(Updates with planned Senate vote on House plan)
By David Lawder
WASHINGTON, July 31 With time running out to
avert cutbacks in federal transportation money due to start on
Friday, Democratic leaders in the U.S. Senate agreed to accept a
Republican plan to extend funding for highway and transit
construction through May 2015.
Senate Majority Harry Reid said he would put the House of
Representatives' $10.9 billion funding plan to a vote on
Thursday evening after the House rejected a shorter, $8.1
billion extension passed by the Senate.
The legislative ping-pong has heightened uncertainty over
the dwindling Highway Trust Fund as Congress prepares to start a
five-week summer recess this weekend.
The Department of Transportation has said it will start on
Friday reducing payments to states by as much as 30 percent from
the dwindling Highway Trust Fund.
Lawmakers and transportation officials say that failure to
approve new funding would cause work slowdowns at the height of
summer road construction season and halt planning for new
projects, putting thousands of construction jobs at risk.
The Senate on Tuesday approved the shorter extension,
lasting only through the end of 2014, because Democrats wanted
to force Congress to act on a long-term funding plan during the
post-election, lame duck session of Congress in November.
But in a vote that Democratic aides said was engineered to
"jam" the Senate just before the recess, the House earlier on
Thursday rejected the Senate plan and sent back its original
version. That left senators little choice but to take the House
plan or face criticism for allowing the trust fund to be
Representative Peter DeFazio, a Democrat, complained that
the Republican extension bill would discourage Congress from
passing a multi-year transport funding plan until next year.
"We'll limp along until next May and there'll be incredible
uncertainty about the next construction season," DeFazio said.
"There won't be major new projects planned."
State transportation directors and business groups have been
clamoring for a long-term solution that would eliminate
uncertainty over the funding of road and rail transit projects
that benefit the heavy construction industry and its suppliers,
including Fluor Corp, Vulcan Materials, LaFarge
SA and Caterpillar Inc.
The Highway Trust Fund has suffered chronic shortfalls in
recent years as revenue from fuel taxes, unchanged since 1993,
have failed to keep pace with rising construction costs and been
hit by improved vehicle fuel economy. Some lawmakers have
advocated a fuel tax increase and believe this may be easier to
achieve after November's congressional elections.
The House funding plan relies heavily on a controversial
revenue source known as "pension smoothing" - an accounting
maneuver that allows companies to reduce near-term contributions
to employee pensions, thus increasing taxable profits.
(Reporting by David Lawder; Editing by Cynthia Osterman)