Refueling ISTEA: Congress primes the pump

When passed in 1991, the Intermodal Surface Transportation Efficiency Act (ISTEA) was trumpeted as a breakthrough in infrastructure legislation, giving states and localities unprecedented leeway to determine where and how transportation funds should be spent. Since then, the nation’s transportation officials have moved slowly ahead, undertaking projects that would have been delayed or even impossible without ISTEA.

Despite signs of progress, however, ISTEA is plagued by persistent underfunding. And there is frustration from local and state officials who say they have met the planning and administrative requirements of the act only to have Congress renege.

“When Clinton ran in ’92, he adopted the phrase ‘Rebuild America,’ and it is certainly disappointing to see that [the Administration’s] commitment to the issue has wained considerably,” says Casey Dinges, director of government relations for the American Society of Civil Engineers. “It is a reasonable prediction to envision that in fiscal year 1996 federal appropriations for transportation will be less than in fiscal year 1995. It’s only a question of how much.”

Proponents of ISTEA are watching closely as Congress prepares to take up the issues of transportation funding in general and, more specifically, designation of the National Highway System. “This is a big year,” says Dinges. “It is a critical turning point for federal involvement.”

‘A slow erosion’

Surface transportation and transit, the two major components of ISTEA (see table), are funded primarily by the federal gasoline tax. Although Congress is authorized to appropriate $151 billion over six years for ISTEA ($119 for surface transportation, $32 billion for transit), federal spending caps have prevented full release of the funds.

Not surprisingly, there have been complaints. “Frankly, both shortrange and long-range planning are difficult,” says Carla Berroyer, chief of urban program planning for the Illinois Department of Transportation. “Not only can we not find out how much federal funding will be available in two years, imagine how difficult it will be for 20 years.”

Despite the unpredictability of funds, Berroyer can point to ISTEA successes in her state — most notably, the $450-million reconstruction of the Kennedy Expressway. “We’ve received hundreds of millions of dollars, which we’ve matched with state funds, to undertake highway and transit improvements,” she-says.

But appropriations remain a concern. “Honestly, it’s been sort of a slow erosion,” she explains. “ISTEA raised a lot of expectations, but from year to year authorized levels have gone up while appropriated levels have fallen.”

The Off-Budget Dilemma

While Berroyer’s perception of dwindling funds is widely held, statistics show that ISTEA appropriations were at their lowest in fiscal year 1993 (see chart on page 42). However, the fact remains that funding has never reached authorized levels.

Dinges is one of several sources who say ISTEA is constrained by the nation’s unified budget rather than lack of funds. Until the Highway Trust Fund is taken off budget, he says, ISTEA will continue to be underfunded.

“Most of ISTEA is funded by dedicated user fees such as the gasoline tax,” Dinges explains. “When this tax was first enacted, the idea was that the public would pay these user fees to be placed in a highway trust fund to be spent on highway and transportation projects.”

Under the Johnson Administration, however, the budget was consolidated so that all federal revenue was placed on a single balance sheet. The dedicated user fees making up the Highway Trust Fund, even though they could only be spent on infrastructure projects, were no longer managed outside the rest of the federal budget.

“The problem with the unified budget approach is that, when Congress puts caps on things like discretionary spending, money in trust funds can’t be spent under those caps,” says Dinges. “The trust funds build up, interest grows, and the federal government uses the interest to pay off other areas of the deficit.

“By not spending the money, they’re making the deficit look smaller,” he continues. “It’s a misuse of the trust funds and is used to disguise the actual size of the deficit.”

The cash balance in the Highway Trust Fund is nearly $20 billion. The Clinton Administration has proposed tapping that money, together with the Aviation, Inland Waterway and Harbor Maintenance Trust Funds, to pay for $1.5 billion in existing general fund programs.

However, two days after President Clinton announced his 1996 budget proposals, Rep. Bud Shuster (R-Pa.), chairman of the U.S. House of Representatives Committee on Transportation and Infrastructure, introduced a bill to move all four transportation trust funds off budget and preserve their dedicated nature.

Shuster is “extremely in favor of the trust funds coming off budget,” says Jeff Nelligan, communications director for the House committee. With respect to the Highway Trust Fund, in particular, he says, “All gas tax is not dedicated to infrastructure, and [Shuster] wants to change that.”

The outlook for Congressional support of the bill is mixed. “There will be Republican support for moving the trust fund off budget,” predicts Dinges. “There is overwhelming bipartisan support on the Senate Public Works Committee.”

Hank Dittmar, executive director of the Surface Transportation Policy Project, takes a more skeptical view. “It’s a hard one to push if Congress is serious about reducing the size of the budget,” he says. “You would have to take the funds off budget and take the spending off. It’s a hard sell.”

designation deadline

Although appropriation problems may go unresolved this year, it is clear that Congress must make a decision regarding at least one portion of ISTEA: the National Highway System (NHS). September 30 is the deadline by which Congress must designate the system (choose which of the nation’s roads will receive priority funding). Without designation, Congress must discontinue NHS funding or, to keep funds flowing, extend the decisionmaking deadline.

Designations for NHS, a 150,000-mile network consisting of existing and proposed roads, were presented to Congress in 1993 by the U.S. Department of Transportation. Last year, the House and Senate could not reach agreement on the proposals, divided by their differences on federal involvement.

“Early evidence suggests that the House and Senate may have a difficult time resolving many of the same NHS issues they dealt with last Congress,” says Dittmar. “Mr. Shuster continues to back congressionally directed projects (there were 450 demonstration projects in last year’s House bill), and it is a fundamental difference that the Senate wants a ‘clean’ bill. The Senate wants to leave those projects to state and local officials.”

NHS money is already being allocated to states for interstate completion and maintenance; the designation would simply limit the use of those funds to specific roadways. Without designation, NHS funding could stop. “If Congress does not authorize the NHS designation, it jeopardizes at least $6.8 billion,” says Dinges. “If the bill does not happen, a large chunk of money will be in abeyance, and states will be left holding the bag for a while.”

Such a freeze is unlikely, says Bob Fogel, associate legislative director for the National Association of Counties. “If Congress does not adopt the map, I suspect they’ll simply extend the deadline for a year or two. That will not create a squeeze.”

Furthermore, NHS is but one component of ISTEA and has little impact on localities, says Fogel. Cities and counties benefit primarily from the federal bridge and surface transportation programs, he adds.

‘fingers crossed’

If NHS escapes major concern in cities and counties, the issue of underfunding in general does not. In particular, small communities (areas with fewer than 200,000 residents) still rely on states to allocate federal surface transportation funds, and there is some argument that these are the areas most tightly squeezed when funds are short.

“When ISTEA is not funded at fully authorized levels, competition is more fierce and a little more threatening to state DOTs,” says Rich Weaver, director of planning and programs for the American Public Transit Association. Fogel, on the other hand, notes that in some states the suballocation process is running smoothly.

“The issue is states handing out money,” he says. “In some states, that’s working very well; in others, [some communities] feel they’re not getting their fair share. That tends to be, frankly, not a function of ISTEA but of long-term relationships between state and local governments.”

For Berroyer, the hierarchy of allocation and the administrative burdens surrounding it are worthy of debate, but for this year she feels the bottom line for ISTEA is money.

Lawmakers’ top priority should be maximizing access to the Highway Trust Fund, she says. “If it was truly run off budget, most people at the state and local level would feel that the chance to get user fees back would be greater.

“We’re hoping for a good, predictable flow of funds out of Washington,” she adds. “We have our fingers crossed.”