During the waning days of the last session, congressional budget and appropriations leaders acknowledged that they will face significant challenges this year in formulating a budget resolution for FY 2003. Over the course of last year, future projected budget surpluses reverted to deficits, primarily due to the declining economy and the residual effects of the September 11 terrorist attacks. The Office of Management and Budget has predicted that the federal government would not be able to balance its budget until 2005, prompting Senate Budget Committee Chairman Kent Conrad (D-ND) to warn that lawmakers face "a sea of red ink" when they return on January 23.

Reaching an agreement on a budget resolution is likely to be difficult given the fact that Republicans no longer control both chambers of Congress, and vastly different spending priorities exist between Democrats and Republicans. Also complicating matters is the fact that all House members and 33 senators face reelection this year.

The Bush Administration will be the first out of the box in the budget discussions when it releases its FY 2003 proposal in early February. That budget proposal is expected to contain increases for homeland security and defense, and funding cuts for most other discretionary programs.

In the meantime, congressional appropriators have indicated that first on their list for consideration is a supplemental spending bill to address the costs associated with the war against terrorism and homeland defense, along with an economic stimulus bill. If Congress reaches an agreement on a budget resolution, the appropriations subcommittees will then be tasked with the difficult exercise of allocating what could be a smaller pot of funding for federal programs.

Outlook for Transportation

For transportation interests, all eyes await the administration's budget proposal, which will present the final Revenue Aligned Budget Authority (RABA) figures for highways for FY 2003. While RABA has grown substantially over the past three fiscal years, providing a total of $4.5 billion in additional funding for states in FY 2002, there have been reports that actual trust fund revenues may be well below earlier projections, resulting a so-called "negative RABA."

Such a scenario would take place if actual gas tax revenues credited to the Highway Trust Fund in 2001 fall short of the projected revenues contained in the president's FY 2002 budget proposal released last February. Unconfirmed reports have said that actual revenues may have fallen $1.5 billion short of projections. This would require as much as a $2 billion reduction in obligation from the FY 2003 level contained in TEA-21.

The reports are speculative at this time. However, the actual Trust Fund revenue figures will be finalized by the Treasury Department within the next two weeks and presented in the President's budget.

Also uncertain is what effect, if any, a smaller pot of discretionary funding will have on earmarking. The FY 2002 appropriations bills saw an unprecedented amount of earmarks for specific projects, including many in the transportation bill. House transportation authorizers sent another letter to colleagues on December 20 regarding the $423 million in RABA funding that was diverted from state formula programs for select highway projects. The letter notes that some $237 million for high priority projects included in TEA-21 was also diverted by appropriators for projects earmarked by appropriators.

While the funding level for highways in FY 2003 is uncertain, there may be some transportation programs that could get additional funding in light of the recent efforts to prevent additional terrorist attacks. In particular, additional funding may be provided for the Coast Guard and Maritime Administration to protect ports and for the Federal Aviation Administration to help implement new security procedures.

Future Spending Caps to be Renewed

Along with addressing funding for programs in FY 2003, Congress and the administration must also look to the future, since the overall spending caps included in the 1997 Balance Budget Act expire this year.

Many analysts describe 2001 in Washington as a year of three parts: the opening act being one in which the Senate was divided 50-50, giving Republicans the upper hand with the tie-breaking power of Vice President Dick Cheney. Those months saw the installation of George Walker Bush as the 49th President, the confirmation of former Congressman Norman Mineta as the lone Democrat in the Cabinet, the unveiling of the Administration's budget proposals which fully funded highway, transit and aviation authorizations, and agreement on a budget resolution that would make those funding levels possible.

Act two began late in May, when the party shift of Republican Senator James M. Jeffords of Vermont to independent status caused a total realignment of Senate control. Democrats gained a one vote majority, placing the reins of the Senate in the hands of Majority Leader Tom Daschle (D-SD). Jeffords became one of the 20 new Senate committee chairmen, taking over the seat of Senator Robert Smith (R-NH), after Ranking Democratic Minority Member Harry Reid stepped aside. While the slim majority still meant cross-party vote courting, it gave Democrats power to set the Senate agenda, marking a major shift in priorities, which at Times has placed it at odds with the Republican controlled House.

Those climate shifts on Capitol Hill were minor, however, in comparison to the aftermath of the September 11 terrorist attacks in New York and Washington, and the launching of the nation's war on terrorism. Homeland security became of paramount concern, prompting the enactment of $40 billion in supplemental appropriations, the creation of a new Transportation Security Administration within the Department of Transportation, and stepped up security efforts nationwide.

Comings and Goings

Transportation supporters were rocked with the announcement in early January that long-time champion Rep. Bud Shuster (R-PA), former chair of the House Transportation and Infrastructure Committee, and father of the firewalls and funding guarantees of TEA-21, was retiring January 31. Shuster cited health reasons for stepping down, saying he had reached the pinnacle of his 28 years in Congress. Shuster was one of nine chairs forced by Republican-imposed term limits in the House to vacate their posts after six years as a chairman. Shuster was succeeded in a special election by his son, Bill Shuster. Succeeding Shuster as chairman of the House Transportation and Infrastructure Committee was Rep. Don Young (R-AK), now in his 15th term in the House.

A long-time colleague of Shuster's, former Rep. Norman Mineta, who chaired the former Public Works and Transportation committee from 1992-95, returned to the transportation arena from his position as Secretary of Commerce under President Clinton by accepting the nomination of President Bush as his U.S. Secretary of Transportation. Speaking to AASHTO in February, Mineta set a high priority on closing the gap "between demand for transportation and the capacity of our transportation infrastructure." Some nine months later Mineta would emerge as a leading figure in the mammoth task of reshaping aviation and transportation security.

In June, Arizona Department of Transportation Director Mary Peters was tapped as the new Federal Highway Administrator, the first woman appointed to that position. Peters met with AASHTO leaders to gather their recommendations on ways in which the FHWA could work more closely and effectively with the states.

The mid-term power shift in the Senate which placed Senator Jeffords in the chair at Environment and Public Works also saw the move of Senator Max Baucus of Montana to a key Post as chair of the Senate Finance Committee. Baucus has announced plans to continue his strong role in federal transportation policy, with a series of hearings on transportation issues in the coming year, including the future of the Highway Trust Fund, aviation security funding, and innovative approaches for transportation financing.

Guarantees Hold Firm

With the installation of the first Republican President since the enactment of TEA-21, transportation supporters watched the Administration's budget proposal closely to measure commitment to adhere to the 40 percent increase in highway and transit funding the bill authorized. Secretary Mineta called upon aid from the transportation community to ensure that aviation funding cuts proposed in the budget "passback" were restored by the President, a gamble which he won.

Prospects for future funding survived a mid-year threat as Congress considered the elimination of 4.3 cents of the federal fuel tax as an antidote to skyrocketing fuel prices. AASHTO warned that such a cut would "have dramatic negative impacts on the nation's highway and transit systems" including a loss of $7 billion a year in highway and transit revenue, and some 300,000 jobs. The proposal ultimately was dropped when Congress enacted major tax cut legislation.

Later in the year appropriators also acted to uphold the funding guarantees of TEA-21, approving an FY 2002 appropriations bill which provides $32.9 billion for highways and $6.7 billion for transit. A major change was made, however, in the distribution of the so-called Revenue Aligned Budget Authority, with appropriators earmarking some $1 billion of the $4.5 billion RABA total for highway prorams. That action touched off a firestorm with members of the House Transportation and Infrastructure Committee which appears likely to continue into the second session of Congress.

Transportation Security

The terrorist attacks in New York and Washington, D.C. produced strong bipartisan support for a $40 billion anti-terrorism supplemental appropriation, although debate on how to allocate the final $20 billion installment proved contentious into the waning days of 2001. Ultimately conferees agreed on some $800 million to shore up transportation security and to repair transportation facilities damaged in the attack.

Other relief to the transportation industry was provided by the passage of a $15 billion bill of loan guarantees and cash grants (PL 107-42) to help airlines recover from the emergency suspension of all air travel, and the subsequent drop in passenger levels.

It took weeks longer to pass an aviation security bill (PL 107-71), which made airport security a federal responsibility and which imposed a surcharge on commercial flights to pay for tighter security measures. The bill established a new Transportation Security Administration within the Department of Transportation to oversee the new federal system and also to issue security-related regulations for all modes of transportation. Former Secret Service and Bureau of Alcohol, Tobacco and Firearms Director John W. Magaw was nominated to head the new administration.

In the wake of the attacks, AASHTO established its own Transportation Security Task Force, chaired by Henry Hungerbeeler, Director of the Missouri Department of Transportation, to coordinate the assessment of state security needs and development of guidelines for hardening security at key infrastructure.

Amtrak on the Rails

The nation's passenger rail system was dealt another blow on November 14 when the Amtrak Reform Council issued a finding that the rail system would not meet the Congressional mandate of achieving self-sufficiency by 2002. That action triggered a requirement that Amtrak prepare a liquidation plan within 90 days and that the ARC prepare a reorganization plan. Both would be submitted to Congress, and neither would be binding on Congress.

In the past four months, the U.S. Customs Service and the U.S. Coast Guard have had to change their focus from searching out narcotics and illegal goods shipments to hunting down terrorists and their handiwork, in an effort to protect both people and an import-export trade valued at about $750 billion a year, the Washington Post reports.

"The plain fact is that the movement of goods into the U.S. is now so efficient that port security has been sacrificed," said Sen. Joseph I. Lieberman, D-CT. "At any given time, authorities have virtually no idea about the contents of multi-ton containers traveling throughout the country."

Both the Customs Service and the Coast Guard have increased their activity in recent months, however, attempting to prevent potential terrorist activities at the nation's seaports and check the contents of containers full of goods that often don't match their manifests and are subject to tampering as container ships move around the globe.

For the first time since World War II, the Coast Guard has established 112 "security zones" around port installations, waterside power plants, commercial ships and other infrastructure, and is constantly patrolling those zones. The Coast Guard also accompanies cruise ships into the Long Beach-Los Angeles Harbor and maintains watch over them as passengers go on and off the ships; that practice will be expanded to other U.S. ports soon, the Post reported.

Divers have been sent to scan the undersides of vessels and shore facilities for possible bombs, and more than a third of the Coast Guard's 8,000 reservists have been called back to duty, at a cost of $1 million a day.

The challenge may be even greater for inspectors of U.S. Customs, because some 7,400 huge shipping containers are offloaded in Los Angeles daily, and there are only enough personnel to inspect about 2 percent of the 14 million containers entering the U.S. each year. The seals on such containers often are cut when inspectors arrive, and the manifests that accompany shipments often are inaccurate or vague - with no legal requirement that they be clear or accurate.

"The exporters are under no legal obligation to tell (the) carrier what it is shipping unless it is hazardous material," said John Simpson, president of the American Association of Exporters and Importers.

Security experts told the Post that to upgrade port defense, two objectives must be met, and soon: first, the federal government needs to create effective communication among its agencies that guard the borders, not only Customs and the Coast Guard but also the Drug Enforcement Administration, the Food and Drug Administration and the Immigration and Naturalization Service.

Secondly, they said, foreign exporters and their governments should be held to strict requirements regarding true disclosure of shipment contents and security.

The airline became the first in the nation to seek, and conditionally receive, a government loan guarantee under a program instituted following the airline industry slump triggered by the terrorist attacks on the United States Sept. 11. But America West, which sought $445 million in loans and had faced a possible reorganization under the federal bankruptcy laws if it failed to secure new financing, had to amend its proposal three Times before the recently created Air Transportation Stabilization Board would give provisional approval to its proposal. America West also had to offer the government an ownership stake and promise to cancel raises and bonuses for employees and hold down labor costs until 2007, according to the New York Times

The Times reported that two other carriers -- Northwest Airlines and US Airways -- may be putting plans to approach the federal board on hold after seeing the concessions America West had to make. "Most airlines are looking at this as a rough guide, and they don't like what they saw," said aviation analyst Raymond Neidl with the firm ABN Amro in New York.

With gasoline prices exceeding $2 a gallon in some parts of the country last year, motorists and truckers clamored for relief, some demanding the elimination of state and federal motor fuel taxes. One of the factors identified as leading to the shortages in the Midwest was the difficulty distributors had in meeting federal standards for reformulated fuels, which are mandated in the most polluted areas of the country. In May, the National Energy Policy Development Group (NEPD) recommended that EPA "study opportunities to maintain or improve the environmental benefits of state and local 'boutique' clean fuel programs while exploring ways to increase the flexibility of the fuels distribution infrastructure, improve fungibility, and provide added market liquidity."

"The lives of Wisconsinites have been enriched because of the efforts of Terry and his more than four decades as a dedicated public servant," McCallum said. "Terry has been a loyal cabinet member whose expertise, experience and insight will be greatly missed."

Mulcahy, who chairs AASHTO's Standing Committee on Highway Safety, also assumed the top job at WisDOT from a Deputy Secretary position. He also serves as chairman of the Governor's Blue Ribbon Task Force on Passenger Rail and has achieved national prominence for promoting integration of such rail into the national transportation system. Mulcahy also is vice-chair of the Wisconsin Land Council, a public-private group which examines land-use issues in the state.

Kussart, who became Deputy Secretary in April of 2000, earlier served as special assistant to the governor for Building Tomorrow's Workforce, where he coordinated a state response to a shortage of skilled workers. He also served as executive assistant to the DOT Secretary from 1997-1999 and prior to that, worked at the state Department of Health and Family Services and the Department of Industry, Labor and Human Relations. He is a native of Sheboygan.

The new streamlined process was adopted by federal, state, and local officials on December 14, 2001 at the second executive summit on environmental streamlining for the southern region of the country. Florida's process was formalized at the summit with the signing of a memorandum by representatives of 24 federal, state, and local agencies. They agreed to:

• Endorse the Efficient Transportation Decision Making Process and commit to support it; and
• Work cooperatively to create mutually agreeable agency-specific operating agreements to implement the Efficient Transportation Decision Process, as well as many other actions.

The ETMD process calls for interagency teams to help develop plans and coordinate project reviews statewide. The process uses interactive computer technology to facilitate agency participation aimed to speed up transportation project reviews while at the same time protecting the environment and ensuring meaningful input from environmental and permitting agencies to the public.

The process calls for each region of the State of Florida to have its own Interagency Advisory Team- dubbed Environmental Technical Advisory Teams (ETAT). The teams will include representatives of each agency with the authority to decide or approve related transportation projects. The agencies, including planning, resource protection, and environmental permitting authorities will appoint a transportation representative to each committee.

Agency representatives will be responsible for a variety of duties such as coordinating transportation project reviews within their agencies and providing agency feedback to the transportation entity, whether it be the state DOT or the metropolitan planning organization.

The state's Geographic Data Library houses the interactive geographic information system, which enables team members to access information and provide input. This information will also be accessible to the public on a read only basis.

Florida's model is seen as an example for streamlining the environmental review process for transportation projects, as required under TEA-21. Florida has served as a pilot state in developing this new method of environmental review.