House bill targets recession-hobbled programs

By BY JIM ABRAMS THE ASSOCIATED PRESS

Posted: July 29, 2009 at 2:08 a.m.

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WASHINGTON — The House is taking up legislation ahead of its August recess to keep recession-hit federal programs that support highway projects, state unemployment insurance and mortgage loans from running dry.

"It's just that they're all running out of money and we have to do something before we leave in August so we'll do that," House Majority Leader Steny Hoyer, DMd., said Tuesday.

The package, scheduled to be addressed today, would add $5 billion to the federal highway trust fund, the pot of money that provides states about $40 billion each year for roads, bridges and other infrastructure projects. The money would come from the general treasury fund and would keep the trust fund solvent through September.

The trust fund, made up of money coming from federal tax that drivers pay at the pump, is projected to run dry next month. It has been depleted in recent years because Americans are driving less in the poor economy and switching to more fuel-efficient vehicles as gas prices rise. Also, lawmakers leery of tax increases have not raised the fuel tax - 18.4 cents a gallon or 24.3 cents a gallon for diesel - since 1993 despite inflation and soaring construction costs.

Federal highway excise tax revenue declined 3.3 percent through June this year after dropping 8 percent in the fiscal year ending last September, according to the Treasury Department.

Federal Highway Administrator Victor Mendez, in a conference call Tuesday with state transportation officials, said that while the shortfall won't shut down federal aid highway projects, it will slow down reimbursements to states. Payments now made on a daily basis could be made weekly or twice a month, he said.

Congress approved the infusion of $8 billion into the trust fund from the general treasury account last September to prevent the trust fund from running out of money.

Congress also provided about $40 billion in the economic stimulus package last February to extend jobless benefits, which vary by state but average about $300 a week. But that assistance too is being eroded by the lingering recession.

The National Employment Law Project, an advocacy group, said 100 percent-federally funded extended benefits, which last 20 to 53 weeks depending on the state's unemployment rate, are covering 2.8 million workers.

But it said that in the five months since the stimulus act passed another 2.7 million jobs have been lost, and there are now a record 4.4 million people out of work for more than six months.

States generally offer 26 weeks in unemployment benefits. The House bill would allow federal unemployment trust funds, financed by a payroll tax, to receive interest-bearing loans from the general treasury to assist states that are seeing their state unemployment funds run out of money. The loans, estimated to be in the $50 billion to $70 billion range, would be repaid as the unemployment trust funds regain financial solvency.

The bill would also raise the Federal Housing Administration's Mutual Mortgage Insurance fund limit from $315 billion to $400 billion.

The FHA became the main source of home loans to borrowers with poor credit and low down payments after the subprime lending market's collapse. The agency lets borrowers take out home loans with a down payments as low as 3.5 percent, compared with 20 percent for a typical loan that doesn't require mortgage insurance. The FHA currently backs around a third of new home loans, up from about 3 percent in 2006.

Monthly volume has averaged almost $33 billion a month over the last three months, and with only $59 billion left in the fund for the fiscal year ending in September, it appears likely that the remaining authority will be exhausted in August. Because the program has a mechanism for repayment of the loans, the action has no immediate effect on the budget.

The suspension of FHA loan backing could have repercussions on the mortgage markets and the government's efforts to ease the foreclosure crisis.

The Senate is also expected to take up the package before its planned Aug. 7 departure for the summer break. The House is scheduled to recess at the end of this week.

The bill is House Resolution 3357.

The White House, meanwhile, threatened Tuesday to veto a $636 billion spending bill for the Pentagon, citing funding for F-22 fighters and a replacement presidential helicopter. President Barack Obama wants to terminate both programs.

The measure is to come to the House floor today. The White House also objected to plans by lawmakers to continue to fund an alternative engine for the F-35 Joint Strike Fighter, but didn't seem to explicitly threaten a veto over the $560 million provision.

The administration is carrying the day on ceasing production of additional F-22s after a decisive vote in the Senate last week during debate on a defense policy bill. It also won a big Senate vote against production of a second engine for alternative engines for the next-generation F-35 fighter that are being built by the General Electric Company and Rolls Royce.

The new presidential helicopter program - a project beset by poor planning and loose Pentagon oversight - is over budget and the White House opposes $400 million in the House measure that's a down payment toward finishing five of the troubled aircraft, which would be assembled at an upstate New York Lockheed Martin Corp., factory.Information for this article was contributed by Andrew Taylor of The Associated Press.

Front Section, Pages 6 on 07/29/2009

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