By Eric Pianin
Washington Post Staff Writer
Tuesday, March 3 1998; Page A05

Senate leaders from both parties struck a deal yesterday to increase highway spending to $173 billion over the next six years, a more than 40 percent jump over previous years.

The deal, which was made under pressure from state governors, industry lobbyists and other senators, clears the way for passage of a new highway bill by the full Senate this month and enhances the prospects for a compromise with the House.

The House leadership has supported spending in the same range as yesterday's Senate deal. However, influential House members and some senators have pushed for even more transportation spending.

Although the increased spending exceeds limits imposed by last year's multi-year balanced budget agreement, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), who attended the final bargaining session in the office of Senate Majority Leader Trent Lott (R-Miss.), pledged to find offsetting cuts in other programs.

"We have made a good faith effort to secure additional transportation funds, but the additional money cannot come at the expense of the good faith efforts to balance the federal budget," said Sen. John H. Chafee (R-R.I.), chairman of the Environment and Public Works Committee.

The deal also changes long-standing regional inequities in the formula for distributing highway funds by assuring that no state gets back less than 91 cents in aid for every $1 of taxes paid into the Federal Highway Trust Fund. Under the current formula, some so-called donor states, especially in the South, get back as little as 71 cents for every dollar they pay into the highway system.

The National Governors Association and other state and local officials have urged Congress to act swiftly on new legislation before a looming May 1 deadline, warning that 42,100 jobs could be lost for every $1 billion of road contracts canceled because of congressional delays. Officials from northern tier states with short construction seasons are concerned that they will have to postpone many highway and bridge projects on the drawing board unless Congress acts soon. But until now the highway bill has been caught in a power struggle.

Rep. Bud Shuster (R-Pa.), the chairman of the House Transportation and Infrastructure Committee, and his allies in the House and Senate have demanded increases beyond the budgetary limits to take advantage of projected surpluses and the 4.3 cents of the gas tax recently earmarked for highways and mass transit.

As part of the compromise brokered yesterday by Lott, the Senate would spend about $51 billion more on construction than the $122 billion permitted under the 1991 highway and mass transit bill, and nearly $26 billion more than recommended by the Senate Environment and Public Works Committee.

An additional $1.9 billion would be spent to complete highway corridors in the 13 states represented by the Appalachian Regional Commission -- marking an unmistakable victory for Sen. Robert C. Byrd (D-W.Va.), a champion of the commission's work. Byrd and Sens. Phil Gramm (R-Tex.), Max Baucus (D-Mont.) and John W. Warner (R-Va.) forged a potent coalition that pressured Lott and Chafee to boost overall highway spending.

A spokesman for Shuster said, "We're encouraged by the Senate plan, but we want to see the details." Shuster has drafted a six-year highway and mass transit reauthorization bill containing $181 billion of new highway construction authority, which is in hailing distance of the $173 billion in the Senate agreement.

Chafee's committee has scheduled a meeting today to ratify the increased spending agreement as part of the reauthorization of the 1991 Intermodal Surface Transportation Efficiency Act (ISTEA). The legislation regulates spending policies for practically every type of land transportation project, from highways to bridges to subways and buses. The ISTEA law expired last year, but Congress enacted a six-month extension that expires May. 1.

The Senate is likely to spend another two or three weeks on the new highway bill, a complex measure that also covers such controversial issues as air quality standards, the prevailing wage on federally funded construction projects, and drunk driving laws.

Lott told reporters yesterday that his chief goal will be obtaining a more fair formula for distributing highway funds to the states. Lott and other representatives of southern and Sun Belt states have complained that the formula approved as part of the 1991 legislation was heavily skewed in favor of northeastern, or "Rust Belt," states.

"My own state of Mississippi, one of the poorest states in the nation . . . has been getting about 84 percent on the dollar -- 84 cents on the dollar," Lott said. "That's not going to continue."