White House Says $200B for Infrastructure Plan Excludes Surface Transportation Reauthorization
March 15, 2019
As part of its limited fiscal 2020 budget rollout this week, the White House once again proposed $200 billion in immediate mandatory budget authority towards an infrastructure initiative and called for spending $1 trillion on new infrastructure. But the Office of Management and Budget also released a new two-page fact sheet on the infrastructure initiative that says that while surface transportation reauthorization legislation should be counted towards the $1 trillion total, the $200 billion itself should go towards forms of infrastructure not covered by the surface reauthorization bill.
After some preliminary words on the importance of infrastructure and some bragging on what the Trump Administration has done to date on permitting reform, here is what the fact sheet says about the infrastructure plan:
The President has called upon the Congress to pass legislation that generates at least $1 trillion in infrastructure investment. The 2020 Budget supports achieving this goal by:
◊ Seeking a long-term surface transportation reauthorization. The Budget commits to working with the Congress on a long-term surface transportation reauthorization bill. The current authorization, the Fixing America’s Surface Transportation (FAST) Act of 2015, expires at the end of 2020. We must provide our State, local and private partners – who build, own and operate the vast majority of the Nation’s surface transportation infrastructure – the long-term funding certainty they need to effectively plan and deliver projects. Such reauthorization must, at a minimum, address the long-term solvency of the Highway Trust Fund in a fiscally responsible manner, focus on nationally and regionally significant projects (emphasizing projects on the Interstate Highway System and other nationally-strategic freight networks), support emerging technologies and innovation, encourage the revenue mechanisms of the future, and promote more efficient and effective permitting.
◊ Providing $200 billion for other infrastructure priorities. In addition to a long-term surface transportation reauthorization, the Administration believes it is important to provide additional investments in infrastructure, across a range of sectors, including water infrastructure. The Administration looks forward to working with the Congress to develop a package that will significantly improve the Nation’s infrastructure, and the Budget includes $200 billion towards this effort. Within that amount, $10 billion is allocated to establish a Federal Capital Revolving Fund to support more cost-effective Federal investment in buildings and other property. The Administration will work with the Congress on allocating the remaining amount toward sectors and projects that address the most important needs and confer the largest benefits to the American people. The Administration does believe that a portion of this funding should promote visionary projects and technologies that can strengthen our economic competitiveness, including 5G wireless communications, rural broadband, advanced manufacturing, and artificial intelligence.
Let’s parse this a bit:
The $1 trillion total now includes surface transportation reauthorization. This seems clear – that introductory sentence calls for Congress to pass “legislation” (a word which can be either singular or plural) that generates at least $1 trillion in infrastructure investment. It then lists two separate areas where legislation could be enacted to contribute towards that $1 trillion total, surface transportation reauthorization and “other infrastructure priorities.”
Counting surface transportation reauthorization towards whatever your nominal Big Infrastructure Number is should have been a no-brainer all along. We don’t have an updated baseline for the program yet, but let’s assume that Congress fixes the $7.6 billion highway rescission left like a ticking time bomb by the FAST Act set to explode on July 1, 2020 so that future baseline obligation limitations equal future contract authority subject to limitation the way they are supposed to. If you take the FY 2020 FAST Act obligation levels (plus the $739 million per year exempt highway funding) and just increase them by 2 percent per year for inflation, which is roughly what the Congressional Budget Office will do once it fixes a post-2020 baseline, the total Highway Trust Fund new obligational authority for a six-year reauthorization bill covering fiscal years 2021-2026 would be about $377 billion, which gets you a long ways towards $1 trillion.
But since we are talking about total infrastructure investment, and since past discussions of the $1 trillion number have always assumed leverage, you have to remember that these are matching programs that require a state/local share of funding as well. For highways, let’s assume that about 93 percent of total FHWA funding that goes out requires a state match, and that the average federal share is about, say, 84 percent (standard share is 80 percent but Interstates are 90 percent, and the last time FHWA published data (back in FY14) the Interstates got 31 percent of the new spending obligations (FHWA, please update Table FA-4C). That ratio gives an average federal share of 83 percent – you could round up because Alaska, Nevada, Idaho, and the Big Square States get federal shares higher than 80 and 90 percent, respectively, because so much of the land in those states is owned by the federal government. But you could also round down because INFRA and some other programs will be paying less than 80 percent on average.
FHWA’s share of the $377 baseline six-year bill would be $303 billion, and we assume 93 percent of that will go towards matching grants ($282 billion). Divide $282 by 0.83 (average federal cost share) and you get $339 billion in total project costs, meaning states are contributing an extra $36.5 billion.
For mass transit, just assume that the entire amount of the Transit Formula Grants account goes out at an 80 percent federal matching share. The FTA share of the $377 baseline HTF obligations is $65 billion, divided by 0.8 gives you $82 billion in total project costs, meaning that local transit agencies have kicked in $16.3 billion.
But wait, there’s more! You might as well count the general fund authorizations in a surface transportation reauthorization bill. Assume that the FTA Capital Investment Grant program gets the same $2.6 billion appropriation in 2020 it got in FY19, and then assume that extended with a 2 percent annual bump over six years. That’s $16.4 billion, and if you assume that local transit agencies will pay an average 50 percent match (it may be a bit less than that, but this is discretionary money we’re talking about), then that’s an extra $16.4 billion that comes in.
Add all that together, and the traditional programs of a six-year surface transportation reauthorization bill, at baseline levels, should be somewhere around $463 billion to count towards that mythical $1 trillion infrastructure total:
|Ballpark Six-Year Baseline Surface Reauthorization|
|Federal $||State Match||Total Infra.|
And this doesn’t include passenger rail reauthorization, which was included in the FAST Act of 2015 but was not really a traditional surface transportation bill component before that. The last year of the FAST Act’s passenger rail reauthorization had almost $2.5 billion in authorizations. Carry that forward for six years and round up and you are now up around $480 billion, and that is before you get into the overly complicated process of figuring out state/local shares for those grant programs.
The $200 billion in the budget will not go towards surface transportation reauthorization. The fact sheet says that the $200 billion placeholder of fiscal 2020 mandatory budget authority will go towards “other infrastructure priorities.” The only specific given is that $10 billion of the money will once again go to a revolving fund for major GSA real estate purchases (an idea that has a lot going for it – see our summary from last August).
The other $190 billion will go towards “sectors and projects that address the most important needs and confer the largest benefits to the American people.” The new fact sheet goes farther into the tech field than did last year’s plan, discussing “5G wireless communications, rural broadband, advanced manufacturing, and artificial intelligence” as possible uses for the money.
If a six-year baseline surface transportation reauthorization bill counts as, say, $480 billion of the $1 trillion (which is a reasonable assumption, as shown above), then the $200 billion in funding for the infrastructure initiative gets you to a total of $680 billion. You only have $320 billion to go towards your $1 trillion total. In terms of leverage, that means you only need the $200 billion to leverage $320 billion in additional funding, a ratio of 1.6 to 1. While not easy, this a far cry from the 5:1 or 7.5 to 1 leverage ratios that were being discussed a year ago.