June 28 (Bloomberg) -- U.S. congressional negotiators agreed yesterday to maintain current transportation spending for 27 months, refocusing federal dollars on highways and giving states more power to set their own priorities.
Members of a House-Senate conference committee reached a deal three days before the latest temporary extension of existing legislation expires. The final measure, which both chambers must approve, will come up for a Senate vote tomorrow, said Majority Leader Harry Reid, a Nevada Democrat. The Senate may act after the House votes, he said.
Republicans said the bill would free states from questionable federal mandates and get projects built quicker. Senator Barbara Boxer, a California Democrat who is chairwoman of the House-Senate conference committee, said in a statement that Republicans met the Democratic-led Senate half way.
“The bill is funded at current levels, and it will protect and create 3 million jobs,” Boxer said. “Our country needs the kind of economic boost that this bill offers.”
Without a long-term bill or another extension of previous law, U.S. authority to collect the 18.4-cents-a-gallon gasoline tax and spend on highways and transit would run out June 30, cutting off money to states for programs funded by the U.S. Highway Trust Fund such as safety and repairs. Thousands of construction and government workers would probably be idled.
Besides transportation-related programs, the legislation poised to clear Congress by the end of the week will include money to keep student-loan interest rates from doubling and a reauthorization of the National Flood Insurance Program. Flood insurance programs expire at the end of July.
The deal came together after conferees dropped two Republican-backed provisions, one requiring approval of the Keystone XL oil pipeline from Canada to the U.S. Gulf Coast and another barring the federal government from regulating coal ash as hazardous waste, said Oklahoma Senator James Inhofe, the senior Republican negotiating from the Senate.
Inhofe said he didn’t anticipate that the absence of the Keystone and coal-ash provisions would threaten Republican support for the bill in the Senate.
“Keystone and coal ash are really sort of one-shot deals,” he told reporters.
Representative John Mica, the chairman of the House Transportation and Infrastructure Committee, said the bill would cut red tape and attract more private financing for projects.
The measure fulfilled his goals of getting funding for as long a period as possible and ending the practice of earmarking, in which lawmakers set aside money for pet projects in their states or districts, he said. The last transportation overhaul, passed in 2005, carried 6,300 earmarks, he said.
“The public just cannot wait,” said Mica, a Florida Republican who negotiated for the House. “We had to provide some stability. A six-month extension would have been a disaster at this point in our economic situation.”
The compromise measure would extend current levels of spending on highways, bridges and mass transit through the end of fiscal 2014, Mica said.
The money to pay for the transportation projects will come from the Highway Trust Fund and an infusion of general taxpayer cash, Senate Finance Committee Chairman Max Baucus said in a statement last night. The general tax money will be fully offset by changes to tax law, including one that stabilizes pension interest rates and another that raises company premiums for the Pension Benefit Guaranty Corp.
The final package funding the highway bill and the student loan rate provision will cost $27.2 billion, Baucus said.
House Republicans also had objected to a U.S. policy that sets aside between 1 percent and 2 percent of gasoline-tax revenues for non-road projects.
States will be able to elect not to spend federal highway money on items such as pedestrian walkways, bicycle paths and roadside wildflowers, according to a fact sheet House leaders distributed yesterday.
Representative Peter DeFazio, an Oregon Democrat, said Boxer had eased his concerns that the bill would erode environmental protections and states’ ability to fund non-road projects such as bike lanes. States will have the option to spend the money on other things as well, he said.
“Some unenlightened states, like Texas, will do that,” DeFazio told reporters. “States like mine will continue to invest in alternate modes.”
Speeding environmental reviews was one of the main sticking points in talks between the House and Senate. House Republicans, including many of the 84 members in their first terms, focused on cutting the length of time it takes to complete highways and bridges built with U.S. funds, estimated at an average of 13 years, according to the U.S. Chamber of Commerce.
House and Senate negotiators compromised on ways to accelerate approval of federally funded projects, said Representative Reid Ribble, a Wisconsin Republican charged with negotiating that part of the bill with the Senate.
“We came toward them on a few things and they came toward us on a few,” Ribble told reporters. “It actually worked the way it was supposed to.”
While some fiscal conservatives won’t support spending more than the income of the Highway Trust Fund, most of them would agree to the funding levels conferees settled on, Ribble said. He predicted the House would pass the bill tomorrow.
“I think we’ll do well on the Republican side,” Ribble said.
The highway measure will reduce the number of projects funded and “streamline the regulatory process,” House Speaker John Boehner told reporters yesterday. He said the measure allows “us to focus our highway dollars on fixing America’s highways, not planting more flowers around the country.”
Lawmakers combined the highway bill with a one-year freeze for government-subsidized student loan rates. Otherwise, those interest rates would double to 6.8 percent on July 1. The rate freeze’s cost is estimated at $5.9 billion.
About 7.4 million students stand to save an average of $1,000, and President Barack Obama has made this a priority since his State of the Union address, White House Press Secretary Jay Carney said in a statement.
“We hope that Congress will complete the legislative process and send a bill to the president as soon as possible,” Carney said. Lawmakers leave at the end of this week for a weeklong July 4 recess.
Environmental groups and transportation advocates were watching to see if Senate Democrats made too many concessions on so-called enhancement projects used to supplement roads, said Kevin Mills, vice president of policy and trail development at the Washington-based Rails-to-Trails Conservancy.
“They’ve been tremendously cost-effective,” said Mills, whose group advocates for the conversion of abandoned railways into bike paths. “We’re concerned there not be backtracking on these vital programs.”
Still, dropping the Keystone and coal ash provisions gave a victory to environmental groups and Democrats who had said the proposals threatened the environment and public health.
Republicans said the Keystone project would create thousands of jobs and lower U.S. dependence on foreign oil.
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