Q & A On Highways Extension & Modified 6-Day Mail Delivery
Q & A On Highways Extension & Modified 6-Day Mail Delivery Courtesy of the Offices of the Speaker, Majority Leader, and Majority Whip, and the Budget, Transportation, and Government Reform Committees Contents: 1) Why is the Highway Trust Fund running out of money before the end of MAP-21? 2) How much of a general fund transfer would be needed to keep the Highway and Transit Trust Funds solvent for one additional year? 3) What option is available to pay for a general fund transfer to extend MAP-21? 4) Won’t using the postal reform savings as an offset to the general fund transfer take money away from the Postal Service? 5) Won’t a short-term extension of MAP-21 make it harder to do a longer term highway bill? 6) Won’t using modified 6-day mail delivery as a payfor for a MAP-21 extension make it harder to enact comprehensive reform of the Postal Service? 7) Isn’t the Postal Service off-budget?
1) Why is the Highway Trust Fund running out of money before the end of MAP-21? The primary revenue source for the Highway Trust Fund is the federal excise tax on gasoline and diesel sales, which currently is 18.4 cents a gallon for gasoline and 24.4 cents for diesel. The current rates were set in 1993. Since that time, motor vehicle fuel efficiency has increased significantly, in part driven by federal Corporate Average Fuel Economy (CAFE) standards imposed on auto manufacturers. In addition, slower than average economic growth since the 2008-2010 recession has contributed to reductions in miles travelled. Because fuel consumption has declined since 1993 but federal spending on road construction has increased, the dedicated tax for the program no longer brings in sufficient revenues to support the current level of spending from the trust fund. While MAP-21 included a general fund transfer intended to keep the trust fund solvent through September 30, 2014, and the transfer was paid for by a collection of mandatory savings policies enacted to other federal
programs, fuel consumption declined more than was anticipated over the last two years. This will likely result in the trust fund dropping below the level that DOT needs to maintain prompt payments to states at some point in the month of July. 2) How much of a general fund transfer would be needed to keep the Highway and Transit Trust Funds solvent for one additional year? According to projections by the Transportation and Infrastructure Committee staff, based on CBO estimates of revenues and spending continuing at current levels, an additional $14 to $15 billion would be needed for a one year extension of MAP-21. 3) What option is available to pay for a general fund transfer to extend MAP-21? Chairman Issa and the Oversight & Government Reform Committee have proposed reforms to the Postal Service which would help to control costs at the USPS. The Postal Service currently underfunds its retiree benefit costs, potentially needing taxpayer bailouts to cover operating losses such as FY 2012’s $15.9 billion shortfall. One proposal would end the delivery of first class mail, catalogs, advertising circulars, and other lower-priority mail on Saturdays. The proposal would still allow for Saturday delivery of packages (including medications) and priority and express mail. Post offices would remain open on Saturdays and there would be no changes for delivery of mail to post office boxes. Adopting this proposal would save $10.7 billion over the next ten years. Adopting this modified six day mail reform could be used to offset an extension of MAP-21 surface transportation programs. It is a realistic offset because President Obama’s FY 2015 budget also recommends termination of Saturday mail delivery by the USPS. An additional available offset would transfer the current balance remaining in the Leaking Underground Storage Tank (LUST) Trust Fund to the Highway Trust Fund. The LUST Trust Fund is financed by a 0.1 cent excise tax on fuel sales. A similar transfer between the LUST and Highway trust funds was included in MAP-21. This would generate savings of about $1.3 billion. If these policies were included as payfors for an extension of MAP-21, the Transportation & Infrastructure Committee has concluded that solvency of the Highway and Transit trust funds could be extended through the end of May 2015. 4) Won’t using the postal reform savings as an offset to the general fund transfer take money away from the Postal Service? No. The savings from allowing the Postal Service to reduce costs will accrue directly to the Postal Service. Due to rapidly declining mail volume, the expenses of the Postal Service exceed its revenues. And it has more than $100 billion in unfunded long-term liabilities, including retirees’ health care benefits. If the Postal Service does not reduce costs, it is almost certainly
going to have to keep raising postal rates beyond the rate of inflation, as evidenced by an exigent rate increase implemented in recent months. In the longer term, the Postal Service’s failure in recent years to make required multi-billion dollar payments to prefund its retirees’ health care is setting the stage for a future bailout from the general fund of the treasury. It is essential to lower postal labor costs (which comprise 80percent of USPS expenses) as soon as possible to better enable USPS to meet this statutory obligation without a general fund bailout (in the form of reducing the size of a future bailout). In forestalling a future federal bailout of the Postal Service by enabling the USPS to better operate within its own revenue stream, a real savings is achieved by the general fund of the treasury (in the form of reducing the size of a future bailout). This can be used to offset the general fund transfer to the Highway Trust Fund. The result will be that the Postal Service has its costs better aligned with its revenues and the general fund of the Treasury avoids future bailout costs. 5) Won’t a short-term extension of MAP-21 make it harder to do a longer term highway bill? No. The problems presented to us in paying for a short term extension are different from those facing a long-term bill. Ultimately, a long-term bill needs to solve the structural imbalance in the program that has lasted for many years, where revenues cannot support spending levels. To extend current spending levels through 2020 would require a general fund transfer or tax increase of $95 billion. Decisions about whether or not alternative revenue sources or spending levels are appropriate are much more difficult than finding a smaller amount of offsets to cover a short term general fund transfer. It would make no sense to cobble together a long-term bill with another collection of one-time payfors that merely patch the problem without solving it through structural reform. However, the serious work needed to develop acceptable policies to achieve structural reform has not been done yet. There is no consensus on what those reforms should be. In the meantime, we must address the problem of near-term trust fund insolvency to prevent a shutdown of federal highway and transit programs. 6) Won’t using modified 6-day mail delivery as a payfor for a MAP-21 extension make it harder to enact comprehensive reform of the Postal Service? No. Actually, granting the USPS the ability to reduce mail delivery is the biggest obstacle to overall postal reform. There is bipartisan, bicameral agreement on other elements of postal reform. 7) Isn’t the Postal Service off-budget?
Yes. However, as noted in question #4, reform would help forestall a future federal bailout of the Postal Service by enabling the USPS to better operate within its own revenue stream. This is a real savings for the general fund of the treasury (in the form of reducing the size of a future bailout). Additionally, the off-budget treatment of the Postal Service is a somewhat arbitrary designation. It has moved between on and off budget status several times since the US Postal Service was created out of the old Post Office Dept. back in 1971.
1) Why is the Highway Trust Fund running out of money before the end of MAP-21? The primary revenue source for the Highway Trust Fund is the federal excise tax on gasoline and diesel sales, which currently is 18.4 cents a gallon for gasoline and 24.4 cents for diesel. The current rates were set in 1993. Since that time, motor vehicle fuel efficiency has increased significantly, in part driven by federal Corporate Average Fuel Economy (CAFE) standards imposed on auto manufacturers. In addition, slower than average economic growth since the 2008-2010 recession has contributed to reductions in miles travelled. Because fuel consumption has declined since 1993 but federal spending on road construction has increased, the dedicated tax for the program no longer brings in sufficient revenues to support the current level of spending from the trust fund. While MAP-21 included a general fund transfer intended to keep the trust fund solvent through September 30, 2014, and the transfer was paid for by a collection of mandatory savings policies enacted to other federal
programs, fuel consumption declined more than was anticipated over the last two years. This will likely result in the trust fund dropping below the level that DOT needs to maintain prompt payments to states at some point in the month of July. 2) How much of a general fund transfer would be needed to keep the Highway and Transit Trust Funds solvent for one additional year? According to projections by the Transportation and Infrastructure Committee staff, based on CBO estimates of revenues and spending continuing at current levels, an additional $14 to $15 billion would be needed for a one year extension of MAP-21. 3) What option is available to pay for a general fund transfer to extend MAP-21? Chairman Issa and the Oversight & Government Reform Committee have proposed reforms to the Postal Service which would help to control costs at the USPS. The Postal Service currently underfunds its retiree benefit costs, potentially needing taxpayer bailouts to cover operating losses such as FY 2012’s $15.9 billion shortfall. One proposal would end the delivery of first class mail, catalogs, advertising circulars, and other lower-priority mail on Saturdays. The proposal would still allow for Saturday delivery of packages (including medications) and priority and express mail. Post offices would remain open on Saturdays and there would be no changes for delivery of mail to post office boxes. Adopting this proposal would save $10.7 billion over the next ten years. Adopting this modified six day mail reform could be used to offset an extension of MAP-21 surface transportation programs. It is a realistic offset because President Obama’s FY 2015 budget also recommends termination of Saturday mail delivery by the USPS. An additional available offset would transfer the current balance remaining in the Leaking Underground Storage Tank (LUST) Trust Fund to the Highway Trust Fund. The LUST Trust Fund is financed by a 0.1 cent excise tax on fuel sales. A similar transfer between the LUST and Highway trust funds was included in MAP-21. This would generate savings of about $1.3 billion. If these policies were included as payfors for an extension of MAP-21, the Transportation & Infrastructure Committee has concluded that solvency of the Highway and Transit trust funds could be extended through the end of May 2015. 4) Won’t using the postal reform savings as an offset to the general fund transfer take money away from the Postal Service? No. The savings from allowing the Postal Service to reduce costs will accrue directly to the Postal Service. Due to rapidly declining mail volume, the expenses of the Postal Service exceed its revenues. And it has more than $100 billion in unfunded long-term liabilities, including retirees’ health care benefits. If the Postal Service does not reduce costs, it is almost certainly
going to have to keep raising postal rates beyond the rate of inflation, as evidenced by an exigent rate increase implemented in recent months. In the longer term, the Postal Service’s failure in recent years to make required multi-billion dollar payments to prefund its retirees’ health care is setting the stage for a future bailout from the general fund of the treasury. It is essential to lower postal labor costs (which comprise 80percent of USPS expenses) as soon as possible to better enable USPS to meet this statutory obligation without a general fund bailout (in the form of reducing the size of a future bailout). In forestalling a future federal bailout of the Postal Service by enabling the USPS to better operate within its own revenue stream, a real savings is achieved by the general fund of the treasury (in the form of reducing the size of a future bailout). This can be used to offset the general fund transfer to the Highway Trust Fund. The result will be that the Postal Service has its costs better aligned with its revenues and the general fund of the Treasury avoids future bailout costs. 5) Won’t a short-term extension of MAP-21 make it harder to do a longer term highway bill? No. The problems presented to us in paying for a short term extension are different from those facing a long-term bill. Ultimately, a long-term bill needs to solve the structural imbalance in the program that has lasted for many years, where revenues cannot support spending levels. To extend current spending levels through 2020 would require a general fund transfer or tax increase of $95 billion. Decisions about whether or not alternative revenue sources or spending levels are appropriate are much more difficult than finding a smaller amount of offsets to cover a short term general fund transfer. It would make no sense to cobble together a long-term bill with another collection of one-time payfors that merely patch the problem without solving it through structural reform. However, the serious work needed to develop acceptable policies to achieve structural reform has not been done yet. There is no consensus on what those reforms should be. In the meantime, we must address the problem of near-term trust fund insolvency to prevent a shutdown of federal highway and transit programs. 6) Won’t using modified 6-day mail delivery as a payfor for a MAP-21 extension make it harder to enact comprehensive reform of the Postal Service? No. Actually, granting the USPS the ability to reduce mail delivery is the biggest obstacle to overall postal reform. There is bipartisan, bicameral agreement on other elements of postal reform. 7) Isn’t the Postal Service off-budget?
Yes. However, as noted in question #4, reform would help forestall a future federal bailout of the Postal Service by enabling the USPS to better operate within its own revenue stream. This is a real savings for the general fund of the treasury (in the form of reducing the size of a future bailout). Additionally, the off-budget treatment of the Postal Service is a somewhat arbitrary designation. It has moved between on and off budget status several times since the US Postal Service was created out of the old Post Office Dept. back in 1971.
