This provision is contained in a tax-extenders bill, HR 4213, the American Jobs & Closing Tax Loopholes Act, which the House passed 215-204. The bill also contains an extension of Build America Bonds, which were created by the American Recovery & Reinvestment Act of 2009. The federal government subsidizes interest costs for the bonds paid by state and local governments when they borrow money to finance infrastructure projects. 

House Transportation & Infrastructure Committee Chairman James Oberstar, D-Minnesota, has been working for more than two months to amend two highway funding categories that were set by the Hiring Incentives to Restore Employment Act. (see March 26 AASHTO Journal story) The HIRE Act mandates the distribution of Fiscal Year 2010 funding for Projects of National and Regional Significance as well as the National Corridor Infrastructure Improvement to the 29 states that received those discretionary funds under the 2005 surface transportation reauthorization law known as "SAFETEA-LU."

Oberstar's original proposal was to distribute the Fiscal Year 2010 funding for PNRS and National Corridor programs among all states based on each state's share of FY 2009 highway apportioned funds. Senate Majority Leader Harry Reid, D-Nevada, promised Oberstar and House Speaker Nancy Pelosi, D-California, in writing that the Senate would consider Oberstar's proposed fix.

However, the fix would have resulted in more than a dozen states losing some of their FY 2010 highway funds. Therefore, several senators objected including Senate Majority Whip Richard Durbin, D-Illinois, whose state was among those that would have been affected. 

Oberstar agreed this week to modify his proposal with a "hold harmless" provision that adds $521 million in highway formula funds ($417 million in annual highway contract authority). The agreement would result in no state having highway funding rescinded, while those states that didn't receive any money from these programs under the HIRE Act will now receive additional funding.

"The provisions in HR 4213 revise the distribution of PNRS and National Corridor program funding so that every state receives a fair share of the funds made available under these programs," Oberstar said in a statement issued Thursday evening. "HR 4213 provides each state with a share of the PNRS and National Corridor funds equal to the greater of that which the state received under the HIRE Act or under HR 4213."

Oberstar said the additional highway funding provided by HR 4213 "translates into thousands of jobs across these states -- jobs that are critically important to a construction sector currently suffering from 21.8% unemployment."

The current language also distributes additional highway formula funds provided for FY 2010 among all 13 of the highway programs rather than among just six of the programs as the current law would require.

HR 4213 also includes an expansion of Build America Bonds for two years (through 2012). For direct-pay Build America Bonds issued in 2011, the amount of the direct payment would be reduced from 35% to 32% of the coupon interest. For such bonds issued in 2012, the amount of the direct payment would be reduced to 30% of the coupon interest. The bill would also allow issuers to refinance Build America Bonds to save money should interest rates fall in the future.

This bonds extension is estimated to cost the federal government $4 billion in interest subsidies over 10 years. For more information about Build America Bonds, see April 9 AASHTO Journal story.

HR 4213 now returns to the Senate, which is in recess until June 7.