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House Water Infrastructure Bill Includes Critical Harbor Maintenance Trust Fund Fix

05 Jul 2016, Posted in All Posts, Blog Posts
By Staff

On May 25, the U.S. House of Representatives’ (House) Committee on Transportation and Infrastructure (T&I Committee) passed The Water Resources Development Act of 2016. The T&I Committee’s bill summary highlights many of the bill’s provisions, including:

• Authorizing appropriations for port, channel, lock, dam and other infrastructure projects;
• Authorizing 28 priority water infrastructure projects as proposed by the Army Corps of Engineers (Army Crop); and
• Authorizing studies for future water resource projects.

While all of this is true, the summary curiously does not mention the bill’s most important provision – Section 108. This section permanently removes Harbor Maintenance Trust Fund (HMTF) spending from the annual appropriations process beginning in 2027.

As we pointed out last month in “Harbor Maintenance Trust Fund: Broken or Misused,” the HMTF is funded through an excise tax “assessed at identified ports on the value of commercial cargo shipped (excluding exported product), or cruise tickets sold, at a rate of .125 percent.” The funds collected are authorized to be appropriated for “dredging channels, maintaining jetties and breakwaters, and operating locks along the coasts and in the Great Lakes,“ but cannot be spent without an annual appropriation from Congress.

The problem is the large mismatch in recent years between revenue collected (~$2 billion annually) by the excise tax and deposited into the fund and the share of that revenue Congress is willing to appropriate from the HMTF on annual basis (~$1 billion), despite the obvious need for investment in our nation’s ports, harbors and waterways. At first blush, this seems ridiculous, but there are two very real obstacles to fully funding harbor maintenance projects: 1) discretionary budget caps and 2) statutes and rules governing federal spending.

By making this change effective in 2027, the T&I Committee avoided both potential obstacles. The bill dodges discretionary budget caps by making the funds “available to the Secretary…without further appropriation…” This effectively reclassifies the spending on the federal ledger from “discretionary” to “mandatory.” Discretionary spending is subject to Congress’ annual appropriations process. Without an explicit appropriation, no funds can be spent from the particular budget account in the relevant fiscal year. Conversely, mandatory spending is permanently authorized and occurs in perpetuity without any action required from Congress.

The bill also escapes statutory pay as you go, or “paygo” rules, which apply to the House and the U.S. Senate, and “cutgo” rules in the House, which requires any new spending be matched with an equal or greater amount of spending cuts, both of which apply only to mandatory spending. This is because these rules focus only on new spending authorized in a bill occurring in the first year, the aggregate of the first five years, and the total of the first ten years.

Fiscal years 2027 and beyond are not within the scope of spending considered when applying these laws and rules (with certain exceptions). There are additional rules that apply to spending occurring beyond the ten-year window, but those rules are not as strictly enforced and at times overlooked altogether. For now it looks like the T&I Committee threaded the needle, but time will tell if this provision passes muster with the Budget Committee and makes it to the House floor. If adopted, this provision will transform the way critical water infrastructure projects are funded for the better.