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House GOP Drops Postal Rescue for Highway Fund

House leaders are setting aside a plan to finance a short-term extension of the Highway Trust Fund with cutbacks in U.S. Postal Service operations after a late barrage of opposition from rank-and-file members.

The House is now considering other offsets for the troubled trust fund, due to run short of money this summer, including another round of pension changes and increases in Pension Benefit Guaranty Corporation premiums.

“The proposal to end six-day [mail delivery] was not well received by a large portion of the Republican conference and appears to be dead,” said a senior House Republican aide. “Other, more viable options are now being considered.”

House Republican aides said the plan collapsed after Majority Leader Eric Cantor lost his primary election in Virginia on Tuesday night. Cantor had been behind the idea from the start, they said.

Cantor wrote a memo to House Republicans last week calling the plan “the best way to ensure continued funding of highway projects in a fiscally responsible manner.”

That did little to soothe concerns.

Aides said Republicans did not like the idea of financing a one-year funding patch by using savings spread out over 10 years from cutting most Saturday mail deliveries. Conservative groups such as Heritage Action and the Club for Growth quickly denounced the idea. Democrats had rejected the idea from the start so House leaders could not afford to lose many Republican votes.

House Republicans now are looking at another round of “pension smoothing” combined with another increase in premiums to the PBGC, which guarantees the pensions of workers with defined benefit retirement plans.

The pension smoothing idea would allow a complex accounting change that would result in companies contributing less to pension plans, thereby paying more in taxes. The Committee for a Responsible Federal Budget and other fiscal hawks have derided the maneuver as a budgeting “gimmick.”

The premium increases would shore up the underfunded PBGC and would be scored as government revenue.

The pension-related revenue raisers routinely emerge whenever lawmakers are looking to offset new spending measures. Congress relied on the same tactic to help finance the last surface transportation bill ( PL 112-141 ) in 2012 and the December 2013 budget agreement ( PL 113-67 ).

But business groups including the U.S. Chamber of Commerce and the National Association of Manufacturers are adamant in their opposition to higher premiums and have ramped up their lobbying efforts now that they are once more under consideration. They have no position on pension smoothing.

“The PBGC premiums are unfortunately always on the table whenever there’s a need for revenue to be raised,” said Christina Crooks, tax policy director for the National Association of Manufacturers. “We just want to let Congress know they can’t continue raising the PBGC premiums and not expect manufacturers to be hurt at the end of the day.”

The premium increases raised $9 billion in 2012 and $8 billion in 2013. A similar increase would come close to netting the $15 billion that Congress needs to keep highway construction programs running without a break in fiscal 2015.

The Senate is looking at other options to keep the Highway Trust Fund solvent, include a repatriation tax holiday that would allow companies to bring foreign profits back to the United States by lowering their tax bills.

The Joint Committee on Taxation estimates it would raise money in the short-term but prove costly in the long-term. The House aide called that “a nonstarter in the House.”

The Department of Transportation expects the Highway Trust Fund to drop below a sustainable level toward the end of July. That would prevent the federal government from reimbursing states for construction projects that are already underway.

Transportation committees in both chambers are working on long-term plans to keep highway and transit construction programs afloat for the long term but both sides have acknowledged that a short-term patch will be necessary to prevent the trust fund from drying up this summer.