ISTEA at 25: Part 1

ISTEA at 25: Part 1

December 23, 2016  | Jeff Davis

December 23, 2016

This week marks the 25th anniversary of the enactment of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). President George H.W. Bush signed the bill into law on December 18, 1991 at a bridge construction site in Euless, Texas.

ISTEA was the attempt by Congress and the Bush Administration to transition the federal-aid highway program from being primarily about building the Interstate Highway System to being about something else. It also made a number of innovative reforms, some of which are still with us today.

(Ed. Note: It seems like every time we want to write a big in-depth article on a major highway law, Federal Highway Administration historian Richard Weingroff got there first. This is no exception – he wrote a lengthy history of ISTEA for its tenth anniversary in 2001, which is highly recommended. We have also put together a page of weblinks to every ISTEA document we could find, which is here.)

The End of the Interstate Era. The 1956 highway law provided $24.8 billion in up-front funding to build a new 41,000-mile system of Interstate highways by 1972 and created a Highway Trust Fund to segregate increased gasoline and truck tax receipts from the rest of the federal budget in order to pay for the construction. It bears remembering that in the beginning, the Highway Trust Fund and the increased taxes were supposed to be temporary, and after the system was completed, the taxes would revert back to their pre-1956 level, the Trust Fund would be abolished, and states would be in charge of maintaining the Interstate system.

Construction of the system (later expanded by Congress to a 43,000-mile map) of course took a lot more time and money than had originally been budgeted. By 1990, though, the light at the end of the tunnel was visible. From 1956 through the 1987 reauthorization law, funding provided for the system had reached $112.8 billion (the system had the misfortune to be built during The Great Inflation) and the expiration date of the Highway Trust Fund kept getting pushed back. But only a few more segments remained incomplete, mostly in high-cost urban areas. (Other urban areas had withdrawn segments from the Interstate map beginning in the 1970s and substituted mass transit systems instead.)

But spending on Interstate construction had been declining, as a share of total federal highway spending, for some time already. “IC” spending peaked as 77 percent of total highway formula apportionments to states in fiscal 1969. By FY 1991 it had declined to just 22 percent. A new program established to provide federal funding for maintaining the Interstate system had been established after states complained they lacked the resources to carry out the original scheme whereby they would maintain the system in perpetuity – that “4R” program was another 20 percent of total apportionments. In the meantime, Congress kept creating new highway programs to fill that gap.

Percentage of Total FHWA Highway Formula Apportionments for Interstate Construction, for Interstate Resurfacing/Restoring/Rehabilitating/Reconstructing (“4R”), and for All Other Highway Formula Programs, FY 1958-1991

It had been widely anticipated for years that the next reauthorization of the highway program, need by fiscal 1992, would provide the final installment of Interstate construction money (about $6 billion) and would also have to finally deal with the “what comes next” question once and for all.

The Shadow of 1990. In order to understand legislation drafted and enacted in 1991, one has to understand that the most important domestic policies of the Bush Administration were enacted in 1990. The centerpiece of the entire Bush term was the five-year deficit reduction deal enacted after the Columbus Day government shutdown and related budget summit in fall 1990 – you know, the one where Bush violated his “Read my lips – no new taxes” pledge and an up-and-coming House Republican named Newt Gingrich tried to torpedo the deal.

The 1990 budget deal increased the federal tax on gasoline and diesel fuel by 5 cents per gallon for five years (FY 1991-1995). All of the receipts of that tax increase were credited towards the overall deficit reduction total of the deal, but 2.5 cents per gallon of the temporary increase was double-counted by depositing the money in the Highway Trust Fund, making it available for highway and mass transit spending (at least in theory).

But the 1990 budget deal also created new statutory caps on annual appropriations and created a new PAYGO process to restrict new spending outside the appropriations process. These restraints made it difficult to increase spending from the Highway Trust Fund, despite increased tax receipts being deposited in the Fund.

And the gas tax was the revenue centerpiece of an unpopular law, rendering it much less likely that President Bush would accept any more gas tax increases during his term.

Also in 1990, Congress also enacted the Clean Air Act Amendments of that year, which created a new system of air quality goals for cities and regions, classifying those areas as either being in “attainment” or “non-attainment” of carbon monoxide, nitrous oxide and particulate matter (soot) emissions. Since many of these regionalized emissions come from car and truck exhaust, the 1990 clean air changes created a natural connection to surface transportation policy.

The National Transportation Policy. Partly due to the obvious need for a fundamental rewrite of highway policy before 1992, the Bush Administration set out in 1989 to come up with a national transportation policy. After extensive listening sessions and outreach (led by then-Deputy Secretary of Transportation Elaine Chao), Transportation Secretary Sam Skinner released the full policy document in February 1990. (Video of Skinner describing the policy at the National Press Club is here.)

The policy called for greater state and local reliance on their own revenue sources (especially tolls and a new concept called public-private partnerships) and proposed to reverse some of the changes made by Congress in non-Interstate highway programs during the 1970s and 1980s and the Interstate’s share of total Trust Fund spending kept declining. In particular, the standard 50-50 federal-state partnership for non-Interstate roads that was in effect since 1916 was amended in the 1970s, first to a standard 70 percent federal share, then to a 75 percent federal share. The report suggested that Congress “Explore incentives in Federal-aid programs for cost-effective use of transportation assets, such as higher matching ratios in the highway program for projects that make better use of existing facilities.” It also advocated the elimination of federal subsidies for mass transit operations and promoted more flexibility in the use of funding by localities.

Predictably, states and localities did not like the prospect of having to return to the lower, pre-1970s funding match ratios and did not appreciate being told to find their own revenue and financing sources. Democrats in Congress (who controlled both chambers in that Congress) panned the plan as well.

The Administration Bill. By February 1991, the Bush Administration had translated its transportation policy goals into legislative language. The Administration unveiled its “Surface Transportation Assistance Act” on February 13 (see legislative text here and a section-by-section summary here). In addition to providing the final $6 billion slug of Interstate construction money, the five-year, $105 billion bill proposed to move forward by creating two main highway formula programs: one for a 150,000-mile National Highway System (of which the entire Interstate System was a subset), and a block grant program for all other federal-aid roads (which totaled over 700,000 miles). (The bridge program, which began as a safety program and slowly morphed into a regular construction program, was kept separate by the Administration bill.) The federal share of the cost of highway projects that were not on the NHS would drop from 75 percent to 60 percent.

The Administration bill abolished the “minimum allocation” system of guaranteeing donee states a certain percentage of highway spending and guaranteeing donor states a certain percentage share of their estimated federal gas tax payments. Instead, it built equity into the formulas – 70 percent of NHS funding was to be apportioned based on state motor fuel tax usage (but with a thumb on the scale in favor of states with low population density) and the entirety of the Urban and Rural block grant program (the “everything else” program) was to be “apportioned in the ratio in which a State contribution to the Highway Account of the Highway Trust Fund bears to the total contributions of all the States to the Highway Account of the Highway Trust Fund.”

While the Bush bill would grow total highway funding levels by about 5 percent per year (from $15.8 billion in 1992 to $20.1 billion in 1996), authorizations for mass transit spending from the Highway Trust Fund would be flat-lined at $3.25 billion per year for the life of the bill. Also, the federal share of mass transit capital formula grants would drop to 60 percent, and the federal share of transit “new starts” would drop all the way down to 50 percent.

In exchange for lower federal shares of project cost, Bush promised greater flexibility to states and localities in determining the proper mix of highway and transit spending in their areas. In fact, the “everything else” highway block grant (the Urban and Rural Program) would give complete flexibility as to how much of the block grant went to highway programs versus mass transit projects. It also tried to devolve those decisions down below the state level, to localities, but the process in the bill was somewhat ill-defined:

(5) COOPERATION IN URBANIZED AREAS- In urbanized areas, projects shall be selected by the State in cooperation with local officials from a transportation improvement program developed under section 114.

(6) DISTRIBUTION OF FUNDS- The States shall develop a method to distribute apportionments within the State under this section fairly and equitably to rural areas, urban areas, and urbanized areas of over 200,000 population.

President Bush said that “Our approach will provide States and localities with flexibility to select which highways will receive targeted Federal dollars, and States and localities will be able to choose whether to spend Federal dollars on transit or highway solutions. As never before, we are encouraging creative new financing and management by the States.”

(Video of President Bush announcing the bill is here and video of Secretary Skinner describing the legislation is here. Video of a National Press Club forum on the legislation that included the Federal Highway Administrator and stakeholder groups is here.)

The numbers in the bill had been telegraphed in the President’s FY 1992 budget request on February 4, 1991. The transit numbers in particular were not popular with stakeholders – see this video of an APTA forum from March 1991 on how to get more funding out of the reauthorization process.

The head of APTA told the Associated Press that the Bush bill continued “to emphasize the movement of cars and not people by proposing a (nearly) 40 percent increase in federal highway spending. We expect Congress will right many of these wrongs.” Historians Mark Rose and Raymond Mohl later wrote that “Skinner had failed to anticipate the reactions of environmental and transit leaders.”

One can understand why the White House was not too worried about the vocal opposition to their transportation bill in February-March 1991. Something else was going on in early 1991 that ensured that the general public would not be paying much attention to domestic policy debates for a while – Gulf War I (Operation Desert Storm) in January-February. On March 2, President Bush’s job approval rating as measured by Gallup hit 89 percent – the highest of any President, ever, before or since. Four days later, on March 6, President Bush addressed a joint session of Congress to celebrate military victory and try to refocus on the domestic agenda. In his remarks to Congress, Bush said:

…tonight I call on the Congress to move forward aggressively on our domestic front. Let’s begin with two initiatives we should be able to agree on quickly: transportation and crime. And then, let’s build on success with those and enact the rest of our agenda. If our forces could win the ground war in 100 hours, then surely the Congress can pass this legislation in 100 days. Let that be a promise we make tonight to the American people.

With an 89 percent approval rating, even a President facing a Congress dominated by the opposition party should be able to get his top two domestic priorities enacted in substantially the way he wanted them, right?

[To be continued in Part 2]

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