How the President's 2014 Budget Affects Transportation

President Obama is to be complimented for recommending in his proposed budget for Fiscal Year 2014 a high level of funding for investment in the nation’s transportation infrastructure and an increased level of support for the successor legislation to the current surface transportation reauthorization act, Moving Ahead for Progress in the 21st Century (MAP-21), enacted last year. MAP-21 will expire on September 30, 2014, during the second session of this Congress. Congress will either have to extend MAP-21 or devise a new federal surface transportation program for Fiscal Year 2015.

The president’s emphasis on the preservation and restoration of existing transportation facilities is consistent with the recommendations over the last several years of the Bipartisan Policy Center’s (BPC) transportation policy project. An interesting feature of the president’s proposals is funding to support and spur state and local innovations, in incorporating resilience to rising sea levels and more severe storm surges in planning and project implementation. While the funds recommended are relatively small, given the nature of this challenge, this is a very important initiative in the post-Sandy fiscal environment, in which state and local funds for infrastructure investment and for such adaptation measures are quite scarce.

What is most disappointing about the president’s proposals is the failure to offer a credible source of funding to support these investments or even to assure adequate support for the authorized program levels of MAP-21. For almost two decades the historic consensus across party and ideological lines at the national level to raise adequate revenues for infrastructure investment has broken down. Neither the congressional leadership of either party, nor successive administrations from both parties have offered recommendations for sustainable revenues to support federal surface transportation programs. The result has been a Highway Trust Fund (HTF) that lacks sufficient resources to meet the program levels authorized by Congress.

The HTF’s viability has been maintained only by the transfer of almost $35 billion of general funds to it and the projection of transferring almost $20 billion more of general funds to HTF during the relatively short life of MAP-21. This is not a sustainable fiscal situation. The president’s budget proposal to support his recommended transportation funding increases from “ramping down overseas military operations” (the so-called “peace dividend”) does not seem to be a reasonable or likely response to this funding challenge. Furthermore, this funding source is a significant deviation from the prior, bi-partisan consensus that transportation infrastructure is to be funded by users and beneficiaries of the system.

It is noteworthy that the president’s FY 2014 Budget, as well as his recommendations at the Port of Miami late in March and various provisions of MAP-21, all seem to reflect a growing trend to meet the shortage of sustainable federal transportation-related revenues and stagnant (of not declining, in real terms) federal funding of transportation programs by a growing emphasis on federal financing. MAP-21 contained an eight-fold increase in the federal TIFIA credit and credit enhancement program. The president has called for even greater growth of these credit support programs. In his Miami speech and in his FY 2014 Budget the president also recommended new financing tools under “America Fast Forward” bonds (the successor to “Build America Bonds”), in increase in the cap for qualified private activity bonds (PABs), and a national infrastructure bank.

In its June 2011 report, and in several papers and statements as MAP-21 was under consideration, BPC’s transportation policy project called for federal incentives to, and rewards for, new state and local initiatives. We believe that this will prompt state and local entities to develop new financing tools and revenue sources for transportation investment and to remove or reduce federal barriers to state innovations and discretion, such as the prohibition on tolling the Interstate Highway System. We hope that these measures will be considered in the context of upcoming budget negotiations and the development of the successor bill to MAP-21.

The reality of fiscal constraints in the transportation sector can best be met by enabling the leveraging of federal funds to the maximum extent that is financially prudent and responsible and the wiser investment of scarce public resources in the most beneficial programs and projects.