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House Proposal to Boost Highway Fund Hits Senate Resistance

Photographer: Andrew Harrer/Bloomberg

Delaware Democratic Senator Tom Carper, chairman of his chamber’s governmental affairs panel that handles postal issues, said the plan is “deeply flawed” and won’t go far. Close

Delaware Democratic Senator Tom Carper, chairman of his chamber’s governmental affairs... Read More

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Photographer: Andrew Harrer/Bloomberg

Delaware Democratic Senator Tom Carper, chairman of his chamber’s governmental affairs panel that handles postal issues, said the plan is “deeply flawed” and won’t go far.

A proposal House Republican leaders outlined yesterday to shore up the U.S. Highway Trust Fund by curbing Saturday mail delivery has met quick Senate opposition.

Delaware Democratic Senator Tom Carper, chairman of his chamber’s governmental affairs panel that handles postal issues, said the plan is “deeply flawed” and won’t go far.

“The proposal from House Republican leadership is a nonstarter,” said Carper, who also heads a Senate subcommittee that oversees highway programs. “It kicks the can down the road yet again on two pressing issues -- fixing the Postal Service and the Highway Trust Fund -- and fails to solve either problem.”

With a two-year measure authorizing federal highway and mass transit programs set to expire at the end of September, the U.S. Department of Transportation has said the highway trust fund that reimburses states for construction projects will dip too low to meet all its obligations as early as July.

House Republican leaders yesterday sent a memo to their caucus members detailing a move to a modified six-day mail delivery service as the main method of paying for keeping the Highway Trust Fund solvent until May 2015. Moving to such a schedule, which would stop delivery of most postal items on Saturday while allowing priority and express mail, would save $10.7 billion over 10 years, the memo from House Speaker John Boehner, an Ohio Republican, and other leaders said.

The one-year infusion would come as lawmakers pursue a broader debate over a long-term extension of federal highway and mass transit programs, the leaders said.

‘Structural Reform’

“We firmly believe that this is the best way to ensure continued funding of highway projects in a fiscally responsible manner that implements a needed structural reform to a growing federal liability,” Boehner, Majority Leader Eric Cantor of Virginia and Majority Whip Kevin McCarthy of California wrote.

A Senate panel has approved a six-year measure that extends programs at current funding levels, plus inflation.

The highway trust fund is funded by an 18.4 cents-per-gallon gas tax. It hasn’t been increased since 1993. Some lawmakers, business and transportation groups say raising the levy would be the best way to deal with mounting infrastructure needs.

“A moderate increase in the gas tax phased in over time would provide the necessary funding, preserve the important ‘user pays’ principle, and provide needed stability,” Tom Donohue, president of the U.S. Chamber of Commerce, told the Senate Environment and Public Works Committee in February.

Tea Party

Yet any tax increase is anathema among many Tea Party-aligned Republicans elected on promises to reduce government spending.

An infusion of general funds with some type of offsetting spending cut -- such as the House Republican leaders are pushing -- would buy more time in the debate over funding projects and reauthorizing programs.

House Republican leaders said ending delivery of first-class mail, catalogs and advertising circulars on Saturday would allow the Postal Service to cut costs, trimming losses that reached $15.9 billion in fiscal year 2012.

Under the proposal, packages including medications, priority and express mail would still be delivered, as would mail to P.O. boxes. Post offices that currently operate on Saturdays would remain open.

Though the Postal Service has its own budget, it’s projected to need a taxpayer bailout, and savings from reducing the cost of that bailout or avoiding it entirely would be counted as offsetting aid to the highway fund, Republican leaders said.

‘Better Aligned’

“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,” they said.

Postal labor unions have questioned the potential savings from cutting Saturday mail delivery, saying it could put the post office in a spiral toward possible extinction by sacrificing revenue and ceding business. The four postal unions have formed a coalition to try to block that plan.

The Postal Service lost $5 billion in its most recent fiscal year, with most of its losses stemming from a congressional requirement that it pay now for the costs of health benefits for future retirees. The service itself has sought to end Saturday delivery and raise rates higher than inflation to increase its revenue to cover its losses, but no consensus has emerged in Congress to allow that.

The House Republican leaders in their memo also discussed transferring money in the federal Leaking Underground Storage Tank Trust Fund to the highway program, generating $1.3 billion.

Paying for highways out of Postal Service changes drew criticism from some Washington small-government advocacy groups influential among the Tea Party followers.

“The idea Congress would use a supposedly self-funding agency that cannot pay its bills as a piggy bank to fund another bankrupt, self-funding fund is absurd,” Heritage Action spokesman Dan Holler said in an e-mail.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Don Frederick, Sylvia Wier

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