June 4, 2015 | Issue Brief on Budget and Spending
The House of Representatives will soon consider the Transportation, Housing and Urban Development (THUD) appropriations bill. The THUD appropriations bill provides funding for the Departments of Transportation and Housing and Urban Development.
The bill provides $55.3 billion in discretionary budget authority. This represents a $1.5 billion increase above the current funding level but $9.7 billion below the President’s budget request. This is only half the story—literally. When other budget resources not counted in the bill are taken into account, the budget authority doubles to $108 billion.
Transportation is a critical component of the THUD appropriations bill, and transportation spending is at the forefront of the debate in Washington. The law that authorizes federal spending on highway infrastructure projects is set to expire on July 30. In addition, the Highway Trust Fund, which funds federal spending on highway projects through a gasoline tax, is nearly bankrupt and will require a bailout of more than $3 billion by October and $8 billion by January 2016 in order to continue current operations. Rather than providing a roadmap to fix these problems, the THUD appropriations bill continues Washington’s bloated, inefficient, and politicized role in infrastructure spending.
In March, The Heritage Foundation published, “The Budget Book: 106 Ways to Reduce the Size and Scope of Government.” It includes an analysis of the entire budget and recommendations for spending priorities within the appropriations bills, including suggestions for reduced spending in various THUD programs.
Limit Highway Trust Fund Spending to Gas Tax Revenues. The bill assumes a highway authorization extension with funding for fiscal year (FY) 2016 at current levels, or about $51 billion in contract authority (the ability of the government to contract for work to be done). Therefore, the bill provides $41.6 billion for spending from the Highway Trust Fund on highway projects and $8.6 billion for spending on transit formula grants. However, the Congressional Budget Office projects revenues flowing into the Highway Trust Fund to be roughly $40 billion in 2016—not enough to cover the spending authorized in the bill.[3 ]
Congress frequently puts itself in the untenable and irresponsible position of authorizing more spending than the Highway Trust Fund can pay for. In fact, the Highway Trust Fund has been operating at unsustainable levels since 2008, requiring Congress to provide bailouts of more than $54 billion from the U.S. Treasury.
To further complicate matters, transportation funding has a unique status in the budget. The funding for highways is ultimately determined by authorizing legislation, which allocates budget authority—otherwise referred to as contract authority—for highway and transit programs. The appropriator’s role is to set what is known as an obligation limitation, or the amount from that level of contract authority that can be spent in any given year.
It is important to understand how federal budget policy accounts for the money spent from the Highway Trust Fund. A Heritage Foundation Backgrounder, “Highway Trust Fund Basics: A Primer on Federal Surface Transportation Spending,” notes: “The Highway Trust Fund is unique in that its contract authority—the authority to obligate funds in advance of an appropriation act, similar to budget authority—is classified as mandatory, while its outlays are classified as discretionary spending.” This odd designation allows highway spending to avoid spending caps set by Congress.
As you can see from Table 1, the bill is only required to count $55.3 billion toward the congressional spending caps. At the same time, however, the bill provides another $53.5 billion in resources (obligation limitations) from the highway and airport trust funds ($50.2 billion from the highway trust fund and $3.35 billion from the airport trust fund), which is exempt from congressional spending limits.
The following should be considered for elimination:
When appropriation bills provide new budget authority for programs whose statutory authorization (the legal authority for the program to continue) has expired, that is known as an unauthorized appropriation. This was intended to place the jurisdiction of a program’s policy objective with the authorizing committees, not the appropriators. However, Congress has made a practice of ignoring this rule, and continuing to authorize funding for programs whose authorizations have long since expired—a technical violation of the law, and a wasted opportunity to review these programs for reform or elimination.
The House Transportation, Housing and Urban Development appropriations bill defines the twisted adage “putting the cart before the horse.” This bill provides tremendous budgetary resources to a bankrupt Highway Trust Fund, as well as numerous programs that make ineffective and inefficient use of federal resources. Appropriators should take a new approach and wait to determine what funding levels should be provided only after the problems in the Highway Trust Fund—including solvency—are addressed. There are also numerous opportunities to save money. More than half of the funding in the Department of Housing and Urban Development could be devolved to states or eliminated outright. The THUD appropriations bill provides conservatives an excellent opportunity to reduce government spending.—John Gray is a Research Fellow in Federal Fiscal Affairs in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation. Norbert J. Michel, PhD, is a Research Fellow in Financial Regulations in the Roe Institute. Michael Sargent is a Research Assistant in the Roe Institute.
 Keith Hall, Director, Congressional Budget Office, letter to Sander M. Levin, Ranking Member, Committee on Ways and Means, U.S. House of Representatives, May 28, 2015, http://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/SanderLevinHTFLetter.pdf (accessed June 3, 2015).
 The Heritage Foundation, “The Budget Book: 106 Ways to Reduce the Size and Scope of Government,” March 2015, http://budgetbook.heritage.org/. For additional recommendations, see Emily Goff, “How to Cut $30 Billion More from the THUD Bill,” Heritage Foundation Issue Brief No. 3984, July 1, 2013, http://www.heritage.org/research/reports/2013/07/how-to-cut-from-transportation-housing-and-urban-development-appropriations.
 Congressional Budget Office, “Projections of Highway Trust Fund Accounts: CBO’s March 2015 Baseline,” March 2015, https://www.cbo.gov/sites/default/files/cbofiles/attachments/43884-2015-03-HighwayTrustFund.pdf (accessed June 2, 2015).
 Congressional Budget Office, “The Highway Trust Fund and the Treatment of Surface Transportation Programs in the Federal Budget,” June 11, 2014, https://www.cbo.gov/publication/45416 (accessed June 3, 2015).
 Michael Sargent, “Highway Trust Fund Basics: A Primer on Federal Surface Transportation Spending,” Heritage Foundation Backgrounder No. 3014, March 19, 2010, http://www.heritage.org/research/reports/2015/05/highway-trust-fund-basics-a-primer-on-federal-surface-transportation-spending.
 See Katherine Bradley and Robert Rector, “Confronting the Unsustainable Growth of Welfare Entitlements: Principles of Reform and the Next Steps,” Heritage Foundation Backgrounder No. 2427, June 24, 2010, http://www.heritage.org/research/reports/2010/06/confronting-the-unsustainable-growth-of-welfare-entitlements-principles-of-reform-and-the-next-steps.
 See David B. Muhlhausen, Do Federal Social Programs Work? (Santa Barbara, CA: Praeger, 2013), pp. 190–204.
 Section 8 vouchers effectively serve as a price floor, thus distorting the rental market and raising prices, especially for those who do not receive vouchers.
 Ronald D. Utt, “America’s Coming High-Speed Rail Financial Disaster,” Heritage Foundation Backgrounder No. 2389, March 19, 2010, http://www.heritage.org/research/reports/2010/03/america-s-coming-high-speed-rail-financial-disaster.