HIGHWAY TRUST FUND AND FEDERAL AID HIGHWAY

FINANCING PROGRAM

WEDNESDAY, JULY 22, 1959

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,
Washington, D.C.

The committee met, pursuant to notice, at 10 a.m., in the committee hearing room, New House Office Building, Hon. Wilbur D. Mills, chairman of the committee, presiding.

The CHAIRMAN. The committee will please be in order.

Today, we begin several days of public hearings on the subject of the financing of the Federal aid highway program. As I stated in the press release announcing these hearings, the committee will receive testimony with regard to the immediate temporary financing problem which exists relative to the highway trust fund as well as with regard to financing the highway program over the long term and the status of the trust fund throughout the total program. As I further indicated in the press release, it is hoped that witnesses will place emphasis on the immediate financing problems.

We are aware of the recommendations which have been made by the President with respect to an increase in the Federal gasoline tax of 12 cents per gallon for the period until July 1, 1964. Other suggestions have also been made with respect to the immediate problems facing the highway trust fund.

The Committee on Ways and Means, due to its very heavy legislative agenda, shall be able to devote at this time only approximately 3 days to these public hearings. A large number of witnesses requested to be heard. The witnesses have been asked to limit their statements to the number of minutes set forth in the calendar, the time indicated therein being allocated in accordance with the total time available to the committee.

On behalf of the committee, I wish to express appreciation for the cooperation of the prospective witnesses for confining their statements to the time allocated and for coordinating their testimony with others who have a similar interest.

As I further indicated in the press release, we will be pleased to receive for the record and for the consideration of the Members' statements by those who choose to file rather than to appear before the committee personally.

Without objection, at this point in the record, I will include the press release which I issued announcing these hearings.

(The press release follows:)

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CHAIRMAN WILBUR D. MILLS, Democrat, OF ARKANSAS, COMMITTEE ON WAYS AND MEANS, HOUSE OF REPRESENTATIVES, ANNOUNCES PUBLIC HEARINGS TO BEGIN ON JULY 22, 1959, ON FINANCING THE FEDERAL HIGHWAY PROGRAM

The Honorable Wilbur D. Mills, Democrat, of Arkansas, chairman, Committee on Ways and Means, House of Representatives, today announced that the committee has scheduled public hearings to begin on Wednesday, July 22, 1959, for the purpose of receiving testimony on the subject of the highway trust fund and the problems incident to the financing of the Federal highway program.

Chairman Mills stated that the committee will receive testimony with regard to the immediate temporary financing problem which exists relative to the highway trust fund as well as with regard to financing the highway program over the long term and the status of the trust fund throughout the total program. Emphasis will be on the immediate financing problems, however, Mr. Mills stated.

The hearings will include, therefore, testimony which witnesses may desire to offer on the recommendations of the President for a temporary increase of 12 cents in the Federal gasoline tax, proposals which have been suggested for suspension of the so-called Byrd amendment, proposals which have been suggested for transferring moneys from the general fund to the highway trust fund, proposals which have been suggested for the issuance of a special class of bonds against the assets of the highway trust fund, proposals for etxending the existing financing period, proposals for stretching out the program, and any other pertinent and relevant proposals which witnesses may desire to discuss.

It is anticipated that the leadoff witnesses will be representatives of the interested Government agencies and departments, including the Treasury Department and the Bureau of Public Roads, Department of Commerce.

Chairman Mills emphasized that the Committee on Ways and Means has already a very heavy legisaltive schedule and that time available for these hearings will be limited. This means that it is absolutely necessary for all persons and groups with similar interests to designate one spokesman to represent them at these public hearings. This also means that, generally peaking, the committee will be able to hear only one spokesman for an industry group. An exception

will be made in those cases where there are differences of views within an industry group. In such cases the request to be heard should set forth, generally, these differences. Other persons and groups within an industry desiring to do so will be permitted to file written statements for inclusion in the printed record of the hearings. Along this line it is suggested that the various organizations which are affiliated with a national organization coordinate their presentation. It is essential that repetitious testimony be avoided. The time allocated each witness will be determined by the total number of witnesses and the total time available for the hearings.

Persons who may be interested in appearing and testifying should submit their request to Mr. Leo H. Irwin, chief counsel, Committee on Ways and Means, 1102 New House Office Building, Washington, D.C., as soon as possible and in any event not later than July 16, 1959. Due to the necessity of allocating time in advance of all witnesses no time can be allocated if a request is received after the close of business July 16.

It is essential that all persons requesting to appear and testify indicate: (1) the general subject and tenor of their testimony;

(2) the amount of time required for their direct testimony; and

(3) the name and address of the witness who will present the testimony for the organization or group concerned,

in order for the staff to allot time and to properly arrange a schedule for the hearings.

All persons who desire to do so may submit a written statement in lieu of a personal appearance. Such statements will be considered by the committee and also printed in the record of the hearings. It is requested that persons who submit such statements in lieu of a personal appearance do so by not later than July 24, 1959. A minimum of three copies of such statements should be submitted. In accordance with the rules of the committee, persons who are scheduled to be heard are requested to submit 60 copies of their prepared statement to the chief counsel 24 hours in advance of their scheduled appearance. If a witness desires to also make available copies of his statement to the press and interested public, an additional 50 copies should be submitted by the date of his appearance.

Persons who submit a written statement for the record in lieu of an appearance may also provide an additional 50 copies of such statement if they desire it to be made available to the press and the public.

We are pleased this morning that our first witnesses are the Honorable John J. Allen, Jr., and the Honorable Bertram D. Tallamy. Mr. Allen is the Under Secretary for Transportation of the Department of Commerce. He was trained for that position for a number of years by serving here in the House of Representatives, and we appreciate the fact that he is back home with us this morning.

Mr. Allen, you are recognized, sir, to proceed in your own way. But before you do proceed, let me suggest to the members of the committee that we hear both Mr. Allen and Mr. Tallamy, whose statements are closely related and set forth the whole picture, before we interrogate either of them.

With that understanding, Mr. Allen, you are recognized, and we will hear Mr. Tallamy immediately following your statement.

STATEMENTS OF HON. JOHN J. ALLEN, JR., UNDER SECRETARY FOR TRANSPORTATION, AND HON. BERTRAM D. TALLAMY, FEDERAL HIGHWAY ADMINISTRATOR, BUREAU OF PUBLIC ROADS, OF THE DEPARTMENT OF COMMERCE; ACCOMPANIED BY J. C. ALLEN, AS THE COMMISSIONER FOR ADMINISTRATION, BUREAU OF PUBLIC ROADS; AND F. C. TURNER, CHIEF ENGINEER, BUREAU OF PUBLIC ROADS, ALL OF THE DEPARTMENT OF COMMERCE

Mr. JOHN J. ALLEN. Thank you, Mr. Chairman.

Before I start my prepared statement, may I say it is a pleasure to be back. I enjoy thoroughly the privilege of keeping alive the acquaintanceships which were so happy over the years just past.

Mr. Chairman and members of the committee, I appreciate this opportunity to present the views of the Department of Commerce with respect to the financing problem which exists in connection with the highway trust fund.

As you know, the Highway Revenue Act of 1956 established the principle that highway users, rather than general taxpayers, should pay the cost of Federal-aid highways. This act established the highway trust fund, and this trust fund has been the depository for revenues from the Federal motor fuel taxes and certain other Federal taxes on highway users. It is from these receipts that expenditures have been made for the Federal share of the costs of the Federal-aid highway projects.

It is anticipated that beginning in October of this year, a deficit will occur in the highway trust fund. This deficit, which results from (1) increased authorizations in 1958, and (2) suspension of the provisions of section 209 (g) of the Highway Revenue Act without providing for additional revenues, is estimated at about $500 million by the end of the fiscal year 1960.

Because of the provisions of section 209 (g), it will be necessary, unless additional revenues are made available, to forego completely any apportionment of interstate funds during the calendar year 1959for fiscal year 1961-and the apportionment during the calendar year 1960 for fiscal year 1962-would amount to a maximum of only $500 million. Thereafter, interstate apportionments would through

1964 amount to $1.6 billion annually, or about three-fourths of theannual amount authorized by statute.

In order to provide additional funds for financing the highway program during the fiscal years 1960 and 1961, and to permit apportionment of the full amounts authorized to be appropriated for the Interstate System for the fiscal years 1961 and 1962, without waiving the provisions of section 209 (g), the President recommended in his 1960 budget message that motor fuel taxes be temporarily increased by 112 cents per gallon, such increase to become effective July 1, 1959, and to remain in effect through the fiscal year 1964.

In expressing concern on two occasions that no action has been taken on his proposal, the President commented on certain other proposals. In a message to the Congress dated May 13, 1959, the President stated that the suggestion that receipts from the manufacturers' excise tax on automobiles be earmarked for the trust fund was an unsatisfactory alternative, since the transfer of these receipts, running about a billion dollars a year, from the general fund to the highway trust fund, would only mean that the problem would then be to raise new taxes to replenish the losses to the general fund. He also said that an even more unsatisfactory alternative would be waiver of the provisions of section 209 (g), since "this would only be a refusal to face reality." In a statement for the press dated June 25, 1959, the President said that the only serious alternatives then being considered by the Congress, "waiving the Byrd pay-as-you-go amendment or diversion of other taxes," would solve nothing, and that either of these alternatives would be unacceptable to him.

There is another proposal which I think should be referred to rather briefly. That is the proposal providing for the issuance of a special class of bonds against the future moneys of the highway trust fund. This Department is opposed to such a proposal. It cannot be reconciled with the pay-as-you-go principle supported by both the Congress and the President.

This Department urges that legislation be enacted implementing the President's recommendation for a temporary increase in motor fuel taxes, which is designed to maintain the trust fund on a selfsupporting basis. The Congress recognized that there might be temporary imbalances between receipts and expenditures in the annual financing of the interstate program when it specifically declared in section 209 (b) of the Highway Revenue Act that it was its policy to enact legislation, if required, to maintain a balance of total receipts and total expenditures in the trust fund. Failure to enact legislation providing for additional revenues for the highway trust fund so as to permit apportionment of the full amounts authorized to be appropriated for the Interstate System for the fiscal years 1961 and 1962 would mean a diminution of the rate at which the program has been. developed, a dispersal of the skillful and effective organizations, both public and private, which have been enlarged for the purpose of carrying out the highway program, and a delay in carrying out the objectives of the Congress as set forth in the Federal-Aid Highway Act of

1956.

The proposed increase would be temporary. Insofar as long-range methods of financing are concerned, this Department believes that consideration of any adjustment in such methods should be deferred.