[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

                               __________

                                     
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            Printed for the use of the Committee on Finance
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                          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

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                            C O N T E N T S

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                           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.*
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    * 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.
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    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

                            [email protected]

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.

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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.


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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.


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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.
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    \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 
[email protected].

    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.
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    \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 
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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.
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    \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 
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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, [email protected].

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