Department of Transportation Budget FY2012

David Randall Peterman
Analyst in Transportation Policy

The President’s Department of Transportation (DOT) budget request for FY2012 totaled $123.9 billion. It was divided into two parts: a “base” request of $78.6 billion, and a one-time “up-front boost,” related to the President’s proposal for surface transportation reauthorization beginning in FY2012, of $50 billion.

The base request was $1.7 billion (2%) more than the FY2010 enacted DOT budget of $76.9 billion. The total request is $53 billion over the FY2010 enacted level. See Table 2 for detailed figures on the request and Congressional action.

One might ask how this increase was possible in light of the President’s stated intention to freeze overall federal discretionary spending in FY2012 (and after) at the FY2010 level. It is possible because most DOT funding is not discretionary funding; it comes from the Highway Trust Fund, and is therefore categorized as mandatory funding. Thus, virtually all of the proposed increase counted as an increase in mandatory rather than discretionary funding. Furthermore, the FY2012 DOT budget request proposed to shift funding for some accounts from the general fund to the highway trust fund (which would be renamed the “transportation trust tund”). This had the effect of reducing the total discretionary funding requested for DOT in FY2012 compared to the amount provided in FY2011, all else being equal.

The FY2012 budget request was complex because it did two different things at once: it requested funding for DOT programs for FY2012, and it restructured the major surface transportation program accounts and funding structure. The latter changes reflected elements of the Administration’s proposal for reauthorizing surface transportation programs for the next six years. The changes included adding intercity rail and new transit construction programs to the programs financed from the trust fund, and increasing the flow of revenues to the fund, although the source of the additional revenues was not specified.

Congress had not passed an FY2012 DOT appropriations bill by the time the 2012 fiscal year began. DOT funding is currently being provided by a continuing resolution (P.L. 112-36, the second one passed for FY2012), which will expire on November 19, 2011.

Congressional action on FY2012 DOT appropriations was delayed due to several factors. First, the FY2011 appropriations act for DOT and other federal agencies was not finalized until April 15, 2011.1 Second, the House-passed budget for FY2012 and subsequent 302(b) allocation of discretionary funding for the Department of Transportation, Department of Housing and Urban Development, and Related Agencies appropriations bill called for cuts to highway funding, among other accounts, that were so steep that some doubted they could pass; perhaps for this reason, action on the bill in the House was postponed. The Senate did not pass a Budget Act for FY2012. Soon after completion of FY2011 appropriations, congressional attention was taken up by protracted negotiations over raising the federal debt limit. These negotiations included discussion of the overall FY2012 appropriations level. Action on raising the debt ceiling. as well as setting an overall FY2012 appropriations level, was not concluded until August 2, 2011, with enactment of the Budget Control Act of 2011.2

The Senate Committee on Appropriations reported out an FY2012 appropriations bill for the Department of Transportation (and HUD and related agencies), S. 1596, on September 21, 2011. This bill has been combined with two other appropriations bills (Agriculture and Commerce- Justice-Science) in a “minibus” (as opposed to “omnibus”) appropriations bill, H.R. 2112. That bill was approved by the Senate on November 1, 2011.

The House Committee on Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies approved a draft bill by voice vote on September 8, 2011.3 The unnumbered draft bill has not been taken up by the full committee. Press reports indicate that the House and Senate are conferencing on the minibus bill.


Date of Report: November 10, 2011
Number of Pages: 11
Order Number: R41650
Price: $29.95

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TARP Assistance for the U.S. Motor Vehicle Industry: Unwinding the Government Stake in GMAC

Baird Webel
Specialist in Financial Economics

Gary Shorter
Specialist in Financial Economics

Bill Canis
Specialist in Industrial Organization and Business

Ally Financial, formerly known as General Motors Acceptance Corporation or GMAC, provides auto financing, insurance, online banking, and mortgage and commercial financing. For most of its history, it was a subsidiary of General Motors Corporation and it still provides significant financing both for GM vehicles and for GM dealers. Like some of the automakers, it faced serious financial difficulties due to a downturn in the market for automobiles during the 2008- 2009 financial crisis and recession, while also suffering from large losses in the mortgage markets. With over 90% of all U.S. passenger vehicles financed or leased, GMAC’s ability to lend, or inability to lend, was particularly important to GM’s retail sales and dealer-financing capabilities.

The Bush and Obama Administrations used the Troubled Asset Relief Program (TARP) to fund assistance for the U.S. auto industry, concluding that the failure of one or two large U.S. automakers would cause additional layoffs at a time of already high unemployment, prompt difficulties and failures in other parts of the economy, and disrupt other markets. The decision to aid the auto industry was not without controversy, with questions raised as to the legal basis for the assistance and the manner in which it was carried out. The nearly $80 billion in TARP assistance for the auto industry included $17.2 billion for GMAC.

The government’s aid to GMAC was accomplished primarily through U.S. Treasury purchases of the company’s preferred shares. Many of these preferred shares were later converted into common equity, resulting in the federal government acquiring a 73.8% ownership stake. This conversion from preferred to common equity significantly changed the outlook for the future government recoupment of TARP assistance. Whether the government will recoup all or most of these funds now depends largely on the future market value of the government’s ownership stake. If the government’s common equity ends up being worth less than the assistance provided, the company has no responsibility going forward to compensate the government for the difference. Conversely, if the common equity ends up being worth more than the assistance, the gain from this difference accrues to the U.S. Treasury (and is used to pay down the national debt as specified in the TARP statute). In addition to TARP assistance, during the financial crisis in 2008, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion that was permitted by the Federal Reserve (Fed) due to prevailing emergency conditions in the financial markets. This change increased access to government assistance, including Fed lending facilities and Federal Deposit Insurance Corporation (FDIC) guarantees, while also increasing regulatory oversight of the company.

In March 2011, Ally Financial (GMAC having changed its name in 2010) filed with the Securities and Exchange Commission (SEC) for an initial public offering (IPO) of shares, which it expected to launch in the second quarter of 2011. The IPO, however, has yet to occur because of stock market volatility. Assuming it eventually occurs, this IPO would be a major step in unwinding the government involvement in GMAC/Ally Financial and could provide an important market signal as to the market value of the government holdings in the company. At this point, the government has not indicated how much of its 73.8% equity in Ally Financial might be sold in a future IPO, nor what price will be sought for the shares.

Although the TARP authority to purchase new assets expired in the 111th Congress, the 112th Congress has continued to oversee the program with hearings in both the House and the Senate. This report will be updated following future legislative action or market events.


Date of Report: November 4, 2011
Number of Pages: 17
Order Number: R41846
Price: $29.95

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Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative Action in the 112th Congress

Bart Elias, Coordinator
Specialist in Aviation Policy

Reauthorization of Federal Aviation Administration (FAA) programs has been an issue of considerable interest during the first session of the 112th Congress. The previous FAA authorization, Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176, hereinafter referred to as “Vision 100”) expired at the end of FY2007. Attempts to enact a successor law failed in the 110th and 111th Congresses. As a result, aviation trust fund revenue collections and aviation program authority have continued under a series of short-term extensions. Most recently, the Surface and Air Transportation Programs Extension Act of 2011 (P.L. 112-30), enacted on September 16, 2011, extends existing authorizations through January 31, 2012.

The House and Senate have passed separate versions of multiyear FAA reauthorization legislation (see S. 223 and H.R. 658), and the Senate has requested a conference to resolve the differences between the House-passed and Senate-passed bills. Whereas the Senate bill only covers FY2010 and FY2011, the House bill would authorize FAA programs through FY2014. For FY2011, the only year the two bills overlap, the House-passed total authorization level for FAA is $2,082 million less than that specified by the Senate. Moreover, the House-passed bill calls for further reductions in authorized FAA funding for FY2012 through FY2014. While these levels reflect broader government-wide efforts to reduce deficit spending, they could pose considerable challenges to ongoing air traffic modernization efforts, and affect FAA’s ability to address its future needs for controllers and technical specialists to operate and maintain the nation’s air traffic system. The Senate bill proposes an increase in jet fuel tax for general aviation and a new jet fuel surcharge for fractionally owned aircraft, while the House bill does not include any changes to existing aviation taxes and fees. Neither bill includes proposals to increase the cap on passenger facility charges, and the House bill does not include the controversial provision passed by the House in the 111th Congress to bring non-aviation employees of express carriers under the National Labor Relations Act instead of the Railway Labor Act.

Key issues addressed in the FAA reauthorization bills include provisions intended to improve the management of and accelerate progress on the Next Generation Air Transportation System (NextGen); address FAA workforce and facility consolidation issues; improve the safety of air ambulance operations; improve runway safety; increase oversight of air carriers and foreign repair stations; integrate unmanned aircraft into the national airspace system; and address aircraft and airport noise and emissions. While there are many similarities in language between the House-passed and Senate-passed bills, particularly with respect to major issues affecting FAA, several important differences remain to be reconciled. Provisions that may be of particular interest during this process include 

• significant differences in authorized funding levels and aviation fuel taxes between House and Senate versions; 

•          a labor provision in the House bill that would overturn recent regulations that make it easier for certain employees covered under the Railway Labor Act to unionize;
 

•          provisions regarding the allocation of takeoff and departure slots at Reagan National Airport; and
 

•          provisions in the House bill to end the Essential Air Service (EAS) program, which subsidizes air carrier service to small and isolated communities.

Date of Report: September 29, 2011
Number of Pages: 52
Order Number: R41798
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Revised Federal Standards for Traffic Signs: Frequently Asked Questions

David Randall Peterman
Analyst in Transportation Policy

In 2007, the Federal Highway Administration of the Department of Transportation (DOT) completed a rulemaking to revise the Manual of Uniform Traffic Control Devices (MUTCD) standard for night-time visibility (retroreflectivity) of street signs. The new standard set a minimum measured value for the retroreflectivity of street signs and required state and local agencies to adopt a method to maintain the retroreflectivity of their signs. Communities are required to comply with this standard by 2018.

In 2010, several press reports conflated this new standard with a 2009 MUTCD revised street sign standard—one having to do with the lettering style of street sign names, which had no compliance deadline—and became controversial, as the press reports made it appear that the federal government was requiring communities to replace street signs just to change their lettering style. This issue has come to the attention of Congress. In 2011 the DOT proposed to amend the target compliance date for the retroreflectivity standard (and several other MUTCD standards) to alleviate possible financial burdens the deadlines may create for highway agencies. Agencies will still be required to comply with the retroreflectivity standard. This report answers a number of questions that are frequently asked about this issue.


Date of Report: September 22, 2011
Number of Pages: 9
Order Number: R41601
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The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History

James M. Bickley
Specialist in Public Finance

Excise taxes have long been a part of our country’s revenue history. In the field of gasoline taxation, the states led the way with Oregon enacting the first tax on motor fuels in 1919. By 1932, all states and the District of Columbia had followed suit with tax rates that ranged between two and seven cents per gallon. The federal government first imposed its excise tax on gasoline at a one-cent per gallon rate in 1932. The gas tax was enacted to correct a federal budgetary imbalance. It continued to support general revenue during World War II and the Korean War.

Economists know the gasoline excise tax as a “manufacturer’s excise tax” because the government imposes it at production (i.e., the producer, refiner, or importer) for efficiency in collection. Particularly in the short run, when the demand for gasoline is relatively inelastic, economists recognize that any increase in the gasoline tax is generally passed forward to the retailer, translating into a higher retail gas sales price. Thus, the burden for much of the tax ultimately falls on the consumer.

The Highway Revenue Act of 1956 established the federal Highway Trust Fund for the direct purpose of funding the construction of an interstate highway system, and aiding in the finance of primary, secondary, and urban routes. This act increased the tax on gasoline from two to three cents per gallon. Each time Congress has extended the Highway Trust Fund it has also extended the federal excise tax on gasoline.

As recently as 1990 and 1993, Congress passed legislation dedicating a portion of gasoline tax revenue for deficit reduction. However, none of the current 18.4-cent-per-gallon tax imposed on gasoline is dedicated to the General Fund. One-tenth of one cent per gallon is dedicated to the Leaking Underground Storage Tank Trust Fund; 2.86 cents per gallon is allocated for mass transit purposes and earmarked to the Mass Transit Account within the Highway Trust Fund; and the balance, 15.44 cents per gallon, is earmarked to the Highway Account, also within the Highway Trust Fund.

On July 29, 2005, President Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This act provided a six-year extension of the Highway Trust Fund excise taxes that were scheduled to expire in 2005. Thus, the gasoline excise tax is scheduled to expire after September 30, 2011. The act also established a Motor Fuel Tax Enforcement Advisory Commission. Among the commission’s duties are to review motor fuel revenue collections, to conduct investigations related to motor fuel taxes, and to help develop and review legislative proposals with respect to motor fuel taxes.

For FY2011, the Congressional Budget Office estimates that revenues and interest credited to the Highway Trust Fund will total $36.9 billion, which will be divided into the Highway Account ($31.8 billion) and the Mass Transit Account ($5.1 billion). CBO also estimates that the fund’s three primary revenue sources and their yields will be the gasoline tax ($24.0 billion), the diesel tax ($8.7 billion), and the tax on trucks and trailers ($2.2 billion).

On September 16, 2011, President Obama signed H.R. 2887, Surface and Air Transportation Programs Extension Act of 2011 (P.L. 112-30), which extended, through March 31, 2012, current surface transportation programs and the motor fuel, heavy truck, and truck tire taxes that support the Highway Trust Fund.


Date of Report: September 21, 2011
Number of Pages: 16
Order Number: RL30304
Price: $29.95

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