The House has passed H.R. 3550, the surface transportation bill after two days of floor debate. One major issue that was debated today was the Isakson amendment. The Isakson amendment was rejected by voice vote, and by a subsequent recorded vote of 170 to 254. The amendment would have included high priority projects and projects of national regional significance under the Minimum Guarantee.

Rep. Lincoln Davis (D-TN) then moved to recommit the bill with an amendment to raise the funding level to the Senate passed level of $318 billion. The motion with amendment was defeated.

The final vote on H.R. 3550 was 357 to 65, and the House and Senate will now meet in conference to work out differences.

House consideration of TEA-LU will be completed tomorrow. Some outstanding issues include the flexbility of states to charge tolls and redistributing the funding levels to account for special member projects. Though some concerns have been raised about various matters concerning the bill, final passage is expected by a significant majority of Representatives.

This is, however, just one more step along the journey. Following final passage, the negotiators from the House and Senate will meet to work out differences between the two bills. The White House will also weigh in on these negotiations. Overall funding levels differ significantly among the competing proposals - the Senate provides $318 billion over 6 years, the House provides $279 billion over six years, while the White House has indicated it will veto any bill over $256 billion.

The Transportation Equity Act: A Legacy for Users (TEA-LU), a $275 billion highway bill is currently being debated on the House Floor. This comes one day following objections forced House Republican leaders to temporarily pull the bill.

Yesterday, House Republicans voiced displeasure with topics including the bill's funding level and how big a share of that money their states and districts would receive. Chairman of the Transportation and Infrastructure Committee, Rep. Don Young (R-Alaska) held a meeting with members of the committee to listen to their concerns. After the meeting, Chairman Young said he would try to address the most divisive issues - the complaints of the "donor" states about getting less money from the Highway Trust Fund for projects than they pay in.

As approved by the committee, the bill would authorize 2,838 highway projects requested by lawmakers - leaving room for more. A total of $11 billion has been set aside for House member requests along with another $6.6 billion for projects of regional and national significance.

A final vote could come as soon as tonight or tomorrow. This would be the last action before the House begins a two-week recess.

In our last report, we indicated a House GOP caucus was meeting to discuss how to move forward on TEA-LU. The result of that meeting is the legislation has been pulled from the House calendar.

Apparently, there was open revolt at the meeting on a number of different issues. Among them was that the committee allocation of project money provided assistance to Democrats in tough races, but not to GOP members in donor states also facing tough battles. There was also concern from the donor state representatives generally that the bill does not address their concerns. These problems are acute because the price tag of the legislation was driven so far below the Committee on Transportation & Infrastructure's original level of $375 billion.

One senior member referred to the meeting as Humpty Dumpty falling off the wall. Obviously, the question is whether all the kings horse's and all the king's men can now put TEA-LU back together again.

The House of Representatives today will begin general debate on H.R. 3550, "TEA-LU." Late in the day, the House Rules Committee is slated to put before the body a rule for consideration which will limit the number of amendments which may be offered when the House moves tomorrow, April 1, to complete its work on the measure. As of this writing (2:45 pm Eastern time) no rule has been released and the House GOP caucus is meeting in a "mandatory" session to discuss the legislation. Rumors are circulating that the House GOP leadership has agreed to push the funding level in the bill down to the Administration 's level on the House floor.

The debate between Congress and the Bush Administration over the funding levels in the bill continued yesterday when the White released a "Statement of Administration Policy" on the bill. The White House indicated that the $275 billion funding level of the bill, even though it is $43 billion below the Senate-passed level would trigger a recommendation from the President's advisers that he veto the bill. A similar threat was lodged against the provision in the bill that requires a reconsideration (or "reopener"). To see the text of the statement click on this pdf document from the White House.

Earlier today, I had the opportunity to discuss with a senior GOP Senator the process for this legislation moving forward. He had participated in a Senate leadership meeting on March 30. His belief after that meeting was that congressional leadership was moving to accommodate the administration's position on the funding level. This is, of course, the view of one participant in the meeting. There may well be other Senators who took a different message away from that session.

Stay tuned for news as the day continues.

The Senate today added $6 billion in funding for child care after an amendment by Olympia Snowe (R-Maine) managed to pass 78-20 despite White House objections. The measure would increse the amount of money through mandatory state block grants. The overall bill will reauthorize the 1996 bill for another five years, and has already attracted a raft of amendments from Democrats eager to boost the minimum wage among other ideas. Snowe argued that low-income mothers would find it difficult to find and keep a job if they were unable to procure child care.

The House defeated a Democratic measure to impose pay-as-you-go rules upon the FY2005 Budget Resolution. The motion failed by a 209-209 vote, with 11 Republicans voting in the affirmative. The conference will now decide whether the final resolution echoes the Senate version (where 4 GOP members switched sides, passing pay-go) or the House version. The rule would require a 60-vote super-majority in the Senate for any tax cuts or spending expansions without an equivalent revenue enhancement measure to offset the loss of funds.

On March 29, a White House official told the BNA News Service that President Bush would veto the House TEA-21 reauthorization bill in its current form. The House reauthorization bill contains $275 billion in funding for highway and transit programs. The bill was scaled down from $375 billion, which the House Transportation and Infrastructure was originally clamoring for.

House Speaker Dennis Hastert had prodded the T&I Committee to mark-up a $275 billion bill to allay administration officials' concerns, who felt the price tag of the reauthorization bill was too high. The administration had made it known that the President would veto any bill over $256 billion, which is the amount of funding the White House requested for reauthorization in the FY 2005 budget. However, the veto threat came after the Senate passed a $318 billion reauthorization bill. Most lawmakers were certain that the administration would be amenable to a bill that significantly reduced the $318 billion package.

The White House is citing two major concerns with the House reauthorization bill. First, the administration has cast some skepticism on the actual price tag of the bill. Some analysts believe that the bill would cost $279.5 billion because of an additional $4.5 billion in exempt obligations that are found throughout the bill. Another industry source commented that the bill would authorize $283.3 billion in highway and transit funding, but only guarantee $279.5 billion in funding. Also, the White House views the T&I bill as a two-year reauthorization because of a re-opener provision included in the bill. The re-opener provision mandates that highway and transit funding be cut-off at the end of FY 2005 until Congress enacts a new law increasing the minimum guaranteed level of funding bequeathed to the states.

Current law requires each state to receive a 90.5 return on gas tax revenue submitted to the highway trust fund. Donor states such as Texas and Florida have long coveted a more equitable allocation of highway funding. House Majority Leader Tom Delay (R-Texas) wants the reauthorization bill to guarantee each state a minimum return of 95%. However, with a $275 billion bill, it is unlikely that the contentious donor-donee issue would be resolved. Delay was originally going to introduce an amendment on the House floor, but will now likely press lawmakers to settle the issue in conference. The Senate bill was able to guarantee each state a 95% return by 2009, the last year of the reauthorization bill.

Despite the veto threat from the White House, lawmakers believe they have enough votes to override such a veto. It takes two-thirds of Congress to override a presidential veto. By vetoing the TEA-21 reauthorization bill, President Bush can assuage his conservative critics by demonstrating fiscal discipline. And if the veto is overridden by Congress, the President can still claim that he is committed to reigning in spending.

Tomorrow the House is expected to vote on a proposal to increase pay-parity for civil service workers. Currently, the White House is asking for a 3.5% pay increase for soldiers and a 1.5% increase for government workers. Virginia Republican representatives Thomas Davis III and Frank Wolf are joined by Steny Hoyer (D-Maryland) in sponsoring the legislation to have the House's version of the 2005 budget blueprint include pay parity. The Senate version already includes such a measure and when the details are hammered out in conference, Davis and other believe it will be easier to pass if both houses have the resolution contained within them.

Ernest Istook (R-Oklahoma), who chairs the House Appropriations Subcommittee on Transportation and Treasury, has been fighting the measure in order to cut costs.

An $80 billion pension relief program has hit a snag once moving to conference: House and Senate negotiators have sparred over funding relief for multi-employer plans. Rep. John A. Boehner, (R-Ohio), chairman of the conference, was quoted by CQ as saying, "These talks are in serious danger. This bill is in serious jeopardy." The dispute stems from the ongoing problem of roughly 31,000 companies with defined-benefit pension plans. Current law mandates a certain amount of contributions to their plans, and these companies are seeking a change in the formula which would allow them to contribute less over the next two years. Work on the conference stopped this morning due to the dispute, with Senate leaders seeking a greater effort to aid the multi-employer plans, which number around 1,600.

We've got several tables showing the funding allocations in the TEA-LU legislation recently moving through the House. Head over to the analysis side for further details.

The House Committee on Transportation & Infrastructure on March 24 approved for floor consideration "TEA-LU," the six-year re-authorization of Federal highway, highway safety, transit and transportation research programs. The total price tag for the measure is $275 billion -- fully $100 billion below the amount originally proposed by committee leadership.

The bill includes $51 billion for transit programs and $225 billion for highways. It includes a provision -- called a "re-opener" -- which would require Congress to come back to the legislation next calendar year to re-visit funding levels. The bill makes clear that any change in the highway formula to address the "donor/donee" problem is contingent upon additional resources for these programs being found. During the mark-up, numerous members indicated they had amendments to the bill they would like to see included in a committee amendment to be offered by committee leadership when the bill reaches the floor. Chairman Don Young (R-Alaska) made commitments to include perhaps a dozen such amendments in his package.

The bill is slated for action by the full House as early as March 31. Rumors abound that Majority Leader Tom DeLay (R-Texas) is developing an amendment for consideration on the floor which would ensure each state recovers from the Highway Trust Fund at least 95% of what it puts in. Such an amendment could roil the waters considerably and produce opposing votes on both sides of the aisle.

Peyser Associates clients saw a 27 page summary of the bill before the mark-up and received updates on the legislation immediately after the markup. We will keep our friends and clients posted on developments as they occur. The final version is available here on the analysis side of our website.

Medicare’s financial condition has been slowly deteriorating partly because of rising health care costs and also from the new Medicare law. The Medicare board of trustees reports that the program’s hospital insurance trust fund could run out of money before the end of the next decade.

This report comes shortly after the Medicare actuary asserted that the administration ordered him to withhold higher cost estimates for the Medicare legislation last year. The trustees reported that: Medicare’s hospital insurance trust fund, which pays for inpatient hospital care, will be exhausted in seven years; Medicare will grow much faster than the economy as a whole; and, projected Medicare costs will exceed those for Social Security in 2024.

The public trustees said that rapidly rising Medicare costs, combined with the new drug benefit, raise doubt about the sustainability of Medicare under current financing arrangements. Moreover, the fiscal outlook may be worse than the official projections indicate, because the estimates are based on the assumption that the average Medicare fee for doctors’ services will be cut about 5% each year from 2006 to 2012, as required under current rules. Doctors are saying that they will lobby Congress to prevent such cuts.

The trustees report that total Medicare spending on the drug benefit would start at $85 billion a year in 2006 and then would grow an average of 9.6% a year, to $161.8 billion in 2013.

Beginning this year, tax receipts alone will no longer cover hospital payments. By 2019, Medicare’s reserves will be depleted and the program will go broke.

Officials are estimating that the new Medicare prescription drug law will accelerate the trust fund’s insolvency by two years through increased payments to private insurers who accept Medicare recipients and higher reimbursements for rural hospitals.

Payments for seniors’ drugs were not reflected in the trustees’ solvency calculations because these costs will be covered by general tax revenues, not by a dedicated Medicare trust fund.

The forecasts angered many fiscal conservatives because of the way it would increase mandatory spending, providing new ammunition for Democrats. Democrats have claimed that the law directs too much money to health plans and not enough to seniors who need it the most.

The long-term projections, if true, could trigger cost-containment measures that fiscal conservatives included in the law. The law requires the president to submit legislation to Congress to curtail spending if general revenue contributions account for more than 45% of total Medicare expenditures for two consecutive years.

We've managed to procure an advance copy of the summary of the version of "TEA-LU" that Chairman Don Young (R-Alaska) will put before the House Committee on Transportation and Infrastructure tomorrow, March 24. To see the full summary, our clients can visit the analysis side of the website.