Tuesday, June 1, 2010

On Extenders and Expirations

Public and community transit systems may have to get by with $500 million less in operating revenue next year.

The "tax extenders" bill (see the May 20 Capitol Clips posting for relevant details) continues to be a moving target for a number of tax and spending issues affecting public and community transportation. As passed by the House on the eve of its Memorial Day recess, the latest version of this bill no longer contains the continuation of increased federal Medicaid spending that was part of the American Recovery and Reinvestment Act (ARRA, or the "stimulus bill"). The bill's COBRA extension also was removed before the final vote, but most other provisions - including the TANF emergency fund extension - remained in place.

So, at this point in time - unless some action takes place otherwise - two key elements for transportation under ARRA are expiring on December 31, 2010:

1. Federal spending under Medicaid, increased to every state under ARRA, will revert to pre-ARRA Medicaid matching rates. This represents a loss of $24 billion in otherwise-anticipated Medicaid funding to states, just at a time when they are trying to ramp up for Medicaid expansion under the Patient Protection and Affordable Care Act (PPACA, or the "health reform bill")

2. The amount of income that employees can use, tax-free, for transit and vanpools is scheduled to drop from $230 a month to somewhere in the vicinity of $120 per month. Under ARRA, the tax-free transit benefit has been boosted to parity with the amount allowed as a tax-free parking benefit, but that ARRA provision expires December 31, 2010, and there has not yet been any legislation introduced that would continue this level. At the ARRA levels, $560 million a year is being pumped into public transit systems' coffers as a result of this tax-free benefit; Internal Revenue Service and Congressional estimates all indicate that transit receipts through this benefit are likely to fall by more than half next year, unless there is a change in statute.

Given historical data on Medicaid spending through public transit, these two items alone suggest that the nation's public and community transit services are being slated for a revenue loss of more than $500 million in calendar year 2011.

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