[Congressional Record Volume 142, Number 109 (Tuesday, July 23, 1996)]
[Extensions of Remarks]
[Page E1352]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     ISTEA REAUTHORIZATION AND THE FALLACY OF THE STEP 21 PROPOSAL

                                 ______
                                 

                         HON. NICK J. RAHALL II

                            of west virginia

                    in the house of representatives

                         Tuesday, July 23, 1996

  Mr. RAHALL. Mr. Speaker, the Subcommittee on Surface Transportation 
has been holding a series of hearings on the reauthorization of the 
Federal Highway and Transit Programs as embodied in the Intermodal 
Surface Transportation Efficiency Act of 1991 [ISTEA], which expires at 
the end of fiscal year 1997.
  One of the most contentious issues raised so far involves the formula 
by which Federal highway funds are distributed to the States. Since the 
inception of modern Federal Highway Program in 1956 when the Highway 
Trust Fund was established, there have always been some States which 
contribute more into the Fund than they receive back, known as donor 
States, and others which receive back more than contributed, known as 
donee States. This arrangement is necessary because a national highway 
system simply cannot be constructed and maintained without it.
  In this regard, there are basically two delivery mechanisms through 
which Federal highway money is distributed to the States: Funds are 
either apportioned or allocated. Apportioned funds are divvied out by 
formula, and each State is assured of a minimum 90 percent return on 
the amount of its estimated contributions to the Highway Trust Fund.
  It is important to note that out of all of the Federal highway funds 
available to States in a given year, the vast majority--89 percent--are 
apportioned by formula for such major programs as the NHS, Interstate 
Maintenance, the Surface Transportation Program and the Bridge Program.
  Allocated funds, on the other hand, are discretionary in nature. 
Allocated funding categories include such items as the Bridge 
Discretionary Program and the Interstate Maintenance Discretionary 
Program. These monies, which only account for 11 percent of the amount 
of Federal highway funds available to the States, are primarily 
allocated on a needs basis.
  A group of donor States, however, are seeking to change the existing 
highway funding distribution formula. Their basic contention is that 
while they receive back 90 percent of apportioned funds, when the 
discretionary (allocated) funds are taken into account they allege that 
they often receive back less than 90 percent of their contributions to 
the Highway Trust Fund. These States, which have organized as the step 
21 coalition, are seeking a number of changes in ISTEA, including a new 
formula that assures them a 95-percent return on payments made to the 
Highway Trust Fund.
  It should be noted, however, that the step 21 proposed formula for 
distributing funds to the States is based on using a percentage of a 
percentage. In other words, each State would receive 95 percent of its 
share of contributions to the Highway Trust Fund without requiring that 
the total amount distributed in a given year equal the total amount 
received. Shades of voodoo economics. Of course the step 21 formula 
paints such a rosy picture for donor States. It is premised upon a 
formula which has as an assumption that more money could be paid out 
than received into the Highway Trust Fund.
  The more appropriate and fiscally prudent way of measuring how each 
State is faring under the Federal highway program is to calculate the 
ratio of its payments to the Highway Trust Fund against what it 
receives. This is the method that has traditionally been used and is 
the most widely accepted.
  Recently, the Federal Highway Administration calculated the amount 
each State has received compared to its contributions under ISTEA to 
date, fiscal years 1992 through 1995. It is interesting to note that of 
the 22 States who are members of step 21, only two, Georgia and South 
Carolina, received back less than 90 cents on the dollar contributed to 
the Highway Trust Fund.
  Morever, seven step 21 coalition States received back a dollar or 
more on each dollar contributed: Arizona, Minnesota, Nebraska, Ohio, 
Oregon, Virginia, and Wisconsin. And another six step 21 coalition 
States--Louisiana, Michigan, Mississippi, Missouri, North Carolina and 
Oklahoma--are receiving back between 95 cents and 99 cents on the 
dollar. The other 7 States all received at least 90 cents on the 
dollar. These calculations, it should be noted, include returns with 
the discretionary accounts factored in.
  It seems to me, then, that the only step 21 coalition States who have 
a bona fide beef with the current highway funds distribution formula 
are Georgia and South Carolina.
  If you believe that there is still a national interest in the 
highways of this country--the Interstate System and the new National 
Highway System--then the step 21 proposal poses some danger to the 
integrity of that system.
  Not only is the step 21 formula based on unrealistic assumptions, but 
it would deprive the ability of the Nation to construct the new high-
priority corridors authorized by ISTEA as part of the National Highway 
System as well as other NHS routes of an interstate nature. Simply put, 
under step 21, there would not be funds available to construct and 
maintain roads of an interstate nature, highways of a national 
interest, as well as to fulfill other Federal obligations, such as 
building and improving roads in units of our National Park System.
  I would urge all of my colleagues to consider these facts when 
deliberating the reauthorization of ISTEA.