[House Report 104-499]
[From the U.S. Government Publishing Office]



104th Congress                                            Rept. 104-499
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 1
_______________________________________________________________________


 
                         TRUTH IN BUDGETING ACT

_______________________________________________________________________


                 March 27, 1996.--Ordered to be printed

                                _______


 Mr. Shuster, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 842]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 842) to provide off-budget 
treatment for the Highway Trust Fund, the Airport and Airway 
Trust Fund, the Inland Waterways Trust Fund, and the Harbor 
Maintenance Trust Fund, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Truth in Budgeting Act''.

SEC. 2. BUDGETARY TREATMENT OF HIGHWAY TRUST FUND, AIRPORT AND AIRWAY 
                    TRUST FUND, INLAND WATERWAYS TRUST FUND, AND HARBOR 
                    MAINTENANCE TRUST FUND.

  Notwithstanding any other provision of law, the receipts and 
disbursements of the Highway Trust Fund, the Airport and Airway Trust 
Fund, the Inland Waterways Trust Fund, and the Harbor Maintenance Trust 
Fund--
          (1) shall not be counted as new budget authority, outlays, 
        receipts, or deficit or surplus for purposes of--
                  (A) the budget of the United States Government 
                submitted by the President,
                  (B) the congressional budget (including allocations 
                of budget authority and outlays provided therein), or
                  (C) the Balanced Budget and Emergency Deficit Control 
                Act of 1985; and
          (2) shall be exempt from any general budget limitation 
        imposed by statute on expenditures and net lending (budget 
        outlays) of the United States Government.

SEC. 3. SAFEGUARDS AGAINST DEFICIT SPENDING OUT OF AIRPORT AND AIRWAY 
                    TRUST FUND.

  (a) In General.--Chapter 471 of title 49, United States Code, is 
amended--
          (1) by redesignating section 47131 as section 47132; and
          (2) by inserting after section 47130 the following new 
        section:

``Sec. 47131. Safeguards against deficit spending

  ``(a) Estimates of Unfunded Aviation Authorizations and Net Aviation 
Receipts.--Not later than March 31 of each year, the Secretary, in 
consultation with the Secretary of the Treasury, shall estimate--
          ``(1) the amount which would (but for this section) be the 
        unfunded aviation authorizations at the close of the first 
        fiscal year that begins after that March 31, and
          ``(2) the net aviation receipts at the close of such fiscal 
        year.
  ``(b) Procedure if Excess Unfunded Aviation Authorizations.--If the 
Secretary determines for any fiscal year that the amount described in 
subsection (a)(1) exceeds the amount described in subsection (a)(2), 
the Secretary shall determine the amount of such excess.
  ``(c) Adjustment of Authorizations if Unfunded Authorizations Exceed 
Receipts.--
          ``(1) Determination of percentage.--If the Secretary 
        determines that there is an excess referred to in subsection 
        (b) for a fiscal year, the Secretary shall determine the 
        percentage which--
                  ``(A) such excess, is of
                  ``(B) the total of the amounts authorized to be 
                appropriated from the Airport and Airway Trust Fund for 
                the next fiscal year.
          ``(2) Adjustment of authorizations.--If the Secretary 
        determines a percentage under paragraph (1), each amount 
        authorized to be appropriated from the Airport and Airway Trust 
        Fund for the next fiscal year shall be reduced by such 
        percentage.
  ``(d) Availability of Amounts Previously Withheld.--
          ``(1) Adjustment of authorizations.--If, after a reduction 
        has been made under subsection (c)(2), the Secretary determines 
        that the amount described in subsection (a)(1) does not exceed 
        the amount described in subsection (a)(2) or that the excess 
        referred to in subsection (b) is less than the amount 
        previously determined, each amount authorized to be 
        appropriated that was reduced under subsection (c)(2) shall be 
        increased, by an equal percentage, to the extent the Secretary 
        determines that it may be so increased without causing the 
        amount described in subsection (a)(1) to exceed the amount 
        described in subsection (a)(2) (but not by more than the amount 
        of the reduction).
          ``(2) Apportionment.--The Secretary shall apportion amounts 
        made available for apportionment by paragraph (1).
          ``(3) Period of availability.--Any funds apportioned under 
        paragraph (2) shall remain available for the period for which 
        they would be available if such apportionment took effect with 
        the fiscal year in which they are apportioned under paragraph 
        (2).
  ``(e) Reports.--Any estimate under subsection (a) and any 
determination under subsection (b), (c), or (d) shall be reported by 
the Secretary to Congress.
  ``(f) Definitions.--For purposes of this section, the following 
definitions apply:
          ``(1) Net aviation receipts.--The term `net aviation 
        receipts' means, with respect to any period, the excess of--
                  ``(A) the receipts (including interest) of the 
                Airport and Airway Trust Fund during such period, over
                  ``(B) the amounts to be transferred during such 
                period from the Airport and Airway Trust Fund under 
                section 9502(d) of the Internal Revenue Code of 1986 
                (other than paragraph (1) thereof).
          ``(2) Unfunded aviation authorizations.--The term `unfunded 
        aviation authorization' means, at any time, the excess (if any) 
        of--
                  ``(A) the total amount authorized to be appropriated 
                from the Airport and Airway Trust Fund which has not 
                been appropriated, over
                  ``(B) the amount available in the Airport and Airway 
                Trust Fund at such time to make such appropriation 
                (after all other unliquidated obligations at such time 
                which are payable from the Airport and Airway Trust 
                Fund have been liquidated).''.
  (b) Conforming Amendment.--The analysis for chapter 471 of title 49, 
United States Code, is amended by striking

``47131. Annual report.''

and inserting the following:

``47131. Safeguards against deficit spending.''.
``47132. Annual report.''.

SEC. 4. SAFEGUARDS AGAINST DEFICIT SPENDING OUT OF THE INLAND WATERWAYS 
                    TRUST FUND AND HARBOR MAINTENANCE TRUST FUND.

  (a) Estimates of Unfunded Inland Waterways Authorizations and Net 
Inland Waterways Receipts.--Not later than March 31 of each year, the 
Secretary of the Army, in consultation with the Secretary of the 
Treasury, shall estimate--
          (1) the amount which would (but for this section) be the 
        unfunded inland waterways authorizations and unfunded harbor 
        maintenance authorizations at the close of the first fiscal 
        year that begins after that March 31; and
          (2) the net inland waterways receipts and net harbor 
        maintenance receipts at the close of such fiscal year.
  (b) Procedure If Excess Unfunded Inland Waterways Authorizations.--If 
the Secretary of the Army determines with respect to the Inland 
Waterways Trust Fund or the Harbor Maintenance Trust Fund for any 
fiscal year that the amount described in subsection (a)(1) exceeds the 
amount described in subsection (a)(2), the Secretary shall determine 
the amount of such excess.
  (c) Adjustment of Authorizations if Unfunded Authorizations Exceed 
Receipts.--
          (1) Determination of percentage.--If the Secretary of the 
        Army determines that there is an excess referred to in 
        subsection (b) for a fiscal year, the Secretary of the Army 
        shall determine the percentage which--
                  (A) such excess, is of
                  (B) the total of the amounts authorized to be 
                appropriated from the Inland Waterways Trust Fund or 
                the Harbor Maintenance Trust Fund, as the case may be, 
                for the next fiscal year.
          (2) Adjustment of authorizations.--If the Secretary of the 
        Army determines a percentage under paragraph (1), each amount 
        authorized to be appropriated from the Trust Fund for the next 
        fiscal year shall be reduced by such percentage.
  (d) Availability of Amounts Previously Withheld.--If, after an 
adjustment has been made under subsection (c)(2), the Secretary of the 
Army determines with respect to the Inland Waterways Trust Fund or the 
Harbor Maintenance Trust Fund that the amount described in subsection 
(a)(1) does not exceed the amount described in subsection (a)(2) or 
that the excess referred to in subsection (b) with respect to the Trust 
Fund is less than the amount previously determined, each amount 
authorized to be appropriated that was reduced under subsection (c)(2) 
with respect to the Trust Fund shall be increased, by an equal 
percentage, to the extent the Secretary of the Army determines that it 
may be so increased without causing the amount described in subsection 
(a)(1) to exceed with respect to the Trust Fund the amount described in 
subsection (a)(2) (but not by more than the amount of the reduction).
  (e) Reports.--Any estimate under subsection (a) and any determination 
under subsection (b), (c), or (d) shall be reported by the Secretary of 
the Army to Congress.
  (f) Definitions.--For purposes of this section the following 
definitions apply:
          (1) Airport and airway trust fund.--The term ``Airport and 
        Airway Trust Fund'' means the Airport and Airway Trust Fund 
        established by section 9502 of the Internal Revenue Code of 
        1986.
          (2) Harbor maintenance trust fund.--The term ``Harbor 
        Maintenance Trust Fund'' means the Harbor Maintenance Trust 
        Fund established by section 9505 of the Internal Revenue Code 
        of 1986.
          (3) Highway trust fund.--The term ``Highway Trust Fund'' 
        means the Highway Trust Fund established by section 9503 of the 
        Internal Revenue Code of 1986.
          (4) Inland waterways trust fund.--The term ``Inland Waterways 
        Trust Fund'' means the Inland Waterways Trust Fund established 
        by section 9506 of the Internal Revenue Code of 1986.
          (5) Net harbor maintenance receipts.--The term ``net harbor 
        maintenance receipts'' means, with respect to any period, the 
        receipts (including interest) of the Harbor Maintenance Trust 
        Fund during such period.
          (6) Net inland waterways receipts.--The term ``net inland 
        waterways receipts'' means, with respect to any period, the 
        receipts (including interest) of the Inland Waterways Trust 
        Fund during such period.
          (7) Unfunded inland waterways authorizations.--The term 
        ``unfunded inland waterways authorizations'' means, at any 
        time, the excess (if any) of--
                  (A) the total amount authorized to be appropriated 
                from the Inland Waterways Trust Fund which has not been 
                appropriated, over
                  (B) the amount available in the Inland Waterways 
                Trust Fund at such time to make such appropriations.
          (8) Unfunded harbor maintenance authorizations.--The term 
        ``unfunded harbor maintenance authorizations'' means, at any 
        time, the excess (if any) of--
                  (A) the total amount authorized to be appropriated 
                from the Harbor Maintenance Trust Fund which has not 
                been appropriated, over
                  (B) the amount available in the Harbor Maintenance 
                Trust Fund at such time to make such appropriations.

SEC. 5. APPLICABILITY.

  This Act (including the amendments made by this Act) shall apply to 
fiscal years beginning after September 30, 1995.

                                Purpose

    The purpose of this legislation is to fulfill a promise 
made by Congress when it levied user fees on transportation and 
dedicated these fees to transportation purposes: to use the 
proceeds for their intended purposes and not to mask the size 
of the deficit.
    The legislation achieves this purpose by taking off budget 
four self-financed trust funds: the Highway Trust Fund, the 
Airport and Airways Trust Fund, the Harbor Maintenance Trust 
Fund, and the Inland Waterways Trust Fund. Under the current 
budget process, spending out of these four trust funds is held 
down to mask the size of the general fund deficit. Currently, 
the accumulated cash balances from all four trust funds is over 
$30 billion.
    Taking the transportation trust funds off budget will 
restore faith with the taxpayers. The transportation taxes that 
go into the trust funds were levied on the express promise that 
they would be used only for transportation purposes. Under the 
law, amounts in these trust funds cannot be used for anything 
else. In addition, the law provides that interest on amounts in 
the trust funds will be credited to and become part of the 
trust funds. While these funds cannot be used for other 
purposes, if spending is held down under the unified budget, 
the general fund deficit will appear to be smaller. H.R. 842 
treats these trust funds from a budget standpoint as they were 
intended to be treated when the taxes were enacted.

                          Background and Need

                 Overview of Transportation Trust Funds

(I) The transportation trust funds are unique in the Federal budget and 
        do not belong in the unified budget

    Four trust funds within the Federal budget stand out as 
unique in their purpose and operation. These four trust funds 
are the Highway Trust Fund, Airport and Airways Trust Fund, 
Harbor Maintenance Trust Fund, and Inland Waterways Trust Fund. 
Each of the four transportation trust funds has the following 
characteristics:
          (1) Wholly self-financed by the users. Receipts to 
        the funds come from user fees and not from general fund 
        transfers. The transportation trust funds meet the 
        requirements of section 401(d) of the Congressional 
        Budget Act that allows contract authority spending 
        because the funds are 90 percent or more financed 
        through fees.
          (2) Not an entitlement program. Unlike many of the 
        other major trust funds, spending from the 
        transportation trust funds are subject to annual 
        spending levels provided in periodic authorization and 
        appropriation bills.
          (3) Self-supporting, operating on a pay-as-you-go 
        basis.
          (4) Deficit proof, with expenditures limited to 
        receipts. The Highway Trust Fund has a built in self-
        regulatory mechanism. The Secretary of Treasury makes a 
        quarterly determination whether the fund is in balance, 
        and spending levels are automatically reduced if there 
        is a shortfall. H.R. 842 provides a similar mechanism 
        for the other three trust funds.
          (5) Invests in long-range construction programs, 
        which benefit from lower costs due to certainty in 
        funding.
    Of the hundreds of trust funds across the Federal budget, 
only these four have these characteristics. Most of the other 
trust funds are not 100 percent user fee financed and many have 
significant general fund contributions.
    While there are some 170 trust funds in the entire Federal 
budget, most are purely administrative in nature. Just 19 trust 
funds are funded through excise taxes, and only the four 
transportation funds are used to provide capital expenditures 
on infrastructure.
    Before the unified budget was adopted in 1969, the Highway 
Trust Fund was accounted for separately. The Highway Trust Fund 
was included in the unified budget in 1969 in order to help 
mask the cost of the Vietnam War. While recommending that trust 
funds be included as part of the unified budget, the 
President's Commission on Budget Concepts stated: ``This 
recommendation fully recognizes that individual trust funds 
must be accounted for separately, and their activities must be 
reported on in a way which allows the identity and integrity of 
trust fund transactions and balances to be preserved.'' 
Unfortunately this recommendation has never been adopted in 
practice.
    The theory of a unified budget is that it provides a total 
macroeconomic picture of the activities of the Federal 
Government and its total deficit (and, thus, total borrowing 
from the private sector). Removing the trust funds from the 
unified budget does not preclude publication of trust fund 
transactions. For example, while the Social Security Trust Fund 
is technically off-budget, its transactions are commonly 
included in presentations of the Federal budget.
    Inclusion of the trust funds in the unified budget implies 
that trust fund revenues can be used for purposes other than 
those to which the funds are dedicated by law. On this point 
the law is clear: amounts in the transportation trust funds may 
only be used for specified transportation purposes. In 
addition, the public is misled as to the actual size of the 
general fund deficit when trust fund surpluses are used to mask 
the size of the deficit.
    It should come as no surprise that before 1969, the cash 
balance in the Highway Trust Fund was less than $1 billion. As 
can be seen from the following graph, Trust Fund balances did 
not explode until the Trust Fund became part of the unified 
budget.


(II) Theory and operation of the transportation trust funds

    In establishing the Highway, Aviation, Inland Waterways, 
and Harbor Maintenance trust funds, Congress had specific 
policy reasons for choosing a user fee (or excise tax) funding 
mechanism and a trust fund. Prior to the establishment of the 
trust funds, transportation infrastructure programs were funded 
out of general revenues. Everyone paid for the capital 
improvements, regardless of use.
    With the creation of the trust funds, a set of user charges 
was levied that drew a relationship between those benefitting 
from the Government expenditure and the tax paid. On the other 
side of the coin, with the creation of a trust fund, the payers 
of the user fee or excise tax had some assurance that proceeds 
would finance a program from which they benefit directly.
    Because of the direct connection between the tax imposed 
and the benefit derived from improvement in transportation 
infrastructure, there is strong support for these user fees. A 
recent poll found that 72 percent of Americans believe the 
motor fuel user fee is the fairest way to finance highway 
improvements. When asked about balances in the transportation 
trust funds, 74 percent of Americans believe trust funds should 
only be used for transportation improvements. Conversely, only 
20 percent believe trust funds should be used to make the 
deficit seem smaller.
    In creating these trust funds, the Government undertook a 
fiduciary responsibility. While it was intended that all but a 
prudent reserve would be spent, the law stipulated that any 
unspent balances be invested in the safest security possible, 
US Treasury notes, the same type of security used for the 
Social Security Trust Fund.
    Just as with the Social Security trust fund, total balance 
is a real commitment regardless of the amount of interest 
earned. Since its inception in 1937, approximately one-half of 
the current balance in the Social Security Old Age and 
Survivors Fund is attributable to accumulated interest 
payments. No one would suggest that these interest payments are 
not payable to recipients. The fact is that if the Government 
were not holding on to the money, taxpayers would be earning 
and keeping the same interest in their own bank accounts. The 
same logic applies to the transportation trust funds.
    The following is a brief description of each of the four 
transportation trust funds:
    The Highway Trust Fund was created by Congress in the 
Federal-aid Highway Act of 1956. The fund was designed to 
finance the construction of the National Interstate and Defense 
Highway System. The Highway Trust Fund was established as a way 
to provide funding for capital construction and this remains 
its principal focus. In 1982, the fund was split into two 
parts, the Highway Account, which finances the Federal-aid 
highway program, and the Transit Account, which funds new and 
rehabilitated transit infrastructure. Eighty percent of the 
revenues into the Trust Fund are deposited into the Highway 
Account, and 20 percent into the Transit Account.
    The Highway Trust Fund receives revenues from the 
imposition of excise taxes on motor fuels, and sales taxes on 
tires, trucks, buses and trailers as well as truck use taxes. 
Approximately 90 percent of Highway Trust Fund revenue is 
attributable to motor fuel excise tax revenues on gasoline and 
diesel fuel. The current Federal tax is 18.3 cents on gasoline 
and 24.3 cents on diesel fuel. Of each of these taxes, 4.3 
cents is deposited into the general fund of the Treasury for 
deficit reduction. The remainder, 14 cents on gasoline and 20 
cents on diesel fuel, is deposited into the Highway Trust Fund.
    In its first 12 years of existence, the Highway Trust Fund 
balance remained at $1 billion or less. With the advent of the 
unified budget in 1969, the Highway Trust Fund balance grew 
rapidly in the 1970's. The current balance in the Highway Trust 
Fund totals $19 billion. The Highway Account balance is over 
$9.4 billion, and the balance in the Transit Account is nearly 
$9.6 billion. Current projections estimate a balance of nearly 
$21.4 billion at the end of 1996, $11.3 billion in the Highway 
Account and $10.1 billion in the Transit Account.
    The balances in the Highway and Transit Accounts exist, in 
large part, because funds are not obligated for highway and 
transit projects. The primary reason for the large balance in 
the Highway Account is Congressionally-established limitations 
on yearly obligations from the Trust Fund. These yearly 
limitations constrain the amount of Federal funds authorized to 
be spent from the Trust Fund that may actually be spent each 
year. Funds that are not available to the States accumulate in 
the Trust Fund, contributing to the growth in the balances.
    Income to the Trust Fund comes from tax revenues and 
interest that is earned on Trust Fund balances. Since 1956, tax 
revenue income to the Highway Trust Fund has generally 
increased. Tax revenues were $1.48 billion in 1957, the first 
year of the trust fund, $3.9 billion in 1966, $5.4 billion in 
1976, $13.4 billion in 1986 (Highway and Transit Accounts) and 
are estimated to be $24.5 billion in 1996 (Highway and Transit 
Accounts). By contrast, interest income has varied, at $3 
million in 1957, $8 million in 1966, $587 million in 1976, 
$1.33 billion in 1986 (Highway and Transit Accounts) and is 
estimated to be $1.31 billion in 1996 (Highway and Transit 
Accounts). The authorizing legislation passed by Congress in 
1956 clearly makes no distinction between revenues credited 
from user receipts and revenues credited as interest income in 
terms of the amounts made available from trust fund balances 
for highway and transit transportation projects and programs.

                          Aviation Trust Fund

    The Airport and Airway Trust Fund (also known as the 
Aviation Trust Fund) was established by the Airport and Airway 
Revenue Act of 1970. The Aviation Trust Fund is financed by a 
10 percent tax on airline passenger ticket sales, a 6.25 
percent cargo waybill tax, a $6 international departure tax, a 
15 cent per gallon tax on aviation fuel and a 17.5 cent per 
gallon tax on aviation jet fuel. The proceeds of the Aviation 
Trust Fund are used for Federal Aviation Administration (FAA) 
airport improvement grants, facilities and equipment costs, 
research and development, and part of the FAA's operation and 
maintenance expenses.
    The Aviation Trust Fund's uncommitted balance has ranged 
from $3.7 billion to $7.7 billion over the past 10 years. For 
fiscal year 1995, income totaled $6 billion and the cash 
balance was $11 billion.
    The Aviation Trust Fund was originally developed to support 
aviation infrastructure needs. FAA's Operations account was to 
be funded with primarily general fund monies. In an attempt to 
assure that the Trust Fund monies would support capital 
projects, the authorization language included a penalty clause 
for many years. If funding for the capital accounts was reduced 
below authorized levels, the penalty clause reduced the amount 
of trust fund monies supporting the Operations account. While 
the penalty clause was in place, the Aviation Trust Fund 
balances grew because FAA's capital accounts were underfunded.
    In 1990, the Appropriations and Transportation Committees 
agreed to remove the penalty clause if the FAA capital 
accounts, specifically the Airport Improvement Program (AIP), 
were funded at specific levels. For 3 years, the Aviation Trust 
Fund supported 75 percent of FAA's budget.
    In 1993, the AIP program was cut and more trust fund monies 
were spent on FAA Operations. In addition, the National 
Commission to Ensure a Strong Competitive Airline Industry 
recommended ``reducing the FAA budget allocation from the trust 
fund from 75 percent to 70 percent in recognition of the 
overpayment by airline users, and the public benefits of 
aviation''. The authorizing language was changed so that the 
Aviation Trust Fund would support 70 percent or less of FAA's 
budget, depending on the level of funding for capital accounts.
    Currently, the Aviation Trust Fund balance is declining 
because Congress has not reinstated the aviation taxes which 
expired on December 31, 1995. We believe the taxes should be 
reinstated as soon as possible.
    The Inland Waterways Trust Fund, begun in 1978, is funded 
by excise taxes on the fuel used in commercial waterway 
transportation by vessels on specified inland or intracoastal 
waterways. The fund covers 50 percent of the construction and 
rehabilitation expenditures for navigation projects on these 
waterways. Fiscal year 1995 income was $100 million and the 
fund balance was $300 million.
    Established in 1986, the Harbor Maintenance Trust Fund is 
financed by: 1) ad valorem user fees imposed on commercial 
cargo loaded and unloaded by specified U.S. ports open to 
public navigation and 2) through a portion of Saint Lawrence 
Seaway tolls. The fund pays for Corps of Engineers maintenance 
of harbors and pays for operations and maintenance costs of the 
Saint Lawrence Seaway. Receipts for fiscal year 1995 were $700 
million and the fund balance is $600 million.
    Although established as user fees, the United States Court 
of International Trade ruled on October 25, 1995, in the case 
of United States Shoe Corp. v. United States, that the Harbor 
Maintenance fees were unconstitutional export taxes that 
violated Article I, section 9, clause 5 of the Constitution. 
Part of the rationale of the court was that there is no 
mechanism to ensure that the fees collected will be used only 
or primarily for the cost of port maintenance associated with 
the shipping that is taxed. Taking the Harbor Maintenance Trust 
Fund off budget would ensure that the fees are in fact spent 
for costs of port maintenance.

(III) Controls on trust fund spending

    Congress and the Executive branch retain all their current 
controls on trust fund programs once they go off budget. 
Authorizing committees will still provide contract authority, 
the level of which is closely scrutinized. Also, both the 
Appropriations and authorizing committees will still be able to 
set obligation limitations to manage the programs. Similarly, 
the tax writing committees retain all their current power to 
set and adjust revenues into the trust funds.
    The only change will be that there will no longer be an 
incentive to use trust fund surpluses to mask the operating 
deficit. This will improve the overall budget process by 
removing the current budget bias toward operating programs at 
the expense of the capital investments made by these trust 
funds.
    Transportation spending would not be a new entitlement if 
the trust funds are taken out of the general fund budget. 
Transportation spending would continue to be subject to a 
variety of controls:
          (1) These programs are subject to adequate budget 
        scrutiny. The budget authority for these programs, 
        usually in the form of contract authority in 
        authorization bills, must be approved by the House and 
        Senate and signed by the President. Non-contract 
        authority programs must receive annual appropriations. 
        In addition annual obligation ceilings are provided--
        and, we anticipate, will continue to be provided--in 
        transportation appropriations bills. Thus, the Congress 
        will be able to decide on the appropriate level of 
        funding for these programs during consideration of 
        these bills.
          (2) In determining the appropriate level of funding 
        for these programs, Congress will be able to consider a 
        number of factors: how much the trust fund can support, 
        whether trust fund spending should be reduced in order 
        to reduce the total amount of money the Government must 
        borrow, the need to control inflation, etc.
          However, taking the trust funds off budget will 
        prevent trust fund programs from being pitted against 
        other programs which must compete for funding from the 
        deficit-ridden general fund.
          (3) And finally, these trust funds are protected by a 
        fail-safe balanced budget provision which assures the 
        trust funds cannot spend more than they take in. The 
        Secretaries of Treasury and Transportation review trust 
        fund spending annually. If they determine that the 
        trust funds cannot pay the bills when they come due, 
        then they are required by law to reduce spending 
        proportionately to assure the trust funds remain 
        solvent.

(IV) Trust funds and the deficit

    The transportation trust funds have not contributed one 
nickel to the Federal deficit. Because of balanced budget-type 
controls, these trust funds are deficit-proof and in fact have 
run substantial surpluses over the years. Their estimated 
combined cash balance at the end of Fiscal Year 1995 is more 
than $31 billion.
    H.R. 842, the Truth in Budgeting Act, does not add to the 
deficit. According to the CBO cost estimate, reprinted in this 
report:

          By itself, taking programs off-budget does not change 
        total spending of the Federal Government and does not 
        affect spending or revenue estimates for Congressional 
        scorekeeping purposes.

    Taking the trust funds off-budget does not alter the 
current authorization and appropriations process. Congress will 
still have to approve every new dollar of trust fund spending. 
Again, quoting CBO:

          The likelihood and amount of a potential increase are 
        very uncertain because they would depend upon future 
        actions by both authorizing and appropriations 
        committees.

    Taking the trust funds off-budget simply changes the budget 
scoring rules so that cuts in trust fund spending can no longer 
be used to mask the size of the deficit.
    Because infrastructure spending spurs economic growth and 
jobs, taking the trust funds off-budget will make it easier to 
balance the budget over the next 7 years. It is this sort of 
long-range vision that is lacking in the current budget debate.

                   Infrastructure Needs Are Enormous

    Without question, the documented needs to repair this 
Nation's crumbling infrastructure far exceed current levels of 
trust fund spending.

Airport needs

    For airport capacity, various airport organizations 
estimate needs at $10 billion per year, of which $6 billion is 
eligible for Federal assistance. The FAA agrees that airports 
need $10 billion annually to maintain and improve US airports.
    In recent years, the Airport Improvement Program (AIP), 
which is funded 100 percent by the Airport Trust Fund, has 
contributed to less than one third of this annual airport need. 
AIP funding for 1996 was $1.45 billion, a 25 percent cut from 
the $1.9 billion level in 1993.
    Aviation traffic has grown significantly in the past and 
will continue to grow. The number of annual passenger 
enplanements have grown from 169 million in 1970, to 529 
million in 1995. FAA expects annual passenger enplanements to 
grow another 47 percent, reaching 775 million by the year 2005.
    If investment needs are not met, aviation passengers will 
experience increasing delays. 23 airports experience more than 
20,000 hours of delay per year. The busiest airports experience 
much more. For instance, delays at Chicago O'Hare Airport have 
exceeded 100 thousand hours every year for the past 5 years.
    If the needed capacity enhancements are not made, FAA 
predicts that by the year 2002, 33 airports will experience 
more than 20,000 hours of delay. These delays are very costly. 
FAA estimates that delaying a commercial aircraft can cost as 
much as $1,600 per hour. In 1991, this was approximately $32 
million for each airport exceeding 20,000 hours of delay.

Highway and transit needs

    According to the Department of Transportation's 1995 Status 
report, nearly 25 percent of the Nation's bridges are 
structurally deficient or functionally obsolete. Over 30 
percent of the Interstate pavement is in poor or mediocre 
condition. The FHWA estimates that in 1994 the backlog in unmet 
needs for the Nation's highways and bridges total $315 billion. 
This is a 13 percent increase from the prior 1993 Needs report.
    DOT estimates that we would have to invest, each year over 
the next 20 years, $54.8 billion, for highway capital 
improvements just to maintain 1993 conditions and performance 
on the Nation's highways and bridges. In 1994, the shortfall in 
highway and bridge capital expenditures approached thirty 
percent. If a higher quality of service was desired for 
highways and bridges, we would need to spend $74 billion in 
capital investment each year.
    DOT further estimates that for transit systems, one-third 
of rail maintenance yards, stations and bridges, and almost one 
half of transit buildings are in poor or fair condition. In 
addition, rolling stock continues to need immediate 
replacement. The average fleet age for all classes of bus and 
paratransit vehicles is greater than the useful life of the 
vehicles.
    Transit needs over the next 20 years approach $8 billion a 
year just to maintain the systems. In order to make quality 
improvements, investments would approach $13 billion a year.
    Beyond the physical condition of the highway, bridge and 
transit systems, congestion relief still alludes us. Congestion 
brings unnecessary delay as well as excess fuel consumption. In 
urban areas, the extent and duration of congestion has 
increased steadily since 1983 while the severity of congestion 
appears unimproved. In 50 urban areas studied, this ``hidden 
tax of congestion'' costs $45 billion each year.

Taking the Transportation Trust Funds Off-Budget Will Spur Productivity 
                    Gains, Economic Growth, and Jobs

    Efficient movement of goods, services and people is central 
to our Nation's social and economic well-being. Transportation 
is a cornerstone of this Nation's economy: America spends 
nearly $1 trillion annually on all modes of transportation and 
transportation services, representing 17 percent of the gross 
domestic product.
    Preliminary results of a new study sponsored by the Federal 
Highway Administration (FHWA) show a strong link between the 
investment in the national highway network and the United 
States' economic performance. This study found:
          (1) On average, between 1950 and 1989, the highway 
        network has contributed to 25 percent of the annual 
        productivity growth in the United States.
          (2) At the national level, every dollar invested in 
        non-local roads from 1950 to 1989 resulted in an 
        average annual production cost savings of 24 cents for 
        United States industries.
          (3) Federal investments in a national highway system 
        produce the highest rates of return.
    One of the key arguments of those in favor of a balanced 
budget is that lower interest costs will improve private sector 
productivity. Instead of focusing blindly on the bottom line, 
this FHWA research points out that improved productivity also 
depends on how we spend Federal dollars. Infrastructure 
investment is one of the few Federal programs that actually 
helps the economy grow.
    Another recently concluded FHWA study also found that for 
every $1 billion of highway investment, the Federal-aid highway 
program supports 42,100 total full-time equivalent jobs. The 
study found these are good, high-wage jobs. In the current 
climate of economic uncertainty and corporate layoffs, 
increased transportation spending is a bipartisan plan to 
create real, private sector jobs.
    There is a wealth of data supporting the link between 
infrastructure spending and the health of the economy and 
businesses:
    Seventy-eight percent of the value of all freight is 
transported by truck over the roads. Over 75 percent of all the 
cities and towns in America rely exclusively on trucks for 
freight delivery.
    Highway and transit infrastructure investments are critical 
to promoting productivity-led economic growth. Efficient 
highways are central to ``lean production'' and ``just-in-
time'' manufacturing, where manufacturers reduce costs by 
minimizing inventories through the use of smaller, more 
frequent deliveries. By 1995, more than one-half of the 
Nation's manufacturers will use just-in-time delivery.
    For example, one domestic auto manufacturer has 32 plants 
operating on just-in-time inventory systems. Every working day 
2,500 trucks travel over 1 million miles delivering components 
and parts to those 32 plants just at the point in the 
production process where they are needed. In fact, a modern 
plant using just-in-time inventory would keep only 3-4 hours of 
many critical parts on hand and rely on the next truckload to 
keep the line moving.
    Congestion takes a terrible toll on the Nation's economy. 
In major urban areas it is estimated to cost $40 billion 
yearly. For example, United Parcel Service has 70,000 drivers 
on the road daily. If each driver encounters traffic delays of 
just 5 minutes per day, it costs United Parcel Service more 
than $40 million per year. Highway and transit infrastructure 
investments are critical to addressing this urban congestion 
problem.
    Highways and transit are needed to access suburban 
development and employment. The bulk of all new jobs created in 
the United States since 1970 have been in the suburbs and the 
majority of the working poor must drive to work in order to 
meet non-traditional work shifts or access dispersed job 
locations. Workplace decentralization will only continue as the 
information superhighway, telecommunications, and computer 
technologies ripple through society. Any effort to empower all 
Americans--urban, suburban and rural--must ensure that they 
have adequate mobility to access to fast-growing areas.
    Federal investment in highways and transit are primarily 
made in the national systems that link all parts of the country 
together and link the U.S. to the rest of the world. These 
investments add value--educing travel time and improving safety 
benefit the entire economy because it allows every business and 
individual to operate more efficiently. This is the proper role 
of government--making transportation improvements that would 
not otherwise be made but are critical to our economy.
    For example, Federal investment in the National Highway 
System is targeted and high-return: gas tax revenues generated 
by highway users are specifically targeted to the Nation's most 
important highways. The National Highway System is made up of 
only 4 percent of the Nation's roads, yet will carry 40 percent 
of our traffic, over 70 percent of the Nation's trucking 
commerce and 80 percent of all tourism. Using dedicated taxes 
to improve the most important highways in America is exactly 
the type of targeted, high-return investment that our Nation 
needs.
    Highway and transit improvements will also help facilitate 
international trade. The North American Free Trade Agreement 
(NAFTA) and the General Agreement on Tariffs and Trade (GATT) 
treaties have made international trade an even larger component 
of our economy. By linking our transportation systems with 
those of Canada and Mexico--our first and third largest trading 
partners--and strengthening links with major ports, airports 
and other intermodal facilities, transportation improvements 
maximize national productivity and our competitiveness in this 
increasingly global economy. Even before the passage of NAFTA, 
trucks carried 80 percent of the freight between the U.S. and 
Mexico and 60 percent between the U.S. and Canada.
    Highways and transit are also central to growth in travel 
and tourism, which constitute America's third-largest industry 
and contribute $350 billion to the economy. Efficient 
transportation systems are essential to promoting and 
furthering tourism.

                      Section-by-Section Analysis

                         section 1. short title

    Provides that the Act may be cited as the ``Truth in 
Budgeting Act.''

 Section 2. Budgetary Treatment of Highway, Airport and Airway, Inland 
             Waterways, and Harbor Maintenance Trust Funds.

    This language tracks the language used to take the Social 
Security Trust Funds off-budget in Section 13301 of the Budget 
Enforcement Act of 1990. Specifically, the language provides 
that all receipts and disbursements of the Highway, Aviation, 
Inland Waterways, and Harbor Maintenance Trust Funds shall not 
be counted as new budget authority, outlays, receipts, or 
deficit or surplus for purposes of: 1) the budget of the United 
States Government as submitted by the President, or 2) the 
congressional budget (including allocations of budget authority 
and outlays provided therein). Additionally, the receipts and 
disbursements are exempted from any general budget limitations 
imposed by statute.
    The effect of this language is to remove the trust funds 
from: 1) calculations of the on-budget deficit, 2) 
congressional budget resolutions, including spending 
allocations provided to committees, and 3) spending points of 
order under the Budget Act.

   Section 3. Safeguards against Deficit Spending Out of Airport and 
                           Airway Trust Fund

    This section duplicates for the Aviation Trust Fund the 
automatic spending safeguards provided by the Byrd Rule in the 
Highway Trust Fund. Specifically, if the Secretary of 
Transportation, in consultation with the Secretary of the 
Treasury, determines that fund balances and expected receipts 
do not cover unfunded aviation authorizations, those 
authorizations are reduced on a pro-rata basis to cover the 
shortfall.
    While spending safeguards are already built into this trust 
fund, this provision provides the absolute assurance of a Byrd 
Rule type process to ensure that the trust fund is deficit 
proof and operates on a pay as you go basis. (Note: the Byrd 
Rule as it applies to the Highway Trust Fund is named after 
former Senator Harry Byrd of Virginia and is not the same Byrd 
Rule in the Senate relating to extraneous matters in 
reconciliation legislation.)

   Section 4. Safeguards Against Deficit Spending Out of the Inland 
        Waterways Trust Fund and Harbor Maintenance Trust Fund.

    This section mirrors Section 3, except that it applies to 
the Inland Waterways and Harbor Maintenance Trust Funds and has 
the Secretary of the Army consult with the Secretary of the 
Treasury in making the necessary determinations.

                        Section 5. Applicability

    Provides that this Act becomes effective beginning with the 
1996 Fiscal Year. The existence of on-budget trust fund 
surpluses only reinforces the public's belief that they are not 
getting an honest return for the taxes they pay to Washington. 
We can restore the contract we have with taxpayers, and help 
restore their faith in government, by ensuring the integrity of 
these self-financed programs.

                    Hearings and Legislative History

    H.R. 842, The Truth in Budgeting Act, was introduced on 
February 7, 1995. It currently has 224 cosponsors, including a 
majority of Republicans, a majority of Freshman members and 91 
Democratic members. On March 10, 1995, the Subcommittee on 
Surface Transportation held a hearing on H.R. 842 and heard 
testimony from Members of Congress and outside witnesses.
    On May 3, 1995, the Full Committee ordered reported the 
bill on a unanimous voice vote, with a quorum present. One 
amendment of a technical nature was offered by Chairman Shuster 
and adopted by voice vote. There were no Committee roll call 
votes.

            Committee Oversight Findings and Recommendations

    With respect to clause 2(1)(3)(A) of rule XI of the Rules 
of the House, the Committee's oversight findings and 
recommendations are reflected in this report.

                     Inflationary Impact Statement

    Pursuant to clause 2(1)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that the 
enactment of H.R. 842 will have no significant inflationary 
impact on prices and costs in the operation of the national 
economy.

                        Costs of the Legislation

    Clause 7 of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 403 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

                     Compliance With House Rule XI

    1. With respect to the requirement of clause 2(l)(3)(B) of 
rule XI of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, the 
Committee references the report of the Congressional Budget 
Office included below.
    2. With respect to the requirement of clause 2(l)(3)(D) of 
rule XI of the Rules of the House of Representatives, the 
Committee on Transportation and Infrastructure has received no 
such findings or recommendations from the Committee on 
Government reform and Oversight on the subject of H.R. 842.
    3. With respect to the requirement of clause 2(l)(3)(C) of 
rule XI of the Rules of the House of Representatives and 
section 403 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 842 
from the Director of the Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 20, 1996.
Hon. Bud Shuster,
Chairman, Committee on Transportation and Infrastructure, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 842, a bill to provide off-budget treatment for 
the Highway Trust Fund, the Airport and Airway Trust Fund, the 
Inland Waterways Trust Fund, and the Harbor Maintenance Trust 
Fund, as ordered reported by the House Committee on 
Transportation and Infrastructure on May 3, 1995. Enacting H.R. 
842 would not affect direct spending or receipts. Therefore, 
pay-as-you-go procedures would not apply to the bill.
    This bill would take the Highway, Airport and Airway, 
Inland Waterways, and Harbor Maintenance Trust Fund off-budget 
and would exempt trust fund spending from the discretionary 
spending caps, pay-as-you-go procedures, and Congressional 
budget controls (including the Budget Resolution, 602 
allocations, and reconciliation instructions).
    By itself, taking programs off-budget does not change total 
spending of the federal government and does not affect spending 
or revenue estimates for Congressional scorekeeping purposes. 
However, because this provision exempts trust fund spending 
from the budgetary control and enforcement procedures that 
apply to most other programs, transportation spending could 
increase significantly. The likelihood and amount of a 
potential increase are very uncertain because they would depend 
upon future actions by both authorizing and appropriations 
committees. Competing factors would come into play. On the one 
hand, the Congress would be able to spend more money because 
the current budgetary controls would no longer apply. On the 
other hand, the Congress plans on balancing the overall federal 
budget by 2002, and spending for these programs would still 
count in determining whether the budget is balanced.
    At the beginning of fiscal year 1996, the amount of 
unobligated contract authority for transportation programs 
subject to an obligation limitation was $10.3 billion. In the 
years after 1996, the balance would grow under CBO's baseline 
assumptions. The Congress could decide to make these balances 
available for obligation. In addition, it could choose to 
increase funding for the Federal Aviation Administration in 
order to modernize the air traffic control system. Even if the 
Congress limits trust fund spending to the amounts of income to 
the funds, spending could increase substantially over the 1995 
level.
    In addition, the bill would establish rules similar to the 
Highway Trust Fund's Byrd rule for the Airport and Airway, 
Harbor Maintenance, and Inland Water Trust Funds. The Byrd rule 
tries to preserve the solvency of the highway account of the 
Highway Trust Fund by comparing unexpended budget authority to 
the fund's cash balance and two years of future revenue. If the 
unexpended budget authority is greater than the cash balance 
and revenue, the budget authority is reduced. The rules 
established in H.R. 842 compare authorizations of 
appropriations that have not been appropriated--rather than 
budget authority--to the fund's unobligated cash balance and 
one year of revenue. Under these rules, if trust fund resources 
are insufficient to cover authorizations of appropriations then 
such authorizations would be reduced. The rule is ineffective 
in preserving a trust fund's solvency because, unlike the 
special rules for authorizations for the Highway Trust Fund, an 
authorization of appropriations is not budget authority but 
only a stamp of approval for a program to receive budget 
authority in the future.
    H.R. 842 contains no intergovernmental or private sector 
mandates as defined in Public Law 104-4 and would impose no 
direct costs on state, local, or tribal governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Clare 
Doherty.
            Sincerely,
                                         June E. O'Neill, Director.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (new matter is printed 
in italic and existing law in which no change is proposed is 
shown in roman):

              CHAPTER 471 OF TITLE 49, UNITED STATES CODE

                    CHAPTER 471--AIRPORT DEVELOPMENT

                    SUBCHAPTER I--AIRPORT IMPROVEMENT

Sec.
47101.  Policies.
     * * * * * * *
[47131. Annual report.]
47131. Safeguards against deficit spending.
47132. Annual report.
     * * * * * * *

                   SUBCHAPTER I--AIRPORT IMPROVEMENT

          * * * * * * *

Sec. 47131. Safeguards against deficit spending

  (a) Estimates of Unfunded Aviation Authorizations and Net 
Aviation Receipts.--Not later than March 31 of each year, the 
Secretary, in consultation with the Secretary of the Treasury, 
shall estimate--
          (1) the amount which would (but for this section) be 
        the unfunded aviation authorizations at the close of 
        the first fiscal year that begins after that March 31, 
        and
          (2) the net aviation receipts at the close of such 
        fiscal year.
  (b) Procedure if Excess Unfunded Aviation Authorizations.--If 
the Secretary determines for any fiscal year that the amount 
described in subsection (a)(1) exceeds the amount described in 
subsection (a)(2), the Secretary shall determine the amount of 
such excess.
  (c) Adjustment of Authorizations if Unfunded Authorizations 
Exceed Receipts.--
          (1) Determination of percentage.--If the Secretary 
        determines that there is an excess referred to in 
        subsection (b) for a fiscal year, the Secretary shall 
        determine the percentage which--
                  (A) such excess, is of
                  (B) the total of the amounts authorized to be 
                appropriated from the Airport and Airway Trust 
                Fund for the next fiscal year.
          (2) Adjustment of authorizations.--If the Secretary 
        determines a percentage under paragraph (1), each 
        amount authorized to be appropriated from the Airport 
        and Airway Trust Fund for the next fiscal year shall be 
        reduced by such percentage.
  (d) Availability of Amounts Previously Withheld.--
          (1) Adjustment of authorizations.--If, after a 
        reduction has been made under subsection (c)(2), the 
        Secretary determines that the amount described in 
        subsection (a)(1) does not exceed the amount described 
        in subsection (a)(2) or that the excess referred to in 
        subsection (b) is less than the amount previously 
        determined, each amount authorized to be appropriated 
        that was reduced under subsection (c)(2) shall be 
        increased, by an equal percentage, to the extent the 
        Secretary determines that it may be so increased 
        without causing the amount described in subsection 
        (a)(1) to exceed the amount described in subsection 
        (a)(2) (but not by more than the amount of the 
        reduction).
          (2) Apportionment.--The Secretary shall apportion 
        amounts made available for apportionment by paragraph 
        (1).
          (3) Period of availability.--Any funds apportioned 
        under paragraph (2) shall remain available for the 
        period for which they would be available if such 
        apportionment took effect with the fiscal year in which 
        they are apportioned under paragraph (2).
  (e) Reports.--Any estimate under subsection (a) and any 
determination under subsection (b), (c), or (d) shall be 
reported by the Secretary to Congress.
  (f) Definitions.--For purposes of this section, the following 
definitions apply:
          (1) Net aviation receipts.--The term ``net aviation 
        receipts'' means, with respect to any period, the 
        excess of--
                  (A) the receipts (including interest) of the 
                Airport and Airway Trust Fund during such 
                period, over
                  (B) the amounts to be transferred during such 
                period from the Airport and Airway Trust Fund 
                under section 9502(d) of the Internal Revenue 
                Code of 1986 (other than paragraph (1) 
                thereof).
          (2) Unfunded aviation authorizations.--The term 
        ``unfunded aviation authorization'' means, at any time, 
        the excess (if any) of--
                  (A) the total amount authorized to be 
                appropriated from the Airport and Airway Trust 
                Fund which has not been appropriated, over
                  (B) the amount available in the Airport and 
                Airway Trust Fund at such time to make such 
                appropriation (after all other unliquidated 
                obligations at such time which are payable from 
                the Airport and Airway Trust Fund have been 
                liquidated).
          * * * * * * *