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Senate Approves $8 Billion Transportation Package

The Senate approved a bill Tuesday that would keep transportation dollars flowing until December. But it has not yet solved the problem of how to avoid any disruption in highway spending.

Senators rejected the financing approach favored by the House, which makes heavy use of an accounting practice known as pension smoothing. The House bill would allow companies to reduce payments to their retirement plans, which would temporarily increase their taxable income and thus federal revenues.

In order to reduce the reliance pension smoothing, the Senate shrank the total package to $8.1 billion. The House version, passed last week, approved nearly $11 billion in spending.

The federal highway trust fund has been running short for years. If Congress does not approve new legislation this week, the feds will have to reduce promised payments to states by Aug. 1.

"States have been warned to expect an average reduction of 28 percent in aid payments," The Associated Press reports. "Without action from Congress, the balance in the fund is expected to drop to zero by late August or early September."

House Speaker John Boehner had warned that the Senate shouldn't mess with the House bill's financing mechanisms. "I just want to make clear, if the Senate sends a highway bill over here with those provisions, we're going to strip it out and put the House-passed provisions back in and send it back to the Senate," he said.

But a bipartisan group of senators decided it would be better policy to come up with just enough money to keep the transportation programs on track until the week before Christmas.

That way, they reasoned, Congress will be forced after the fall elections to come up with a longer-term plan.

The House and Senate will now have to reconcile their versions — or hope that they can make the other chamber blink just ahead of a planned five-week recess.

"As I have said before, we won't let the clock run out on transportation funding," Ron Wyden, an Oregon Democrat and the Senate Finance Committee chair, said in a statement.

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