Transportation Spending Under an Earmark Ban

Summary

In the 112^th Congress, which convened in January 2011, the House and Senate began observing an earmark ban. Earmarks—formally known as congressionally directed spending—directed a significant amount of federal transportation spending prior to the ban. This report discusses how federal highway, transit, rail, and aviation funding were distributed before and after the earmark ban, and how Members of Congress might influence the distribution with a ban in place.

Currently, about 92% of federal highway funds and more than 75% of transit funds are distributed by statutory formulas. The use of formula highway funds is under the control of the states. The bulk of formula transit funding is under the control of local governments and public transit agencies. Most federal funding for aviation is for operation of the air traffic control system and safety-related programs, and generally has not been earmarked. Most aviation infrastructure spending is distributed according to priorities set forth in national plans, but a small percentage was available for earmarking prior to 2011. Most rail funding goes to Amtrak to operate national intercity passenger service. Federal funding for maritime purposes is directed by statute and has not been earmarked.

Most of the remaining federal transportation funding is distributed under discretionary programs. U.S. Department of Transportation (DOT) discretionary funds are typically distributed through a competitive grant-making process, within guidelines established by Congress and DOT. In practice, however, much of this funding was earmarked by Congress prior to 2011. The precise share of federal transportation dollars that was spent on earmarks cannot readily be calculated, but, according to a DOT Inspector General report, in FY2006 approximately 13% of DOT's total budgetary resources were earmarked.

Banning earmarks has not eliminated the opportunity for Members to influence the allocation of transportation resources. The funding formulas and eligibility rules in authorization bills can be shaped to favor particular states, congressional districts, and projects. "Soft" earmarks can be used to identify a project as a congressional priority in appropriations bill report language apparently without violating an earmark ban by not specifying an amount of funding. Without earmarking, Members can continue to call or write DOT in support of projects. Members may also seek to influence the priority a project receives under mandated state and local planning procedures, which can increase the likelihood of federal funding without an earmark.

Introduction

Since the beginning of the 112^th Congress, convened in January 2011, the House and Senate have observed a ban on earmarks, formally known as congressionally directed spending. The ban has led to changes in the way transportation funding decisions are made. This report explains what earmarks are and discusses their use in surface transportation finance. It then discusses how federal transportation funding is distributed with a ban in place and how Members of Congress might influence the distribution.

The structure of federal transportation funding is largely determined in periodic transportation authorization legislation, which typically continues some existing programs (often with modifications), allows some programs to expire, and creates new programs. The most recent authorization act in surface transportation, for example, is the Fixing America's Surface Transportation (FAST) Act (P.L. 114-94), enacted in December 2015.

The vast majority of federal transportation funding is distributed directly to states, local governments, and transportation authorities by formulas that are set in these laws. For example, under the FAST Act about 92% of highway program spending through FY2020 will be distributed by formula. This is up from the 84% distributed by formula in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA; P.L. 109-59), the 2005 law that was the last long-term surface transportation authorization enacted prior to the earmark ban.¹ Under the formula programs, the decisions about which projects get funded with that money are made by the states and local governments, subject to federal guidelines.

Authorization legislation also creates a number of discretionary (non-formula) transportation grant programs. These programs collectively distribute a relatively small portion of federal transportation funding. Under these programs, the U.S. Department of Transportation (DOT) awards grants at its discretion through a competitive application process.

For several years prior to 2011, funding for discretionary transportation grant programs was heavily earmarked by Congress in authorization legislation and in the annual DOT appropriations acts. In addition, Congress on occasion earmarked portions of highway formula funding.² Earmarks were not prevalent in all parts of the transportation funding process. For example, the Federal Aviation Administration (FAA) budget historically was largely free of earmarks, with the Airport Improvement Program's discretionary funding being the major exception.

Number of Items

Millions of Dollars

Percent of DOT's New Budget Authority

Congressionally Directed Spending

13.5

Authorization

N/A

Appropriation

N/A

DOT Agency

Number of Items

Millions of Dollars

Percent of Agency's New Budget Authority

Department of Transportation

13.5

Federal Highway Administration

15.5

Federal Transit Administration

28.0

Federal Aviation Administration

2.8

Other

1.5

In the past, Congress has dealt with the issue of long-term unobligated earmarks in at least three ways. First, Congress has redesignated unused earmarks for other specific projects. This was done, for example, in the FY2003 DOT Appropriations Act (P.L. 108-7). The current earmark ban does not allow earmarks to be redesignated for other specified projects. Second, Congress has rescinded budget authority for old earmarks as it did, for example, in the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10, §§2210 and 2211). Third, Congress has also allowed old unused earmark funding to be used for projects that are generally permissible. In the Consolidated Appropriations Act, 2016 (P.L. 114-113, §125), for example, Congress allowed states to redirect long-term unobligated earmarks to a surface transportation project within 50 miles of the original project. A long-term unobligated earmark is often defined as one that is over 10 years old and for which 90% or more of the funding remains unobligated.

The rules in both houses of Congress include identical definitions of "congressionally directed spending."⁴ The rules define an earmark as

a provision or report language included primarily at the request of a [Member, Delegate, Resident Commissioner, or] Senator providing, authorizing, or recommending a specific amount of discretionary budget authority, credit authority, or other spending authority for a contract, loan, loan guarantee, grant, loan authority, or other expenditure with or to an entity, or targeted to a specific State, locality or Congressional district, other than through a statutory or administrative formula-driven or competitive award process.⁵

The definition of "congressionally directed spending item" under House and Senate rules appears to permit some "soft" transportation earmarks. Whereas "hard" earmarks specify the project place, purpose, and funding amount in bill or bill report language, "soft" earmarks do not specify the amount of funding.⁶ Two types of soft earmarks are found in federal transportation legislation: place naming and road naming.

Under place naming, the project location is named in the bill or report language, but no funding amount is designated. The appropriators direct the agency to give priority to grant applications from the named places. This form of congressional designation has been most commonly used to influence Airport Improvement Program (AIP) spending. For example, in the FY1990 Department of Transportation Appropriations bill, the House conference report (H.Rept. 101-183) urged the Federal Aviation Administration (FAA) to give priority to

By not designating the amount, place naming appears not to be covered by the definition of earmarks under current House and Senate rules.⁷

that when distributing funds among Recommended New Starts [CIG] Projects, the Administrator shall first fully fund those projects covered by a full funding grant agreement, then fully fund those projects whose section 5309 share is less than 40 percent, and then distribute the remaining funds so as to protect as much as possible the projects' budgets and schedules.

In the 112^th Congress, which convened in January 2011, the House and Senate began observing an earmark ban. The ban is not a formal rule in either the House or the Senate, and thus is not enforced by points of order.¹⁰ Instead, the ban has been established through party and committee rules and protocols, and is enforced by chamber and committee leadership. The rules of the House Republican Conference for the 112^th Congress included a standing order labeled Earmark Moratorium that stated, "It is the policy of the House Republican Conference that no Member shall request a congressional earmark, limited tax benefit, or limited tariff benefit, as such terms have been described in the Rules of the House." This was extended for the 113^th and 114^th Congresses.¹¹ The Senate Republican Conference adopted a similar resolution on November 14, 2012. Subsequent to the House Republican Conference instituting its earmark rule, President Obama vowed at the State of the Union Address given on January 25, 2011, to veto legislation that contained earmarks.¹² In early 2011, the Senate Appropriations Committee issued a press release stating that the committee would implement a two-year ban on earmarks, which was also later extended.¹³ These actions have effectively stopped both the House and the Senate from considering legislation with earmarks.

Extensive earmarking of surface transportation programs is a relatively recent phenomenon. It was common in authorizations that covered the period from FY1992 through FY2012 and for appropriations from FY2001 through FY2010.¹⁴

There were typically fewer than 50 highway earmarks in annual appropriations bills through FY1990, and there were none in the FY1996-FY1998 period.¹⁸ The 1913 House ban on highway earmarks was repealed in 1999. The number of highway earmarks in appropriations bills grew quickly from 96 in FY2000 to 614 in FY2010.¹⁹

Some of the remaining highway funding is distributed to states and localities through discretionary programs such as the Nationally Significant Freight and Highway Projects Program. The rest goes for transportation facilities on federal lands such as national parks; research and training; and administrative expenses.

By far the largest intercity passenger rail program is support for Amtrak. Amtrak receives both operating and capital support. The expenditure of these funds is determined by Amtrak (though Amtrak's capital spending is concentrated in the Northeast, where most of the infrastructure that it owns is located). There are several other smaller discretionary programs administered by the Federal Railroad Administration (FRA), such as funding for intercity passenger rail grade crossing improvements, positive train control implementation, and passenger rail corridor investment planning. These programs do not all receive funding every year.

Most federal aviation funding is spent by the Federal Aviation Administration (FAA) on operating air traffic control, known as the Operations and Maintenance (O&M) account, and acquiring and maintaining air traffic control equipment, known as the Facilities and Equipment (F&E) account. Lesser amounts are also spent by the FAA on aviation safety programs and research. About 20% of FAA's authorized funding goes for the Airport Improvement Program (AIP).

The AIP is both a formula and a discretionary grant program. All development projects identified in the National Plan of Integrated Airport Systems (NPIAS) are eligible for AIP funding. Generally, about two-thirds of funding is distributed as "entitlements" through formulas set forth in the authorization act. Entitlement funds may generally be used for any AIP-eligible projects. However, FAA policy and statutory requirements discourage airport sponsors from using entitlements for lower-priority projects if they are also seeking discretionary funds. This linkage with the availability of discretionary funds is a tool that FAA uses to make airport sponsors think twice about using entitlement funds for low-priority projects. FAA oversees the distribution of AIP entitlement funds and enforces compliance with the eligibility criteria. Unlike the Federal-Aid Highway Program, federal aid to airports flows directly to the airport sponsor, usually an airport authority.

After the entitlement funds are apportioned, whatever is left over is available for discretionary grants. Airports compete against each other for discretionary grants in the sense that they compete against each other for high national priority ratings (NPR) within the Airport Capital Improvement Plan process, which is a subset of the NPIAS and is developed by FAA, airport sponsors, states, and planning agencies. AIP discretionary funds were often earmarked substantially before the earmark ban. Earmarking moved an airport up the priority list and provided funding. On the other hand, it also moved the non-earmarked projects down. The discretionary funds are also subject to set-asides for nationwide priorities set by Congress, such as the 35% noise set-aside and the 4% Military Airport Program set-aside.

Prior to the earmark ban, some earmarks also appeared in the F&E account of the FAA budget. The most significant of these were for projects under FAA's Tower/Terminal Air Traffic Control Program and the Instrument Landing Systems Program. The priorities for spending under these programs also are established through a national planning process. According to DOT's inspector general, earmarking delayed some projects assigned high priority through this process while funding lower-priority projects.²³ Virtually all aviation earmarks occurred in appropriations legislation.

DOT's Federal Maritime Administration provides support for certain maritime operations and vessel construction, typically under criteria set by law. Most capital programs to benefit marine transportation, such as harbor dredging and lock repair, are undertaken by other federal agencies, notably the U.S. Army Corps of Engineers, rather than by DOT.

One of the largest discretionary programs overseen by DOT is the Transportation Investment Generating Economic Recovery (TIGER) program, a multimodal funding program with the stated intention of supporting "projects that will have a significant impact on the Nation, a metropolitan area, or a region" (Consolidated Appropriations Act, 2016; P.L. 114-113). Enacted initially as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), the TIGER program has been funded in all seven subsequent appropriations bills. Funding, appropriated from the general fund, is $500 million in FY2016. Projects are selected by DOT on a competitive basis according to the benefits their project would deliver for five long-term outcomes: safety, economic competitiveness, state of good repair, quality of life, and environmental sustainability. DOT also evaluates projects on innovation, partnerships, project readiness, benefit cost analysis, and cost share.²⁴

Highways, transit, and intercity passenger rail are included in a single multi-year surface transportation authorization bill, which establishes programs and sets authorized spending levels.²⁵ In the House, highways, transit, and rail are under the jurisdiction of the Transportation and Infrastructure Committee (T&I). In the Senate, the Environment and Public Works Committee has jurisdiction over the highway provisions, the Banking, Housing, and Urban Affairs Committee handles transit, and the Commerce, Science, and Transportation Committee handles rail. Provisions involving highway trust fund and revenue issues are under the jurisdiction of the Ways and Means Committee in the House and the Committee on Finance in the Senate. Aviation reauthorization bills are primarily under the jurisdiction of the T&I Committee in the House and the Commerce, Science, and Transportation Committee in the Senate.

For appropriations legislation, highways, transit, and aviation are under the jurisdiction of the appropriations committees in each house. Members of the appropriations committees also oversee the implementation of federal transportation spending through hearings that provide the opportunity to publicly call the attention of DOT officials to issues that are important to the Member's state or district.

The process of developing a transportation authorization bill typically begins with a schedule of hearings in which Members can participate, and at which local officials promoting the need for particular projects can testify. Once the bill is introduced, Members may discuss their concerns with the committee (both at the Member and staff levels). Such discussions may continue through the bill markup and even during the eventual floor debate.²⁶ An earmark ban does not affect the ability of Members and their staffs to engage in such discussions. Nor does it limit their ability to correspond and meet with DOT officials in support of projects.

A ban on transportation earmarks principally affects discretionary programs overseen by DOT. It has little direct impact on the formula programs that make up most federal transportation funding. Earmarks serve as a way for Members of Congress to ensure that discretionary transportation funds are distributed according to their priorities, rather than those of the Administration. With earmarks prohibited, and if Congress does not act in other ways to set funding priorities within the discretionary programs, then the job of setting priorities is left to DOT, subject to the grant selection criteria set forth in law and regulation. One alternative to earmarks is more detailed legislative language to govern the allocation of funds.

Divergences between congressional and Administration priorities for transportation funding have come to the fore on several occasions. In FY2007, a year in which Congress passed a year-long continuing resolution and the appropriators did not earmark the discretionary programs, the George W. Bush Administration decided to consolidate virtually all discretionary funds in the highway and transit programs to advance its focus on comprehensive congestion mitigation strategies in metropolitan areas through urban partnership agreements. The roughly $850 million in discretionary funding was divided among just five cities.²⁷ This amount included unallocated discretionary bus program funds that had been divided among hundreds of projects by Congress in the previous fiscal year.²⁸

Similarly, the Obama Administration used unallocated FY2009 Bus and Bus Facilities funds to support one of its policy priorities, "livability."²⁹ Livability, which involves providing alternatives to the car and integrating transportation, housing, and environmental policies, was not specifically established as a policy priority by Congress.

An earmark ban elevates the visibility of the programmatic selection process and of the selection criteria, which may be established by Congress. Under the earmark ban, other traditional avenues for Members of Congress to influence the flow of transportation funding become more important, such as involvement in the policymaking aspects of transportation budgeting and interaction with both federal and state transportation officials. Increased reliance on formula funding may make it more critical for Members to try to make sure that projects of importance to their constituents are included in transportation plans at an acceptable priority level.

Members of the appropriations committees can improve the chances that a specific project will be funded without earmarking by increasing the amount of funding provided to a particular program. Members also have the opportunity to include provisions in appropriations legislation that may affect transportation program expenditures, including project selection, without identifying specific projects.

Due to its size, the Federal-Aid Highway Program has the largest impact on highway spending at the state and local levels. Reauthorization bills may extend existing programs, create new or revised programs, or allow programs to lapse. Typically, Members may support increased spending for programs that are more important to their state or district relative to other programs. For example, a Member from a state or district with air quality problems might give priority to increased funding of the Congestion Mitigation and Air Quality Improvement Program.

In the absence of earmarks, highway program formulas become more important in directing the flow of highway funding. For example, the Transportation Equity Act for the 21^st Century (TEA-21; P.L. 105-178) added factors to two programs' funding formulas based on the annual contributions to the highway account of the Highway Trust Fund by state motorists. This directed money toward states whose motorists paid larger amounts of highway taxes and away from states whose motorists paid relatively less in highway taxes.

Like the highways programs, most federal transit programs rely heavily on funding formulas established in authorization laws. Formulas are not a neutral way of distributing funds, as the way in which a formula is constructed and subsequently modified can have significant effects on the allocation of funding. For example, in the 1980s transit funding dedicated to fixed guideway modernization was distributed by DOT based on an administrative formula that sent most funds to transit rail systems that existed before the creation of the federal transit program in 1964. This administrative formula was altered and inserted into law in 1991 in part to widen the distribution of funds to include rail systems built in the 1970s and 1980s. This change was reinforced by modifications made to the formula in the surface authorization law passed in 1997.

The allocation of funding among the various transit programs is more important in the absence of earmarks. For example, districts with rail transit systems are likely to do well when more funds are dedicated to the State of Good Repair Program. Rural districts, by contrast, are likely to benefit when more funding goes to the Rural Area Formula Program. FTA also administers the Bus and Bus Facilities Program, which was heavily earmarked in the past. While MAP-21 distributed Bus Program funding entirely by formula, the FAST Act has added a competitive discretionary component. With a ban on earmarks, funding will be distributed according to FTA criteria, and Congress may want to provide FTA with guidance in developing those criteria.

The earmark ban has not made much of a difference in the realm of intercity passenger rail because, as noted earlier, these funding programs have not been earmarked.

The earmark ban is less significant for aviation than for surface transportation, due to the relatively minor role of earmarking in aviation funding. An earmark ban does not affect the ability of Members to help make the case for a higher priority for particular projects in the Airport Capital Improvement Plan. Alternatively, Members may seek to adjust the entitlement formulas in the Airport Improvement Program in ways that might benefit particular airports.

In the absence of earmarking, Members whose states or districts have particular concerns about noise mitigation or conversion of a military airfield to civilian or dual use could support increases in the set-asides for those purposes, increasing the likelihood that a particular project will be funded without naming the project. Members could also intervene in the process of setting priorities for FAA facilities and equipment expenditures under the Tower/Terminal Air Traffic Control Program and the Instrument Landing Systems Program.

One of the federal government's more visible aviation programs, the Essential Air Service Program, subsidizes commercial flights to airports that lost service under airline deregulation. This program is not earmarked, although Congress has from time to time altered the criteria that determine whether a particular airport is eligible for the program.

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