BIC Matters – President Signs 5-Year Transportation Bill

On December 4, President Obama signed a five-year, $305 billion transportation bill. Earlier in the week, the U.S. Senate approved the bill by a vote of 83-16, with both Indiana senators voting in favor. The House of Representatives approved the same measure by a vote of 359-65, with all nine Indiana legislators voting in support.

You can view a comprehensive summary of the legislation prepared by the American Road and Transportation Builders Association here.

Known as the “FAST Act,” the bill provides the first long-term federal highway program authorization since SAFETEA-LU expired in 2009. The legislation provides a total of $281 billion from the Highway Trust Fund over five years (2016-2020), with $225.2 billion going to highways and the remainder to transit and highway safety programs.

The good news is that federal highway funding will jump by 5 percent in FY2016. Unfortunately, after that point, the legislation only provides for inflationary increases (of approximately 2 percent each year). For Indiana, FY2016 funding will be $966.5 million, growing to $1.055 billion in the last year of the bill. For reference, FY2015 funding for Indiana was $919.7 million.

Congress failed to identify a stable, long-term way to pay for highway investment (such as a gas tax increase), instead opting to transfer $70 billion from the federal government’s General Fund to the Highway Trust Fund. This General Fund transfer is offset by a hodge-podge of revenue-raising provisions having nothing to do with transportation – the largest of which took money from the Federal Reserve Bank.

With regard to donor state equity, the legislation continues the status quo, effectively locking all states into the percentage share of total distributions they experienced in FY2015. For example, during FY2015 Indiana received 2.43 percent of all federal highway formula distributions. That same percentage will determine our distributions for each year between 2016-2020.

Federal law has frozen each state’s share of Highway Trust Fund formula distributions since 2010. BIC raised concerns about this situation to our congressional delegation explaining that because our percentage of distributions is frozen at 2.43 percent, and our share of contributions continues to grow, our rate of return is dropping. (Rate of return = percent of distributions/percent of fuel tax contributions.)

During both House and Senate consideration of the highway bill, Indiana legislators worked to improve Indiana’s rate of return. In the U.S. Senate, both Senators Donnelly and Coats prepared amendments to increase Indiana’s rate of return. Unfortunately, the majority leader did not allow them to offer their amendments. On behalf of BIC, Senator Donnelly worked to rally a group of 10 senators on a letter asking transportation committee leaders to ensure that all states receive no less than a 95 percent rate of return.

On the House side, Congressman Todd Rokita and Congressman Andre Carson made a bipartisan push to improve Indiana’s rate of return. On behalf of BIC, during House Transportation and Infrastructure Committee consideration of the legislation, the Indiana legislators introduced an amendment calling for a 95 percent rate of return for all states. The amendment stimulated a healthy debate in committee regarding donor state equity. Despite these efforts, there were not enough votes to modify the legislation.

Considerable thanks go to Indiana’s congressional delegation for working with BIC to raise this important issue and push for reform.

If you have any questions about this issue of BIC Matters, call us at (317) 634-4774.