caucus: Anita Hairston,
    PolicyLink, 202-906-8034, anita@
    policylink.org or Emily Chatterjee, The Leadership Conference on Civil
    and Human Rights, 202-466-3648, chatterjee@civilrights.org.

                                       [all]