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Highway Fund Replenished

DANIEL LOOKER 08/01/2014 @ 9:27am Business Editor

Thursday the U.S. Senate reached what some have called the "highway cliff" and blinked. It passed an $11 billion House bill to replenish the Highway Trust Fund that the Senate had amended earlier in the week to force a vote on longer term legislation in December. The House Bill provides funds through next May. 

The 81-13 vote temporarily ends uncertainty over federal funding for highway construction projects that would have been cut by 28% today if Congress didn't act on Thursday.

The root of the problem, Senator Tom Harkin (D-IA) said earlier on Thursday, is that Congress hasn't raised the 18-cent federal gasoline tax since the 1990s, and the trust fund hasn't kept up with demand. 

Harkin favored the amended Senate version because he wanted to see the Senate take up the issue in the lame-duck session of Congress after the November elections. Harkin also favors raising the gas tax and writing a five-year highway bill: "That's what we used to do," he said Thursday before the final passage of the bill.

The gasoline tax has a host of problems, however. Some say it's regressive and hits the poor harder because they haven't been able to buy more fuel-efficient new cars. And the small percentage of all-electric cars on the road don't pay the gasoline tax at all. 

None of the legislation considered this week deals with the gas tax. The House bill -- the one finally passed by the Senate yesterday -- uses something called "pension smoothing" to bring in extra funds by allowing corporations to set aside less money for pensions. That's supposed to increase profits and raise tax receipts. The Senate stripped that from the House bill earlier this week and substituted a shorter-term fix of closing some tax loopholes. The House rejected that and in a game of political ping-pong, sent the bill with pension smoothing back to the Senate.

As always, politics played a role in this maneuvering, too. Democrats, who now control the Senate, would still be in control in December. Republicans, who control the House, are hoping to also be in control of the Senate next May if they win a majority in mid-term elections this November.

Earlier this week, Mike Steenhoek, executive director of the Soy Transportation Coalition based in Iowa, expressed frustration with the process in an email that urged farmers to push Congress to act.

"It’s frustrating that Congress has been unable to provide an extension of funding to ensure the Highway Trust remains solvent," he wrote. "When considering road and bridge construction and maintenance, predictability of funding is almost as important as volume of funding. State departments of transportation often will have five-year plans for the system under their jurisdiction. Given the expense and time required to construct and maintain roads and bridges, it is essential that funding is provided in a predictable manner. Unfortunately, the federal government has been unable to provide this certainty. Our transportation system and the broader economy suffer as a result."

The federal trust fund reimburses state governments for part of their highway maintenance costs.

Steenhoek's group has studied the issue of modernizing funding for road maintenance. Steenhoek explained in his email:

"An extension of highway funding would prevent the Highway Trust Fund from becoming insolvent, but the primary need for our surface transportation system is a funding approach that provides robust and predictable funding."

His group has also put together an analysis of the fuel tax that can be found on its website.

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