For informational/historical purposes only.

MEMORANDUM
The Ohio Department of Transportation
July 2, 2002

Federal Funding Update

To: Transportation Stakeholders
From: Michelle Holdgreve, ODOT Legislative Director
Date: July 2, 2002
Re: Federal Funding Update

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We appreciate your participation in our monthly federal funding meetings. They have proved to be an excellent opportunity for all transportation interest groups in our state to share information regarding their involvement and perspective in the upcoming reauthorization of the federal transportation funding legislation.

At the last meeting on Tuesday, June 24th, we announced that we were canceling the next two meetings because there would be little to discuss due to the summer congressional schedule. We were proven wrong: There have been some major developments in the last week regarding ethanol and the reauthorization bill. The meetings are still canceled but we are sending this newsletter to alert you to what is occurring at the congressional level.

The first major development concerns the 2.5 cent ethanol tax redirection. As we have pointed out in the past, ethanol blended fuels are taxed at 13.1 cents per gallon, a 5.3 cent reduction from the 18.4 cent gasoline tax. Further, 2.5 cents of the tax collected is redirected from the Highway Trust Fund to the General Fund. This tax break and funding diversion reduces Ohios annual federal funding return by nearly $160 million.

Earlier this year, Senator Max Baucus (D-Montana) was successful in amending the Senate version of the Energy Bill (S. 517) to remedy the 2.5 cent diversion. The Energy Bill passed by the House (H.R. 4) does not contain this provision. A conference committee has been appointed to reconcile the differences between the two bills. This is a significant step. Because of other environmental issues in the bills, it was doubtful that a conference committee would be appointed at all.

We were also very pleased to learn that Ohio congressmen Paul Gillmor and Michael Oxley have both been appointed to the Energy Bill Conference Committee. Congressman Oxley was appointed because of his role as chairman of the House Financial Services Committee. Congressman Gillmor is a high ranking member of the House Energy & Commerce Committee. Having two members from the Ohio Congressional Delegation is outstanding, just another indication of the strength of our delegation.

Governor Taft recently wrote to all 61 members of the committee to ask for their support in retaining the 2.5 cent ethanol provision; a copy of this letter is linked here and below. Please contact congressmen Gillmor and Oxley and express your support for this provision as well. The committee met briefly last week before leaving for the congressional July 4th holiday recess. They are expected to resume meetings when Congress returns the week of July 8th. Their schedule for completion is not known, but we are optimistic that they will complete work by the end of the year.

The second recent development was the introduction of the first reauthorization bill. Last week Senator Max Baucus (D-Montana) introduced the Maximum Economic Growth for America through the Highway Trust Fund Act, or the MEGA TRUST Act. This is the first in a series of bills the senator plans to introduce concerning reauthorization. The MEGA Trust Act focuses solely on revenues to the Highway Trust Fund. This bill would do the following:

  • Ensure the taxes paid on gasohol are fully credited to the Highway Account of the Highway Trust Fund, by crediting the Highway Account with the 2.5 cents currently being diverted to the General Fund (this is identical to the Senate Energy Bill provision described above).
  • Ensure that the General Fund of the Treasury, not the Highway Account of the Highway Trust Fund, would shoulder the cost of the gasohol tax preference. Accordingly, the bill would leave the gasohol tax rate preference in place but credit the Highway Account of the Highway Trust Fund with the 5.3 cents in revenue equal to that forgone to the Treasury by the gasohol tax preference.
  • Credit the Highway Account of the Highway Trust Fund with interest on its balance, which it currently does not receive.
  • Credit the Mass Transit Account of the Highway Trust Fund with interest on its balance, which it currently does not receive.
  • Extend the basic highway user taxes and the Highway Trust Fund so that they do not expire.
  • Require a study regarding the future financing of the federal highway and transit programs.

As chairman of the Senate Finance Committee, Senator Baucus may be successful in winning approval for this bill. But, it is very early in the process. The next Congress will have authority over the majority of the reauthorization legislation since the current bill does not expire until September 30, 2003. However, we plan to follow the progress of the MEGA TRUST Act closely.

Between now and our next meeting in September, I will send updates like this one as needed. If you have any questions or need further clarification, please contact Michelle Holdgreve at 614-466-8480.

Thanks again for your participation and interest.

Link to: Governor Bob Taft's letter to U.S. Congressmen regarding the ethanol situation