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Highway Trust Fund – How it works

The Highway Trust Fund, which collects and allocates money to build and maintain surface transportation structures, receives almost 90 percent of its funding from a fuel tax on gasoline and diesel, while remaining revenue comes from miscellaneous taxes on tires, heavy vehicles, etc. Since 1993 the fuel tax has not adjusted. Advancements in technology has led to a decrease in the amount of fuel consumed and thus a decrease in revenue. Additionally, the almost 25 percent of the revenue from the fuel tax is diverted away from highway spending.

The Highway Trust Fund itself is divided into two accounts—the Highway Account and the Mass Transit Account—and each account expends roughly 85 percent and 15 percent of the total funds respectively. Highway Trust Fund spending has routinely outpaced fuel tax revenue. For the 2015 fiscal year, the Highway Account is estimated to spend upwards of $44 billion on roadway infrastructure and similar projects while only taking in $34 billion. Including the deficit accumulated by the Mass Transit Account, the Highway Trust Fund is expected to amass a deficit of $13 billion by the end of the 2015 FY.

Because the Highway Trust Fund cannot have a negative balance and must have a $5 billion minimum balance to meet obligations, Congress must shift money from the Treasury’s general fund. Over the last six years, Congress has diverted general fund dollars to the Highway Trust Fund more than thirty times. These “patches” are short-term fixes typically lasting from six months to a year and do not represent viable options in the long run.

Proposals for sustainable solutions include:

  • Increasing fuel tax
  • Decreases non-highway spending
  • Taxing the overseas earnings of multinational corporations (repatriation)
  • Downsizing Federal role in transportation
  • Additional State actions such as tolls, bonds, sales taxes

Click here for more information on how the Highway Trust Fund works.

Was the Budget Deal a good Deal for the American Public: Are lawmakers worthy of praise for passing a Budget?

68The long awaited Budget Deal has finally passed out of both Houses of Congress.  But what has really happened.  The answer is in most ways, not much to crow about.  While, Budget Chairs, Ryan and Murray, worked hard to coral unity in their political parties, and did in fact avoid, another potential government shut down, and perhaps will avoid further sequester cuts to Domestic Programs.  The reality is the deal is not much to be proud of.

After accounting for inflation, non-defense discretionary funding (Domestic Programs) is slated to fall in 2015 nearly back to the 2013 post-sequestration level.  By 2016, funding will have dropped below the 2013 post-sequestration level, meaning that all of the gains from the Murray-Ryan deal will be gone.  The 2016 funding level is $105 billion – or 18 percent – below the 2010 level, after adjusting for inflation.

While the Budget deal restores some funding to defense and domestic spending, it mostly halted a downward trend of sequester cuts, but it did little to build up to the levels that keep up with inflation or the growing needs.

So while Murray-Ryan was a positive step, policymakers ultimately will need to revisit the funding limits in current law to prevent the further erosion of funding for critical programs.

As one of the Washington Post staff writers recently blogged:

In fact, while pundits debate whether Republicans or Democrats won the negotiations, the real losers are the American people, on whose backs the deal was brokered. Never mind that it makes none of the crucial investments in education, infrastructure and research that will secure our future. This budget is a lousy deal for the millions of Americans still out of work, for the1 in 5 children growing up in poverty, for the countless families still struggling to make ends meet.

It cuts the pensions of federal workers and military retirees while keeping wide open egregious tax loopholes that benefit the wealthiest. It reduces domestic discretionary spending to Bush-era levels. It does absolutely nothing to create jobs at a time when unemployment remains our biggest economic problem.

Negotiators didn’t even extend unemployment benefits – set to expire three days after Christmas – for1.3 million long-term unemployed workers(and millions of their children), …… Meanwhile, conservatives and progressives agree that letting unemployment benefits lapse would further imperil our fragile economic recovery. In addition to being needlessly cruel, this deal is just plain bad policy…..Simply doing something doesn’t mean that you’re doing the right thing. Washington Post Blog

The end result is the work of Congress is far from done.  All agree headway has been made, avoiding bad consequences of sequester, more choice is now given to committees to fund programs.  But where are we really?  That question won’t be answered by January 15, 2014.  Congressman Ryan on Meet the Press last week called the deal a baby step, and he is right.  There is still uncertainty, for government employees, contractors, Indian Nations and the many that are dependent on Federal Funding for essential programs.  The only fact known is that there is still a need for a grand solution that looks at tax reform for sources of revenue and reform of key programs such as Medicare and Social Security.  Real lawmaking will require more effort than what we are seeing from the current Congress.

Lawmakers Agree to a Deal: Cease Fire in Spending War

Last week, both houses of Congress passed the Ryan-Murray budget deal put forth by the Budget Conference Committee.  The House passed the measure on Thursday night Dec. 12th by a 332-94 vote, and the Senate followed suit by passing the deal the following Thursday Dec. 19th by a vote of 64-36, and the final measure was to be signed into law by President Obama before he leaves on holiday travels to Hawaii.  The two year deal provides for $1.012 trillion in discretionary spending in FY2014, with a slight increase to $1.014 trillion for FY2015.   The compromise deal sits essentially half-way between the $1.058 trillion passed by the Democratically controlled Senate in their budget bill this past spring and the $967 billion sequester level spending Republicans sought to continue.

The deal allocates $520.5 billion in military spending and $491.8 billion for domestic programs in 2014.  The across the board spending cuts of sequestration have been lifted, with the moderately increased spending to be split evenly between military and domestic spending, which restores military funding nearly to pre-sequestration levels.  However, Congress will still face tough decisions in allocating domestic spending through the appropriations process, but the impact on popular programs such as education and Head Start will be less severe. The compromise deal does not continue unemployment benefits for the long-term unemployed which are set to expire three days after Christmas, as Democrats had wanted, and it removes the across the board spending cuts of sequestration in exchange for future savings, disappointing Republicans.  In favor of reaching a deal in time to meet the January 15, 2014 deadline, the larger and more ideological issues of tax reform to raise more revenue and containing growing Medicare and Social Security entitlement spending were left largely unresolved.

Among other specific provisions, the deal raises airline fees, presumably to be dedicated towards costs of airport security, and extends the 2% reduction in Medicare payments under the Budget Control Act of 2011 for an additional two years through 2023.  However, the largest impact will be felt by government employees and military veterans.  Although federal workers will receive a 1% pay increase, that is below the 1.2% inflation rate recently published by the Bureau of Labor Statistics, and does not extend to the lowest paid tiers of wage grade federal employees.  New federal employees will be required to contribute 4.4% of their income towards their government pension program, a continued increase from the .8% required pre-sequestration.  Also contentious is the reduction of the cost-of-living adjustments by 1% for military retirees under age 62.  Despite the increased spending, domestic programs may still face staff reductions through layoffs and early retirement or buyout offers.

Recognizing the challenging timetable to complete the appropriations process before the current stop-gap measure that ended the October federal shut down expires on January 15, 2014, the allocation levels for the twelve individual appropriations bills, known as 302(b) spending caps, were not made public as is customary.  Each subcommittee was privately told it’s cap and given until January 2, 2014 to make detailed appropriations and policy changes.  Negotiators will convene the following week with the goal of getting passage through the House by January 10, allowing the Senate to begin deliberations on January 13, in time to send a final bill to President Obama for his signature by the January 15 deadline. Assuming this two-year budget deal can be finalized in time to meet the January 15 deadline, Congress still faces revisiting the debt-ceiling issue as that short-term measure is set to lapse as early as March 2014.

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