By Eric Pianin
Washington Post Staff Writer
Monday, September 22 1997; Page A17

It's small wonder that Rep. Bud Shuster (R-Pa.) and other champions of concrete and asphalt projects are locked in a bitter struggle with congressional leaders over control of the federal highway trust fund.

In an era of deficit reduction and fiscal prudence, surpluses in the bulging highway trust fund loom as a tantalizing target for the stewards of the nation's highway programs. Yet Congress has restricted spending from the fund for highway purposes, even as revenues from the federal gasoline and diesel fuel tax continue to dramatically mount.

This year, for example, trust fund revenues totaled $26.3 billion while about $24 billion was spent on highways and mass transit -- boosting the fund's surplus to a record $24.3 billion.

In the coming year, gasoline-tax revenues are projected to rise to nearly $28 billion while highway trust fund spending will continue to lag by more than $3 billion. By 2002, the trust fund surplus could reach a staggering $81 billion.

"The money is there in the trust fund for additional spending," Shuster, chairman of the House Transportation and Infrastructure Committee, said recently. "This is a question of being straight with the American people."

Shuster's lament is echoed throughout the transportation industry, with many complaining that Congress is sitting on desperately needed funds for improving the nation's highways and bridges.

"We feel that all money collected from highway users ought to be put into the highway trust fund and promptly used for highway purposes," said Kenneth Simonson, chief economist for the American Trucking Associations.

But the issue is more complicated. Some budget leaders caution that a sudden highway trust fund spending spree could seriously undermine the balanced budget agreement, by breaching spending caps or forcing offsetting cuts in other programs.

Moreover, federal transportation programs have fared relatively well over the years, they say. During the next five years, transportation spending authority will increase by three times the rate of other non-defense discretionary spending under the budget agreement.

"No one is arguing you don't need more for highways," said Bill Hoagland, a top aide to Senate Budget Committee Chairman Pete V. Domenici (R-N.M.). "The question is, how much is enough?"

The highway trust fund is financed entirely by taxes on gasoline and other fuels. Growing steadily over the years, those taxes will reach 18.3 cents per gallon effective Oct. 1, following congressional action this summer that shifted an additional 4.3 cents per gallon of revenue to the trust fund that previously was earmarked for deficit reduction.

The highway trust fund -- created in 1956 during the Eisenhower administration -- has long been a battleground for conflicting congressional and industry interests. Originally sold to the public as the financial engine of the interstate highway construction program, the trust fund gradually evolved into a massive pot that benefited other programs and priorities besides highways.

In the late 1960s, the highway trust fund and other special accounts were brought together under a "unified" budget. Then, in 1974, a budget reorganization act lumped highway trust fund spending and other discretionary programs together in setting overall spending limits.

These changes had the net effect of pitting appropriators, who were looking out for the interests of other programs, against highway authorizers like Shuster who sought to maximize highway spending.

By law, trust fund surpluses must be invested in special issue Treasury bonds, which means that billions of dollars of highway revenues are regularly pumped back into the general fund and used for other programs -- or to mask the true size of the deficit. This year, the budget deficit would have been $2.7 billion higher than it was if it hadn't been for the surplus in the highway trust fund.

So, even though gas taxes are designated for the highway trust fund, that is simply an accounting tool. The money actually goes -- along with aviation fuel taxes and other levies -- into one governmental pot rather than into, say, separate boxes.

Critics of congressional budget policy argue that trust funds -- whether for highway construction, Social Security or Medicare -- should be used exclusively for their intended purpose.

"We don't think highway users should be singled out to pay an extra share of deficit reduction," said Simonson, the trucking associations official.

Shuster's solution would be to move the trust fund "off budget" -- and hence off limits for spending other than transportation -- and allow Congress to dip freely into the annual revenues for highway and bridge projects.

The House approved Shuster's proposal in April 1996, but the plan has gone nowhere in the Senate. He has offered his plan repeatedly, but has encountered strong resistance from the leadership.

Some opponents say the Shuster plan would trigger a push by more lawmakers to move other trust funds off budget. Others say that Shuster and his allies raise a legitimate point but that Congress should delay serious consideration of moving the trust fund off budget for another year or two to see whether the budget agreement is working.

"You can't just do this overnight . . . without screwing up the balanced budget agreement," said Rep. David L. Hobson (R-Ohio), a senior member of the House Budget Committee.

Hoagland, the Senate budget aide, contends it would be a serious mistake to grant special status to the highway trust fund. While the budget appears headed toward balance by 2002, he said, Congress and the White House will face a crisis of exploding Social Security and Medicare costs as baby boomers begin to retire. Surpluses in the highway trust fund and other accounts may be critical to holding down the deficit.

Also, a push to significantly bolster pork-barrel transportation projects earmarked for individual states would run counter to the GOP's thrust to reduce taxes and shrink government, he said.

"There is a good argument to be made that Congress should continue to gradually reduce its role in infrastructure and place greater reliance on states," Hoagland said.