The Senate took a major step forward last night in its battle with the House over transportation funding, releasing a plan to give $26.8 billion to the dwindling highway trust fund and — perhaps most importantly, for the long term — to restore the fund’s ability to keep the interest it earns.

Senate Finance Committee Chairman Max Baucus (D-MT) (Photo: Baucus ’08)

The Senate plan, forged by Finance Committee Chairman Max Baucus (D-MT), was endorsed by two of the chamber’s more progressive transportation-minded members, Commerce Committee Chairman Jay Rockefeller (D-WV) and Robert Menendez (D-NJ).

The legislation would send $22 billion to the highway trust fund, slightly more than needed to keep it solvent until the Obama administration’s proposed stopgap transportation law expires in 2011.

The nation’s mass transit account, which is not facing the same imminent insolvency as highway programs, nonetheless would receive $4.8 billion under Baucus’ bill.

In a statement released last night, Menendez touted that investment in mass transit as a good omen:

This robust investment in mass
transit amounts to an investment in the foundation for 21^st Century
economic security. It is not only a sector that creates jobs, but it helps
lower energy costs, cleans the air we breathe and saves commuters time and
money. It is tremendously important to ensure that when we replenish the
transportation trust funds, transit gets its historical share, and this
legislation accomplishes that. This positions us to make significant
investments in transit projects in the forthcoming transportation
reauthorization bill.

Baucus’ bill is likely to clear the Senate by the end of the month, but the House remains in a holding pattern. Transportation committee chairman Jim Oberstar (D-MN) is still marshaling his colleagues in favor of a new six-year transport bill before September 30, and while he may be open to agreement on a fix to keep the trust fund flush until then, a long-term rescue will be difficult to sell.

Interestingly, however, the Senate’s decision to restore interest-accruing powers to the trust fund represents a victory of sorts for Oberstar. The House transport chairman contended in early June that rescuing the highway program would be a matter of reversing the 1998 deal that blocked the trust fund from keeping the interest it earns.

Baucus’ bill also would restore the money that was taken from the trust fund between 1989 and 2004 to pay for emergency spending bills, a move that Oberstar might ordinarily endorse.

But the clash over passing new transportation legislation this year has changed the political calculus for Democrats, increasing the chances that the issue won’t be resolved until after Labor Day.