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Infrastructure bill falls short of meeting ag’s needs

Highway Trust Fund revenue shortcomings as well as COVID-19 emergency deepen projected funding shortfall.

The U.S. House of Representatives voted 233-188 on Wednesday to pass H.R. 2, the Moving Forward Act, comprehensive legislation that invests more than $1.5 trillion in the nation’s infrastructure including roads, bridges and schools. The transportation component involves a $500 billion plan over 10 years.

However, Senate majority leader Mitch McConnell (R., Ky.) said the bill will go nowhere in the Senate and called it the “cousin of the Green New Deal masquerading as a highway bill.” President Donald Trump has also expressed his lack of support for the House Democrats’ plan.

As the nation continues to navigate through the COVID-19 pandemic, efforts will begin to transition from triage and stabilization to long-term wellness activities. “Investing in infrastructure is one of the most effective ways to promote the long-term wellness of the U.S. economy, including agriculture,” Mike Steenhoek, executive director of the Soy Transportation Coalition, said.

Steenhoek noted that he’s encouraged any time infrastructure receives attention from policy-makers. “However, the reality in Washington, D.C., is that there is a limited window of opportunity to achieve meaningful legislation on infrastructure and other areas of importance. It is, therefore, essential that both Democrats and Republicans work together on the front end to develop a transportation bill that has the potential of becoming passed," he said.

“Time wasted today is often not recovered tomorrow,” Steenhoek added.

The current surface transportation law – the Fixing America’s Surface Transportation (FAST) Act – is scheduled to sunset on Sept. 30. The nation’s state departments of transportation strongly urged Congress and the Administration to replace the current law with a new five-year bill prior to Sept. 30 so states can have the confidence and predictability from the federal government to proceed with their specific transportation plans.

Highway funds shortfall

While the FAST Act has provided an additional $70 billion in general funds transferred to the Highway Trust Fund (HTF), Congress must still address the fundamental revenue shortcomings within the fund. 

The HTF is projected to become insolvent beginning in 2022, with a balance deficit of more than $6 billion. “To keep pace and recover from the pending funding shortfall of the HTF, a long-term commitment to prioritize and invest in our aging infrastructure is essential to the overall health of the agriculture industry,” Megan Nelson, economic analyst for the American Farm Bureau Federation,noted in a recent "Market Intel" report.

The U.S. highway system is funded through two primary federal sources: the FAST Act and the HTF. With a focus on highway safety and structural highway programs, the FAST Act authorizes $305 billion over fiscal years 2016 through 2020. Federal funds are distributed to states using a formula based on how individual states may benefit from federal highway assistance relative to other states.

The HTF funds all federal highway programs as well as 80% of public transportation programs via fuel, truck and tire taxes. Last raised in 1993, the excise tax on fuel – 18.4 cents/gal. on gasoline and ethanol blended fuels and 24.4 cents/gal. on diesel fuel – accounts for about 90% of the HTF. For perspective, if the motor fuel tax were adjusted to 2020 values using the Consumer Price Index, the excise tax would be 32 cents/gal. on gasoline and ethanol blended fuels and 43 cents/gal. on diesel.

Nelson noted that when the HTF was conceived, annual vehicle miles traveled -- and, therefore, motor fuel tax revenues -- were rising rapidly. However, this is no longer the case. Every year since the 2007 recession, the dedicated tax revenues flowing into the HTF have fallen short of the surface transportation spending Congress has authorized.

Nelson stated that compounding the issue, the COVID-19 emergency and stay-at-home orders have slowed travel this spring, deepening the projected HTF revenue shortfall. According to the U.S. Department of Transportation, travel on all roads and streets was down 41.2%, or 112 billion vehicle miles, in April and 27.2%, or 60 billion vehicle miles, in March. So far, cumulative travel for 2020 has declined 14.8%, or 152.3 billion vehicle miles.

While the House legislation passed July 1 does not address the solvency issues of the HTF, the authorization of a $1.5 trillion transfer from the general fund would more than cover the scope of the legislation, Nelson said.

Meanwhile, the Senate Environment & Public Works Committee approved the America’s Transportation Infrastructure Act of 2019 (S. 2302) last July. The Senate bill would provide an average of $57.5 billion annually from the HTF from fiscal 2021 through 2025. The five-year, $287 billion in HTF contract authority represents a 27% increase over the five-year funding set forth in the FAST Act. S. 2302 also doesn’t have a funding mechanism to make up for loss HTF revenue and has additional committee stops before heading to the Senate floor.

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