Copyright 2000 Federal News Service, Inc.
Federal News Service
March 22, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 2830 words
HEADLINE:
PREPARED TESTIMONY OF STEPHEN SANDHERR EXECUTIVE VICE PRESIDENT AND CEO THE
ASSOCIATED GENERAL CONTRACTORS OF AMERICA
BEFORE THE
HOUSE TRANSPORTATION AND INFRASTRUCTURE COMMITTEE GROUND
TRANSPORTATION SUBCOMMITTEE
BODY:
Good
afternoon, Mr. Chairman and Members of the Committee. I am . AGC is the nation's
largest construction association with 33,000 members in 100 chapters in every
state and Puerto Rico. AGC represents the leading transportation construction
firms in the nation.
While we are generally pleased to have the
opportunity to testify on issues affecting the construction industry, I regret
that this hearing is even necessary. Two years ago, the members of this
committee, working together in a bipartisan fashion, crafted the most
significant public works bill since the creation of the interstate highway
system: TEA-21. The centerpiece of that legislation was the return of trust to
the Highway Trust Fund. Against formidable odds and numerous shortsighted
editorial commentaries, the Members of this Committee held firm in their desire
to return the user fee concept to transportation funding. Through your efforts,
the gas tax is and will be spent on its intended purpose: to pay for road,
bridge, and transit improvements.
This is responsible public policy:
those who use the transportation networks, pay for it through a user fee. And,
it is clear that when the public is informed of this policy, they support it. A
poll conducted last year by Luntz research for the Rebuild America Coalition
found that 69% of the public supports the concept of gas taxes paying for
transportation improvements. The reason that I regret the need for this hearing
is that there is a hue and cry that we need to suspend or repeal all or part of
the federal user fee because the price of gasoline and diesel has increased
dramatically. In no way do I wish to minimize the financial impact that the
dramatic increase in fuel prices has had on businesses and consumers. In fact,
it is having a profound effect on construction firms across the country who are
heavy users of gasoline and diesel fuel. The price of asphalt has increased 160
% in the past 12 months, increasing the costs of highway construction. The
reality is that the gas tax is not the cause of the problem and the elimination
of it will not provide the solution.
For those who say that the
suspension or elimination of the gas tax is good politics, my advice is look
before you leap. Gasoline prices have, on the average, increased by 55 cents in
the past year. Eliminating 4.3 cents would still result in increased prices of
more than 50 cents per gallon. And that is assuming that the wholesaler will
pass on the tax savings to the consumer. How would members of congress respond
to the fact that consumers are still paying more? The American public will see
through that transparent political gimmick very quickly and will hold spin
doctors who apply a symbolic band-aid to a gaping policy wound accountable for
political malpractice.
Politics aside, there are serious policy reasons
for not tinkering with the user fee. The 4.3 cents gas tax accounts for
approximately $7.2 billion a year, while the 24.4 cent diesel
fuel tax contributes $8.8 billion to the highway trust fund.
The loss of that combined $16 billion will have a devastating
impact on all 50 states. Transportation planning will be hampered and needed
projects delayed.
Meanwhile the traveling public, who the tax measure is
intended to help, would be the ultimate losers. The money that is lost to
highway and transit construction will result in fewer improvements to our
nation's roads, bridges and transit systems. Consequently, the driving public
will encounter declining road conditions that will result in additional wear and
tear on cars and trucks. The repair costs will far exceed the potential pennies
per gallon saved because of a reduced tax.
Finally, let's not forget
that the money spent on road and bridge improvements reduces injuries and saves
lives. Thirty percent of all traffic fatalities nationwide--more than 12,000 a
year--are the result of road conditions. This figure would undoubtedly increase
if needed road and bridge improvements are not made.
The bottom line is
that you have developed an equitable method to pay for transportation programs
through the user fee. Elimination of the user fee will not result in any real
savings for consumers but will ultimately increase their travel costs, delay
safety improvements and increase traffic congestion. The members of AGC will
work with you to preserve the integrity of the Highway Trust Fund.
Extended Remarks
The construction industry is sympathetic to the
truckers and motorists in this country that are feeling the pain of the
increased fuel prices. The construction industry is a vast consumer of diesel
fuel. Our industry depends on large fleets of trucks, such as dump trucks, ready
mix concrete trucks, and all types of trucks that deliver materials and supplies
over the road for construction projects. In addition, our material costs have
also increased. For instance, the cost of asphalt has increased 160% over the
last 12 months. These sharply rising costs are not considered in many of the
projects that we have already bid, which is particularly problematic for
long-term projects. In some cases, we are losing money on these projects.
Nevertheless, the construction industry strongly opposes repealing or reducing
the gas or diesel fuel tax.
We oppose this initiative for many reasons.
First, because it will not have a significant impact on fuel prices. Second,
because it was not the cause of the recent escalation in fuel prices. And,
third, because it will have a detrimental impact on the highway safety and
congestion relief projects that are underway and planned in every state in the
country. We also oppose this initiative because it eviscerates a bipartisan
program for a transparent political gimmick. The legislative prowess and
accomplishments of this committee have always been rooted in the bipartisanship
that permeates this committee. It was the tremendous bipartisanship that created
the historic TEA-21 legislation, which finally established and honored the
integrity of the Highway Trust Fund. The movement to repeal the gas tax is a
political ploy that will win no points with voters, but will cost the states
billions.
These federal motor fuel taxes are the sole lifeblood of the
federal- aid highway program, and are used to make our nation's highways safer
for the travelling public. Repealing the 4.3-cent gas tax, or suspending the
24.4-cent diesel tax would have a devastating impact on state highway and
transit improvement programs in every state. Each state would lose millions of
federal-aid highway funds if either of these motor fuels were repealed or
reduced.
AGC is the nation's largest and oldest construction trade
association, founded in 1918. AGC represents more than 33,000 firms, including
7,500 of America's leading general contracting firms. Our members build and
improve our nation's roads, bridges and transit systems.
The funding for
these vital transportation improvements comes from the Highway Trust Fund.
Reducing the money in the Highway Trust Fund would result in more dangerous
roads. Today, 42,000 people lose their lives on America's highways each year;
12,000 of these deaths are attributable to poor road conditions. Cutting the
federal gas tax would only risk more lives on our nation's roads.
Repealing the 4.3-cent Gas Tax Will Not Benefit Consumers
If
Congress reduced the federal gas tax by 4.3 cents, the American consumer would
find little or no benefit at the pump. Simply reducing the federal tax is not a
mandate that oil companies must reduce their price at the pump. Oil companies
and independent gas station operators are free to set their prices regardless of
federal and state gas taxes.
Furthermore, most fuel is purchased by
wholesalers who pay their tax at the terminal rack. The wholesaler then sells
the fuel to the retailer, who sells to the consumer at the pump. Until the
supply of tax-paid fuel is consumed, retailers will be unable to pass along a
4.3 cent price decrease because they already paid the tax on their shipment. In
other words, if the 4.3-cent gas tax was repealed and implemented by the
wholesalers and retailers, it would take a period of time to affect the consumer
if it ever reached the consumer. Moreover, by then market forces may have
already led to falling prices. Or, fuel prices could continue to rise, leading
consumers to believe that retailers are simply gouging the public by not passing
along the tax reduction. In either case, the effect of a lower gas tax will
simply be symbolic, with no real effect on the price of gasoline but billions of
dollars worth of impact on state highway programs.
Problem
The
rising cost of gasoline is not the result of the federal 4.3-cent gas tax. The
increasing cost of gasoline is the result of supply and demand. The worldwide
crude oil supplies have declined as major, foreign crude oil exporters have
reduced production. These declines, in conjunction with increased worldwide
demand for crude oil from growing economies, have driven world oil prices to
higher levels. Since crude oil is the largest cost component of gasoline and
diesel fuel, prices of these fuels have increased. During times of rising fuel
prices, people clamor for the government to act. It is important that the full
range of consequences is considered before our government takes any action.
Rising gas prices is not a new phenomenon. History has
illustrated that gas prices will sometimes rise quickly, and soon return to a
normal price when the supply and demand balance out.
The current price
of crude oil is $34 per barrel. Just last year, the price was
approximately $13 a barrel. While gas prices are abnormally
high today; last year they were unusually low. The increase in crude oil is
largely attributable to OPEC and several non-OPEC producers such as Mexico and
Norway removing significant amounts of crude oil from production. This reduction
in production is resulting in higher gasoline prices. It should be noted that
the federal motor fuels taxes have not increased since 1993.
Big Losers
Are the Highway Trust Fund, States, and travelling Public
While the
potential benefit to motorists is minimal, the cost to the Highway Trust Fund is
devastating. The 4.3-cent gas tax accounts for approximately
$7.2 billion a year, while the 24.4-cent diesel fuel tax
contributes $8.8 billion to the Highway Trust Fund. In turn,
states would be short-changed hundreds of millions of dollars, which would
decimate states' vital transportation improvements. The result would be more
deaths on the highways, increased congestion, and the loss of thousands of jobs.
The repeal of the 4.3-cent gas tax would cost California
$1,739,100,000 in 2002 and 2003; Pennsylvania
$922.7 million; Wisconsin $368.4 million.
Meanwhile, the travelling public, who the tax measure is intended to
help, would be the ultimate losers. The money that is lost to highway and
transit construction will result in fewer improvements to our nation's roads,
bridges and transit systems. Consequently, the driving public will encounter
declining road conditions that will result in additional wear and tear on cars
and trucks. The repair costs will far exceed the potential pennies per gallon
saved because of the reduced federal tax. Similarly, transit riders will face
increased delays and a stoppage of expansion projects.
Say the average
motorist drives 15,000 miles per year and gets 25 miles to the gallon--that
driver would save $25 dollars per year if the gas retailers
were forced to pass through every penny of the 4.3 cents to the motorist. Even
under that scenario, the average motorist still loses. According to the Road
Information Project (TRIP): Driving on bad roads costs our nation's motorists an
additional $23 billion a year -- or $126 per
motorist -- in extra vehicle operating costs. If highway funding is cut, it will
cost motorists even more because needed repairs and improvements will not be
made. This figure is much higher than any amount purportedly saved at the pump.
Traffic congestion now costs our nation's motorists $72 billion
a year in wasted time and ADDITIONAL FUEL costs. This figure would increase if
highway funding is cut and needed traffic congestion improvements are not made.
30 percent of all traffic fatalities nationwide -- more than 12,000 a year --
are the result of road conditions. This figure would increase if needed road and
bridge improvements are not made.
-- A cut in the federal highway
funding would result in job loss at the state and local levels. Moreover
economic development would be adversely affected. Every dollar of highway
investment results in more than $2.60 in economic benefits to
the nation.
In June 1998, Congress recognized the need for additional
highway investment and overwhelmingly approved the Transportation Equity Act for
the 21st Century (TEA-21). TEA-21 directly linked Highway Trust Fund revenues to
state funding allocations. One of the primary objectives and achievements of
TEA-21 is the assurance to states of predictable funding levels for state
highway and transit programs. States have responded to TEA-21 by making
long-term transportation plans that will be eviscerated if the 4.3-cent gas tax
is suspended. TEA-21 also ended the decades-old practice of using the Highway
Trust Fund to fund other government programs. Now, less than two years since the
passage of TEA-21, Congress is again looking to rob the Highway Trust Fund in
order to solve other government problems.
Moreover, during the TEA-21
negotiations, the conferees explicitly decided to dedicate the 4.3-cents to
highway improvements. The agreement was that the 4.3 cents would be spent on
highway improvements, but that $8 billion of the surplus from
the Highway Trust Fund and interest would be returned to the general fund. Now,
in search of a solution to the increased gas prices, Congress is seeking to
renege on the TEA-21 agreement, and repeal the 4.3-cent gas tax from its
intended purpose -- making highway improvements.
Solutions
The
Congress should not have to rob from the surplus, the Social Security Trust Fund
or medicare to replenish the Highway Trust Fund. The Highway Trust Fund should
operate as TEA-21 directed -- receive motor fuels taxes into the fund and
distribute the money to the states for vitally important transportation
projects.
Other viable and more appropriate solutions exist to help
reduce the gasoline prices. AGC encourages the Congress to quickly reauthorize
the Energy Policy and Conservation Act that provides authorization for the
Strategic Petroleum Reserve to be released. The federal government should also
reduce our dependence on foreign supplies and increase domestic production of
crude oil by opening our best oil prospects to responsible exploration and
development. Many of these oil fields have been untouchable by the federal
government. Since 1983, access to federal lands in the western United States,
where approximately 67 percent of our onshore oil reserves are located, has
declined by 60 percent.
AGC also supports H.R. 3822 (the Oil Price
Reduction Act), which will be voted on tomorrow in the House. This legislation
seeks to make oil- producing countries that engage in oil price fixing subject
to the loss of United States assistance. Foreign countries that are jeopardizing
America's economy should not be rewarded with American assistance. These
countries should be held accountable. This action will likely lead to less oil
price fixing, and less spiking of gas prices in the U.S. and around the world.
The rising gas prices have highlighted the need to
examine our domestic and foreign energy and oil policy. A knee-jerk reaction to
reduce the federal gas tax is short-sighted and ill-conceived. It is a
transparent political gimmick. The ramifications are serious and long- lasting
as America's highway and transit programs will be stymied -- critical
infrastructure projects will be delayed or cancelled.
Conclusion
While many AGC members are detrimentally impacted by the rising prices
for oil, gas and diesel fuel, we strongly oppose efforts to repeal or reduce any
gas or diesel fuel taxes. The tax gimmick will not be passed onto the consumer,
so it will not result in lower gas prices; however, it will definitely cut
federal aid for highway and transit construction. In TEA-21, Congress heavily
invested in America's transportation infrastructure. To back away from the
promise of TEA-21 would be tantamount to bankrupting America's infrastructure
and jeopardizing our nation's economic future for a transparent political
gimmick. AGC urges Congress to look at real reform and examine our country's
domestic and foreign energy policy, which will yield long- term stability in gas
and diesel fuel prices.
Again, thank you for the opportunity to testify
before you. I would be happy to answer any questions you may have.
END
LOAD-DATE: April 20, 2000