Presentation by Sarah Puro, Principal Analyst in CBO’s Budget Analysis Division, at the Annual Conference of the National Federation of Municipal Analysts. The Fixing America’s Surface Transportation Act, which was signed into law on December 4, 2015, provided $281 billion in contract authority for surface transportation programs through 2020. But projected spending from the Highway Trust Fund exceeds its revenues. Under current law, CBO estimates that the Highway Account of the Highway Trust Fund will be able to meet obligations through 2021 and the Transit Account through 2020. Some proposals involve establishing a new entity to finance infrastructure investments. However, even if such an entity is not officially a federal agency, its activity might be considered part of the federal budget.

1. Congressional Budget Office
The FAST Act and the Budgetary Treatment of
Federal Financing Instruments
National Federation of Municipal Analysts
Annual Conference
May 5, 2016
Sarah Puro
Principal Analyst, Budget Analysis Division

2. 1CONGRESSIONAL BUDGET OFFICE
Federal, State, and Local Governments’ Shares of
Spending on Transportation and Water Infrastructure
Federal
Government:
$69 Billion
(38%)State and Local
Governments:
$112 Billion
(62%)
Federal
Government:
$27 Billion
(12%)
State and Local
Governments:
$208 Billion
(88%)
Capital
($181 Billion)
Operation and Maintenance
($235 Billion)

3. 2CONGRESSIONAL BUDGET OFFICE
The FAST Act and the Status of the
Highway Trust Fund

4. 3CONGRESSIONAL BUDGET OFFICE
The FAST Act provides $281 billion in
contract authority for all surface
transportation programs through 2020 and
authorizes appropriations of another
$25 billion, most of which is for transit and
rail programs.

5. 4CONGRESSIONAL BUDGET OFFICE
The FAST Act also:
• Provides $275 million to $300 million per
year for loan and loan guarantee programs
under the Transportation Infrastructure
Finance and Innovation Act (TIFIA),
• Allows states to transfer funds allocated by
formula for TIFIA’s subsidy cost, and
• Makes changes to the Railroad
Rehabilitation and Improvement Financing
program.

6. 5CONGRESSIONAL BUDGET OFFICE
The FAST Act transfers $70 billion from
the general fund of the Treasury to the
Highway Trust Fund, mostly from
remittances to the Treasury from the
Federal Reserve, but does not generate
any new revenue from transportation users.

7. 6CONGRESSIONAL BUDGET OFFICE
Estimated spending from the Highway
Trust Fund exceeds its revenues.
Under CBO’s baseline projections, the
transit and highway accounts may have
difficulty meeting all obligations by 2021
and 2022, respectively.

8. 7CONGRESSIONAL BUDGET OFFICE
Actual and Projected Receipts, Outlays, and Balance or Shortfall for
the Highway Account Under the March 2016 Baseline, 2006 to 2026
Billions of Dollars
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
-80
-60
-40
-20
0
20
40
60
80
100
Outlays
Receipts
End-of-Year
Balance or Shortfall
Actual Projected

9. 8CONGRESSIONAL BUDGET OFFICE
Budgetary Treatment of
Federal Financing Instruments

10. 9CONGRESSIONAL BUDGET OFFICE
Some proposals involve establishing a new
entity to finance infrastructure
investments. Even if such an entity is not
officially a federal agency, its activity might
be considered part of the federal budget.

11. 10CONGRESSIONAL BUDGET OFFICE
What activities are recorded as part of the
federal budget?

12. 11CONGRESSIONAL BUDGET OFFICE
“Borderline agencies and transactions
should be included in the budget unless
there are exceptionally persuasive reasons
for exclusion.”
—President’s Commission on Budget Concepts (1967)

13. 12CONGRESSIONAL BUDGET OFFICE
In CBO’s estimate, any entity that is
financed by federal funds and subject to
federal control is included in the federal
budget.
Activities do not have to be conducted by
a federal agency to be classified as
governmental and included in the budget.

14. 13CONGRESSIONAL BUDGET OFFICE
How does the federal budget treat loan
and loan guarantee programs?

15. 14CONGRESSIONAL BUDGET OFFICE
Under the Federal Credit Reform Act of
1990 (FCRA), the cost of loans and loan
guarantees is recorded as the net present
value of the cash flows to and from the
government when the loan is disbursed
(accrual accounting).
That net present value is the subsidy cost.

16. 15CONGRESSIONAL BUDGET OFFICE
A Simplified Credit Reform Model
Disbursement and repayment of the loan (and interest payments) are not recorded
in the federal budget because those transactions are only “financing” cash flows.
The federal budget shows:
Appropriation to agency ($10)
Agency calculates the subsidy rate
(10%) and awards the ($100) loan
Agency records a
cost of $10
The loan is $100.
$100
Annual repayments
and interest payments
Loan recipient
Treasury disburses the
loan amount ($100) and
receives payments

17. 16CONGRESSIONAL BUDGET OFFICE
Under FCRA, for direct loans, principal
repayments and interest payments are not
available to revolve into new loans.
Those receipts are accounted for in the
estimated net present value of the loan.
Spending of such receipts would require
additional authority and result in
additional costs.

18. 17CONGRESSIONAL BUDGET OFFICE
Borrowing is not a receipt. Bond proceeds
or repayable equity investments are a
means of financing a project—not the
ultimate source of capital—and are not
treated as federal receipts.

19. 18CONGRESSIONAL BUDGET OFFICE
Notes about slide 7:
CBO’s baseline projection for outlays is calculated by
increasing the obligation limits set for the current year by a
measure of projected inflation. CBO’s baseline projection for
receipts is based on market conditions, and incorporates the
assumption that the current tax on fuels and on heavy vehicles
will be extended.
The receipts line includes revenues credited to the highway
account of the Highway Trust Fund and intragovernmental
transfers to the account. Those transfers have totaled about
$114 billion since 2008.
The Highway Trust Fund cannot incur negative balances. Once
account balances are exhausted, the chart illustrates the
cumulative annual shortfalls for the highway account under
CBO’s baseline.

20. 19CONGRESSIONAL BUDGET OFFICE
• Cost estimates for legislation:
www.cbo.gov/search/ce_sitesearch.cfm
• Other CBO publications on transportation and
infrastructure:
www.cbo.gov/topics/infrastructure-and-transportation
• Sarah Puro: sarah.puro@cbo.gov; 202-226-2860