DRIVE Act Would Increase Highway Funding Faster than Projected Inflation

This report briefly discusses the Developing a Reliable and Innovative Vision for the Economy Act (DRIVE Act; S. 1647). The DRIVE Act would authorize $278 billion for a six-year federal highway program.

CRS Insights DRIVE Act Would Increase Highway Funding Faster than Projected Inflation Robert S. Kirk, Specialist in Transportation Policy (rkirk@crs.loc.gov, 7-7769) July 13, 2015 (IN10316) On June 22, the Senate Environment and Public Works Committee (EPW) ordered reported favorably the highway title of a six-year surface transportation reauthorization bill. The EPW bill, called the Developing a Reliable and Innovative Vision for the Economy Act (DRIVE Act; S. 1647), provides for spending on highways to rise faster than the projected rate of inflation. Three other Senate committees, the Committee on Banking, the Committee on Commerce, and the Committee on Finance, would need to add their pieces if the Senate is to approve a bill to supplant the existing authorization act, the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141). That 2012 legislation, which provided for a major consolidation of highway programs, has been extended twice, most recently through July 31, 2015 (see CRS Report R42762, Surface Transportation Funding and Programs Under MAP-21: Moving Ahead for Progress in the 21st Century Act (P.L. 112-141), coordinated by Robert S. Kirk). DRIVE Act Spending Exceeds CBO Baseline Projections The DRIVE Act would authorize $278 billion for a six-year federal highway program. For the first year, FY2016, it would set spending at $43.8 billion, some $2.2 billion more than the Congressional Budget Office (CBO) estimates would be required to maintain the MAP-21 spending level adjusted for inflation. In subsequent years, the DRIVE Act would increase highway spending at a slightly faster rate than CBO's projection of inflation. Thus, in the bill's final year, FY2021, spending would be 7.0% above CBO's baseline level. Over the entire FY2016FY2021 period, the amount available for federal-aid highway and highway safety construction would be $16 billion more than the $262 billion baseline level calculated by CBO (Table 1). Table 1. DRIVE Act Highway Spending (Obligations) Compared to CBO's Baseline (Current $ in millions)   FY2015 FY2016 FY2017 FY2018   43,816 44,736 45,721 DRIVE Act Obligations Baseline 40,995 Obligations Difference   % Increase Over Baseline   FY2016FY2019 FY2020 FY2021 FY2021Total 46,773 47,897 49,047 277,990 41,606 42,338 43,192 44,046 44,940 45,835 261,957 2,210 2,398 2,529 2,727 2,597 3,212 16,033 5.3% 5.6% 5.8% 6.1% 6.5% 7.0% 6.1% Source: Federal Highway Administration, Congressional Budget Office, CRS calculations. Notes: Obligations include CBO projected annual obligation limitations plus annual "exempt" obligations of $739 million. These calculations do not include spending for public transportation programs, which is also authorized in surface transportation bills but is not under the jurisdiction of EPW. The main programmatic change made in the DRIVE Act is the funding of a National Freight Program. The new program is funded at $13.386 billion over six years. This represents 83.4% of the above-baseline funding in the bill. DRIVE Act Yearly Increases The EPW Committee achieved most of this spending increase by providing for a 6.9% increase in FY2016. The increases over the remaining years of the bill are smaller, ranging from 2.1% to 2.4% per year (Table 2). This appears to assume a slightly higher rate of inflation than projected by CBO, which assumes annual inflation of 2.0% from FY2018 through FY2021, the last four years of the bill. Table 2. DRIVE Act: Year-over-Year Highway Spending Increases (Obligations) (Current $ in millions)   Obligations Increase over   Previous Year Percent Increase,   Over Previous Year MAP21 DRIVE DRIVE DRIVE DRIVE DRIVE DRIVE FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 40,995 43,816 44,736 45,721 46,773 47,897 49,047 2,821 920 985 1,052 1,124 1,150 6.9% 2.1% 2.2% 2.3% 2.4% 2.4% Source: CRS calculations based on FHWA data. Notes: Obligations include obligation limitations plus annual "exempt" obligations of $739 million. Highway Trust Fund Sufficiency and the DRIVE Act All of the federal-aid highway program and 80% of the federal public transportation programs are funded out of the Highway Trust Fund (HTF); see CRS Report R42877, Funding and Financing Highways and Public Transportation, by Robert S. Kirk and William J. Mallett. The HTF is financed from a number of sources, but roughly 90% of the HTF tax revenues come from excise taxes on motor fuels. The motor fuels taxes have not been raised since 1993. Since September 2008 Congress has provided Treasury general fund and other transfers of $65 billion to the HTF to keep the fund solvent through July 31, 2015. Projected HTF revenues are insufficient to support continuation of the highway program even at the levels authorized in MAP-21. CBO's March 2015 baseline indicated that the HTF faces a cumulative shortfall through FY2021 of $92 billion. The DRIVE Act would further widen the gap between HTF revenues and spending, unless Congress provides for increased HTF revenues or Treasury general fund transfers to fill the gap. Factoring in various other changes, the cumulative shortfall over the FY2016-FY2021 period would come to around $103 billion. Congress would face decisions about some combination of tax increases, budget offsets, and general fund transfers in order to fully fund the highway program the DRIVE Act would authorize.