Welcome to the FAST Act era in transportation. Time to get back to work.

With just hours to spare before the Midnight expiration of road and transit spending, President Obama Friday signed the Fixing America’s Surface Transportation (FAST) Act, a five-year, $305 billion bill paid for with a combination of existing gas tax revenue and $70 billion in offsets from other areas of the federal budget. It calls for spending about $225 billion on highways and $61 billion on transit projects over the next five years. The legislation is the first transportation funding bill lasting longer than two years that Congress has passed since 2005 and delivers some degree of long-term certainty to state transportation officials around the country who have struggled to keep transportation investment afloat through years of mostly short-term extensions. Despite delivering that certainty and a variety of important policy tweaks, there is still plenty to be concerned about for the future of the federal transportation program and the discussion about the next bill has already begun.

What’s in the Legislation?

The FAST Act contains plenty of policy and programmatic endeavors that will be of interest to states. Among the details:

  • $225 billion for highways, $61 billion for transit, $10 billion for Amtrak and $7 billion for highway safety programs
  • A $4.5 billion freight-specific competitive grant program and a $6.3 billion formula program for highway freight projects
  • Added flexibility for state and local governments in how they spend their Surface Transportation Program dollars.
  • Further streamlining of environmental review and permitting processes that can slow project delivery
  • A new innovative finance bureau at the U.S. Department of Transportation that could help states jumpstart some major transportation projects.
  • A tweak to a 1998 pilot project that allowed three states (Missouri, North Carolina and Virginia) to explore adding new tolls to existing Interstate highways. Those states haven’t been able to move forward due to political opposition. They’ll now have one year to move ahead or lose their slots to other states, which will then have three years to complete their projects or be removed from the pilot.
  • A $95 million pilot program for state exploration of user-based alternative revenue mechanisms.

What’s Not in the Legislation?

There were also plenty of items not included in the FAST Act that prompted either disappointment or relief depending on your perspective. Among them:

  • The popular lending program created under the Transportation Infrastructure Finance and Innovation Act (TIFIA) was scaled down from a high of $1 billion to $275 million. But under the revised program smaller projects with a minimum cost of $10 million will be able to qualify for loans and transit-oriented development projects will be able to qualify for financing.
  • The bill does not reauthorize the popular TIGER discretionary grant program, which has provided millions in funding for transit and other projects in recent years. That leaves it subject to possible elimination in the annual appropriations process.
  • The FAST Act does little to extend an emphasis on performance measurement included in 2012’s MAP-21 legislation.
  • An amendment added in the House that would have redistributed transit funding allocated to Northeastern states under the formula-based High Density States Program didn’t make the cut. Instead the FAST Act will provide an $18.5 million increase in funding for the program, which allows those states to address transit maintenance needs.
  • The Transportation Alternatives Program, which helps states and communities build bike and pedestrian facilities, didn’t get the axe as some feared but it is capped at $850 million and unlike other programs included the legislation, it doesn’t grow over the life of the bill.

Funding Mechanisms

Due to limited interest in raising the federal gas tax this year, producing a five-year, $305 billion bill required lawmakers to come up with about $70 billion in revenues from elsewhere. Among the sources tapped for the FAST Act: a reduction of interest rates paid by the Federal Reserve to large banks, increased fees for customs processing and the future sale of oil from the Strategic Petroleum Reserve.

Last week I spoke about these “pay-fors” and the bill’s missed opportunities with Rory Kress, a reporter for The Fuse, a website focusing on energy news and analysis. As I told Kress: “The FAST Act fails to adequately address the issue of how to sustain the Highway Trust Fund long term. It continues the shift away from the user fee-based system that has been the foundation of the federal program and relies on what many have called a series of budget gimmicks to shore up its funding levels. It is left to future Congresses to ensure the bill’s shaky promises are kept and to shape a sustainable future for the federal transportation program. That is something that should concern all state government officials even as they celebrate having a long-term bill… in hand.  It’s a shame that in a year when eight states had the courage to increase gas taxes, Congress has ignored what many say is an obvious solution—raising the federal gas tax—and resorted to this kind of short-sighted solution.”  

Oregon Congressman Peter DeFazio, who is ranking member on the House Transportation and Infrastructure Committee, told The Oregonian he’s skeptical these pay-fors will produce the promised funding. But he said the legislation guarantees the funding even if it adds to the deficit and he believes borrowing money to invest in infrastructure can be easily justified.

Why the FAST Act? Why this year?

Kress also asked me why I thought the FAST Act succeeded in winning bipartisan support this year. Here’s what I said:

I’d like to think that one reason might be that Congress finally heard the voices of state government officials who have been saying for years that a long-term bill was needed.

I wonder too if seeing so many states step up to the plate this year and in 2013 to address their transportation funding needs finally convinced some in Congress that states deserve a strong federal partner they can rely on to move the nation’s infrastructure forward.

As an aside, last week I was in Augusta, Maine to address the Maine Transportation Conference. I spoke about how the eight states that approved gas tax increases this year were able to accomplish that. Later this week, I’ll head to Nashville for the CSG National Conference, where on Friday we’ll highlight many of those same states.

I also think that the 2016 election might have been on the mind of members of Congress. If we see more transportation projects that are able to get underway next year because of this bill, that’s a tide that’s likely to lift all boats come November, regardless of party.

Moreover, I think it was just time. This one had been on the to-do list for far too long. In an era when Congress can’t seem to agree on much of anything, it makes some sense that they would turn to transportation investment—something that has always had broad, bipartisan support in the past—to seek common ground.

But it has also taken Congress this long to reach the conclusion that they were never going to agree on increasing taxes for transportation and that broad-based tax reform or any kind of grand bargain on anything wasn’t likely to happen anytime soon. In reaching that conclusion, they’ve committed to the path that they’ve actually followed for the last several years, which is supporting the Highway Trust Fund with General Fund dollars and gimmicky, non-transportation-related and non-user fee-related pay-fors. 

The Bottom Line

While state officials should welcome the FAST Act as the first long-term transportation bill since the last one expired in 2009 and the first one passed by Congress in a decade, it offers plenty of areas for concern. Outside of the unsustainable funding, which some believe will amount to deficit spending in the end, the major difficulty many analysts have with the bill is that it doesn’t think big enough. It commits the nation to an inadequate status quo for the next five years and fails to innovate in meaningful ways. Despite a 15 percent increase in highway spending and an 18 percent increase for transit over the five years of the bill, it doesn’t come close to reaching the funding levels many have said are needed to make up for years of inadequate investment in the nation’s infrastructure. 

The FAST Act may ultimately prove to be a missed opportunity. The problem with missing the opportunity is that time marches on and in five years we may find ourselves further behind.

As a Bloomberg View editorial entitled “A Highway Bill We’ll Regret” put it: “Congress should've simply boosted (the federal gas) tax modestly and indexed it to inflation. Simplicity, alas, isn't a legislative specialty these days. Now inflation will continue to erode the buying power of the federal gas tax. Vehicles will continue to grow more fuel-efficient. And new technology, such as driverless cars, could upend gas consumption and driving patterns in unpredictable ways. So when the gags and gimmicks in this highway bill expire, the underlying problem of how to pay for the country's transportation needs will only have gotten worse.”

Looking Ahead

If there is any silver lining to all this (outside of states having the certainty in funding they haven’t had in recent years), it’s that everyone is promising to work harder next time.

Politico reported that Senator James Inhofe, who chairs the Senate Environment and Public Works Committee was still beaming this week about the passage of the five-year bill but he was also focused on the future. "I want to be looking down the road so we don't have to go through this again. Assuming I'm around here at the time," Inhofe said, "I want to be ready when this thing expires with another bill."

House Transportation and Infrastructure Committee Chairman Bill Shuster told reporters last week that, “as soon as the president signs this, we've got to bring the stakeholder community to the table" to come up with a long-term fix.

And as President Obama said in a written statement before signing the bill last week: “As we applaud the kind of bipartisan compromise that was reached last night, we should also recognize that we still have work to do. … Congress should pass a bill like the GROW AMERICA Act I’ve proposed in the past, one that supports even more jobs and invests even more in our roads and highways than the bill passed last night so we can meet our country’s infrastructure needs.”

That means it’s time to put away the champagne and get started on the next bill now. If the last six years are any indicator, the FAST Act’s long-term successor could take a while.

Further Reading