Wednesday, March 21, 2012

Ken Orski's review of both House and Senate budget processes at this time, including High-Speed Rail.

Ken Orski is on "the right side of God" on this issue.  Here he reviews some of the House language regarding high-speed rail of the Transportation Extension Bill, as both Houses are about to come together on yet another such extension of the current 'temporary' budget, this time until June 30, since the current one expires end of this month.

By June 30, they will most likely have to cook up a further extension until after the elections.  By June, both Parties will be going after each other 'hammer and tongs.'  I would imagine any longer term resolution by that time will be out of the question until after November.

Just to be clear here, I oppose the Republican efforts to couple their Transportation Budget version to oil drilling to cover the costs in that budget beyond the revenue produced by the gradually declining Highway Trust Fund, which is based on gas taxes.  We cannot drill ourselves out of our various energy concerns, but I want to bypass that issue in this discussion.

And, I should reiterate that I support the development of local, urban and regional transit where there is indeed growing demand.  

Inter-state rail, however, is another matter that requires much further examination, while high-speed rail should be off the table as an option due to its dreadful cost/benefit ratio.  Which is to say that high-speed rail in California would be something like the luxurious Orient Express in Europe, only faster, and that rail-line is privately funded and operated for profit.

Having watched several programs on the Orient Express, it's obviously a dazzling experience, but comes at a cost higher than many people's annual salaries.  HSR is likewise a fancy and expensive train ride. We've been asserting that when actual ticket costs are priced for this train in California, its costs will be prohibitively high, if only because state subsidies for operations are prohibited. 

My point here is simple: the government has no business being in the luxury inter-city train service.  This is not Europe or Asia. We can't be compared with them on the basis of a number of criteria that are typically ignored by the rail advocates, such as population density, and pre-existing regular passenger rail service. 

Even the California rail authority now publicly appreciates the need for a basic comprehensive regular rail system that supports high-speed rail found in most other HSR-hosting countries, since HSR, after all, cannot be a stand-alone operation. 

Why aren't others, besides myself, commenting on the fact that the Democrats continue to support the development of a train that will serve only the upper reaches of the income ladder? That surely seems to be counter-intuitive. And, the "jobs" claim made by the Democrats is, at the very least, highly exaggerated.

We have also added Ken Orski's latest Newsletter with a detailed analysis and critique of the Senate Transportation Bill and its shortcomings below the comments on high-speed rail that Ken provided for us.
ARTBA Washington Newsline Plus for March 20, 2012
FY 2013 House Budget Resolution and  HSR

The narrative accompanying the proposed FY 2013 House Budget Resolution contains the following commentary concerning high-speed rail:

"The mechanisms of federal highway and transit spending have become distorted, leading to imprudent, irresponsible, and often downright wasteful spending.  Further, however worthy some highway projects might be, their capacity as job creators has been vastly oversold, as demonstrated by the extravagant but unfulfilled promises that accompanied the 2009 stimulus bill, particularly with regard to high-speed rail.
"In the wake of these failures, and with the federal government's fiscal challenges making long-term subsidization infeasible, high-speed rail and other new intercity rail projects should be pursued only if they can be established as self-supporting commercial services.  The threat of large, endless subsidies is precisely the reason governors across the country are rejecting federally-funded high-speed rail projects.  This budget eliminates these projects, which have failed numerous and clear cost-benefit analyses."


Vol. 23, No. 12 

March 21, 2012

The Fiscal Implications of the Senate Highway Bill (S.1813)--Part II

On March 14, by a vote of 74-22,  the Senate passed an 18-month highway bill (S. 1813) re-authorizing the federal surface transportation program through the end of FY 2013. Twenty-two senators, all Republican, voted against the final bill.

While Washington stakeholder interests and advocacy groups applauded the Senate action as a "victory for bipartisanship," the question of the House response and another temporary extension has cast a shadow on the celebration. House leadership is far from certain they have the votes to pass the 18-month Senate bill. As of now,  the goal is still to move a five-year $260 billion bill according to John Mica, Chairman of the House Transportation and Infrastructure Committee.  

 A temporary extension of the expiring authorization through June 30 has been proposed by house leadership. This should give them more breathing space to muster support for the bill. Whether the House will have the political will to pass a major multi-year transportation bill so late in the season,  with the  election campaign in full swing, remains to be seen.  Many conservative  House and  Senate members would just as soon see the current law extended  past the November elections in the hope that a Republican-controlled Senate next year would give them a better chance to enact a long-term bill to their liking.  

The self-congratulatory mood among the Democrats and their industry allies was also tempered by a realization that the bill is essentially a short-term fix. In six months‚ time "we'll have to start all over again," Sen. Boxer herself reportedly acknowledged. State DOT officials have long maintained that a longer term legislation is required to enable them to plan major projects.

Nor has it escaped any one's notice that coming up with the money for the bill required some creative thinking. As one Senate aide told us, " The measure is popular with our members because they see it as a 'jobs bill.' That's why so many of them were willing to hold their noses and vote for it, knowing full well that the bill uses budgetary accounting gimmicks to cover up the [$12 billion] shortfall."

Sen Bob Corker (R-TN) put it more diplomatically: "The highway bill is so popular that members on both sides of the aisle are willing to kick the can down the road ... But passing a bill that spends money over 18 months and tries to recoup it over a 10 year period is a road to insolvency."

Sen. John Cornyn (R-TX) summed up what many of his colleagues are probably thinking when he noted, "The Highway Trust Fund is broke and we're trying to figure ways to deal with that, but unfortunately we seem to be piddling around the edges rather than dealing with the root causes." (Quoted in Politico's Morning Transportation)

The Highway Bill's Tortured Arithmetic

How, exactly, is the Senate bill being paid for? Our colleague  Gary Hoitsma, editor of the widely-read Washington Letter on Transportation (published by the Carmen Group). has revisited this question in his latest issue (March 19) with a more detailed account than the one provided (and reported by us) last week.  Along with Hoitsma, we agree that the question of the bill's financing  deserves far more scrutiny than has been accorded to it by the national and trade press---and by the transportation community for that matter.

Hoitsma notes that within the final hours before final passage of S. 1813, significant changes to the bill's financing package were incorporated into the legislation through amendments approved in roll call votes and through "unanimous consent."
"It is doubtful," he writes, "that many senators or other outside observers were fully aware of these changes or their significance, just as it is equally doubtful that many members or observers had earlier attempted to delve into the murky details of the convoluted pay-for legislation the Senate Finance Committee originally marked up on Feb. 7 and further modified thereafter." 

Here, in Hoitsma's own words,  are the highlights of  how the Senate bill's finance package has been put together:

There is an outright $5 billion transfer in direct appropriations from the General Fund, comparable in nature to the $35 billion in General Fund transfers made over the past three years. No specific offset for this transfer is identified. The transfer is assumed to be paid for through a variety of pension and tax-related adjustments over 10 years. 

It is noteworthy that no mention of the $5 billion General Fund transfer was made in any of  the Senate Finance Committee's public deliberations or documents  that were issued in the months of February and early March. Its first mention only appears on March 13, burried in the 221-page "Second Manager's Amendment" adopted on the Senate floor by unanimous consent without debate. The transfer was made public the following day, March 14, when it was posted online just a few hours before the final 74-22 vote on the bill. 

There is an immediate transfer of $3 billion to the Highway Trust Fund from the Leaking Underground Storage Tank (LUST) Trust Fund.  No offsets are deemed necessary because these monies are said no longer to be needed to fulfill LUST obligations.

A total of only $9.3 billion is transferred to the HTF through the end of FY 2013, i.e. during the life of the Senate bill. This includes a transfer of tariffs on imported vehicles ($1.6 billion) in addition to the General Fund transfer ($4.5 billion) and the LUST transfer ($3 billion).  Another $4.6 billion is to be transferred to the HTF over the subsequent eight years (FY 2014-22) for a total ten-year  transfer of $13.9 billion.

The bill claims to raise $3.4 billion in the first two years and  $17.1 billion over 10 years in 12  offsets to pay for the HTF transfers and for the bill's newly-designated non-HTF spending (at least $1.4 billion, pending further CBO scoring that is sure to increase this number significantly). A total of $9.9 billion of this revenue comes from three pension-related provisions; up to $7.2 billion is derived from  loophole-closing items.

The bill includes no spending cuts as offsets to pay for the bill.  Without any compensating spending cuts in other parts of the federal budget, the bill's spending would violate the Budget Act by breaking through the discretionary spending caps set in law in last year's national debt deal. Facing a point-of-order challenge on this very issue, the Senate voted 66-31 to expressly "waive the Budget Act".

Note: For those who wish to get an even more detailed picture, the March 19 issue of the Washington Letter on Transportation contains a detailed line-item summary of the S.1813 Finance and Revenue Provisions. The summary is broken down to show  two-year and 10-year totals.

Will the House Assert its Authority Under the Origination Clause?

It is these transfers and offsets, extending over a period of up to 10 years to cover 18 month‚s worth of expenditures, that have drawn the most pointed criticism among many Senators and that might  become a  bone of contention in any eventual House-Senate conference on the bill. As a Boehner spokesman  pointedly reminded reporters, "they [the Senate] need to consult Article I of the Constitution."  He was refering to the so-called Origination Clause of the Constitution (Article 1, Section 7, Clause 1)  which stipulates that the House has exclusive authority to introduce bills raising revenue ( "All bills for raising revenue shall originate in the  House of Representatives.")

According to the Congressional Research Service, when a Senate-introduced revenue bill is passed by the Senate and sent to the House for its consideration, the House may place a "blue slip" on the legislation noting the House's constitutional prerogative, and return it to the Senate without taking further action. This "blue-slipping" procedure is meant to affirm the constitutional provision that the House is the sole body authorized to introduce revenue  legislation (The Origination Clause of the U.S. Constitution: Interpretation and Enforcement, James Saturno, Congressional Research Service, March 15, 2011, pp.9-10).  It is not clear whether the House will choose to follow this formal procedure or simply ignore the Senate bill and pursue a version of its own. However, Boehner spokesman's remark suggests that House leadership is quite aware of  its constitutional prerogative.

Implications for the Future

The contortions that the Senate Finance Committee had to go through to come up with offsets to cover a mere $12 billion funding gap, presages an even more difficult challenge in the years ahead. By October 2013, when the 18-month bill (if approved by both Houses) will have reached its end, new offsets will be even harder to find, especially for a multi-year bill. What we may be faced with in the future, one House staffer speculated, is a permanent condition of serial short-term (one- or two-year) reauthorization bills each of which would require only modest amounts in offsets to achieve a balance between expenditures and revenue.  If a longer period of funding certainty were desired, entirely new methods of raising multi-year sums of transportation revenue would need to be devised.

For now,  the Senate is merely toying with half measures that give an illusion of a legislative success but in reality leave all the fundamental questions unresolved.

C. Kenneth Orski, Editor/Publisher

Note: the NewsBriefs can also be accessed at ;   They are occasionally posted  on;;; and the National Journal Transportation Experts Blog (  A listing of all recent NewsBriefs can be found at

Please feel free to forward or reprint this item with appropriate citation. All correspondence, including requests to unsubscribe, should be addressed to: C. Kenneth Orski, Editor/Publisher, email: tel: 301.299.1996;  fax: 301.299.4425. Please make sure that your email account is set up to accept incoming mail from 

No comments: