Stephens testified on Monday on behalf of AASHTO at a hearing by the Transportation and Infrastructure Subcommittee of the Senate Environment and Public Works Committee. While expressing strong support for legislation backed by the Committee to restore highway funding to "at least" the level authorized for FY 2003 in TEA-21, Stephens added that it was his emphatic view that the "at least" for FY 2003 be no less than the $31.8 billion level provided in FY 2002. Stephens said, "With 36 state governors and legislatures already contending with severe budget shortfalls, and the Highway Trust Funding overflowing with fuel tax receipts it is vital to maintain current funding."

Stephens painted a grim picture of what will occur, should Congress fail to act swiftly. He said, "as early as next month, state and local officials will have to begin the task of cutting billions of dollars in highway projects from their FY03 Transportation Improvement Programs. Final decisions will be made public in September, affecting nearly every community in the nation."

"Construction contractors throughout the country will cut back on equipment purchases and lay off tens of thousands of well-paid construction workers. Stock prices of several heavy equipment manufacturers and construction companies have already dropped. Engineering consulting firms, already hard hit by the recession, will almost immediately have to start laying off engineers and technicians as design work for next year's projects is delayed or canceled.

Stephens cited several specific state examples of impacts based upon a survey AASHTO now has underway.

• In Nevada, a $50 million cut in federal funding will translate into a $50 million reduction in construction contracts. Future years programs will be downsized as well. This funding cut would jeopardize our progress on numerous projects to meet the demands of the nation's fastest growing state.
• In Oklahoma, a total of $120 million in construction and right-of-way projects would be delayed or canceled and the state's proposed $1 billion GARVEE Bond Program would be jeopardized.
• In Montana, a $67 million reduction would result in a loss of 2,800 jobs - roughly equal to a quarter of the new jobs created in Montana in 2001.

Stephens also expressed concern that the FY03 cut from $32 billion down to $23 billion will be used as the baseline for the reauthorization of TEA-21. He told the Subcommittee, "This damage to our highway system and the nation's economy need not occur. There is over $19 billion in the Highway Trust Fund. By using only $2.4 billion for outlays in FY03, we can sustain highway investments at the FY02 level."

Stephens concluded, "As we struggle to regain our economic vitality, we dare not "pull the plug" on our transportation investments. The American motorist's fuel taxes collected for highways should be spent on highways."

Highway Users Decry Cuts

William D. Fay, President of the American Highway Users Alliance, told the committee that the projected $8.6 billion cut could be "calamitous" for state transportation projects and for the economy. He said, "A 27 percent cut in one year in the nation's largest infrastructure program is too much. It would have serious economic repercussions just at a time when the country is struggling to get out of a recession and it would be a devastating blow to our national transportation system.

In a letter to colleagues on Monday, Chairman Don Young (R-AK) and Ranking Minority Member James Oberstar (D-MN), and Highways and Transit Subcommittee Chairman Thomas Petri (R-WI) and Ranking Minority Member Robert Borski (D-PA) urged members to cosponsor H.R. 3694, the Highway Funding Restoration Act.

The letter notes that the bill (H.R. 3694) would restore funding for the federal-aid highway program to the level authorized in TEA-21, some $27.6 billion. The President's budget proposal had proposed that highway funding be reduced form current levels by 27 percent, some $8.6 billion, to a level of $23.2 billion. "Not only does this bill mean more highway funding for every state," the letter continues, "it means saving family-wage jobs at a time when they are badly needed."

The letter also notes that identical legislation has been introduced in the Senate (S. 1917) and is supported by every member of the Senate authorizing committee.

Senators Decry Cut

During a Senate Transportation and Infrastructure Subcommittee hearing on Monday, members of the Subcommittee expressed their strong opposition to the administration's proposed cut in highway funding. Subcommittee Chairman Harry Reid (D-NV) said that while he supported the RABA provision, "it's not necessary to follow a broken mechanism off of a cliff."

During the hearing Federal Highway Administrator Mary Peters and DOT Assistant Secretary for Budget and Programs and Chief Financial Officer Donna McLean defended the budget proposal, saying that the RABA computation was based upon a formula created under TEA-21 that could adjust highway spending either up or down, depending on Highway Trust Fund receipts. McLean told Subcommittee members that the administration made the decision "to follow the principle of TEA-21." She also noted that spending above the proposed obligation limitation would require cuts to other discretionary programs.

Peters said that the reduction "is not good news for the states," and said that the FHWA is looking for ways to assist states in handling the reduction in highway funding. Peters also offered technical support to the Subcommittee in examining S. 1917.

On Tuesday the Executive Committee of the National Governors' Association adopted an interim policy supporting a fiscal 2003 budget authority level for the federal aid highway program equal to the current year. "Given the probability of a weak economic recovery" the policy states, "this is not the time for a major reduction in highway funding."

The policy continues that "it is critical that Congress resolve this issue prior to the normal budget cycle to prevent significant disruption or delay of ongoing transportation projects, prevent programmatic funding inefficiencies and minimize job losses." Noting that most state budgets begin on July 1, failure to act swiftly will "mean cuts in the current 2002 construction season" the policy adds.

The governors also note that "many states have planning schedules that look five years ahead, so the cutbacks would be felt swiftly in many communities across the nation absent swift congressional action." With redistricting of legislative districts underway, many state legislatures may adjourn early, leaving little time to address the issue at the state level, they state.

The interim policy will be high on the agenda when the NGA convenes its Winter Meeting in Washington on February 23, and is expected to be one of the topics governors address in their annual meeting with the President.

Davis Registers "Grave Concern"

California Governor Gray Davis wrote to President Bush on February 5 to express his "grave concern about the dramatic funding reductions in the federal-aid highway Program." Davis said, "As we seek at the state and federal level to stimulate the economy, it is a particularly bad time to contemplate an $8.6 billion reduction in infrastructure spending. He noted that California stands to absorb a "staggering" reduction of approximately $620 million, more than any other state.

Funding cuts of this magnitude "would cause significant harm to the California economy as well as the overall U.S. economy, Davis states, with California sustaining job losses of nearly 20,000 people.

"Overall, I think the budget is fair, but there are some glaring problems that this committee will need to address as we go along," said Chairman Harold Rogers (R-KY) of the Transportation Appropriations Subcommittee.

Rogers focused in on three main concerns throughout the hearing, including Amtrak's grim financial shape and his belief that the $4.8 billion request for Transportation Security Administration is too low. Then he addressed the projected cut in highway dollars, "In addition, the committee would like to hear any ideas that the department is going over to bail us out of the mess that TEA-21 put us in this year."

"The chairman outlined major problems that this committee faces, that is by far the largest list of unresolved problems that I have observed in 24-years on this subcommittee," said Martin Sabo (D-MN), Ranking Member of the Subcommittee.

As he did during last week's hearing before the Senate Transportation Appropriations Subcommittee, Deputy Transportation Secretary Michael P. Jackson acknowledged concerns over the required adjustment to Highway Trust Fund spending. He said the President's $59 billion budget request for U.S. DOT is an eight percent increase over the 2002 budget, if TEA-21 formula adjustments for highways are excluded. "With those required adjustments, however, we are tightening our belts, specifically on highway spending," he said. "Most DOT programs will nonetheless see an increase in 2003."

Congressman John Olver (D-MA) expressed his concerns over the cut in federal highway monies, "The amount that's in the President's budget in this instance, is about 30 percent off the total in what was appropriated last year including the RABA monies and that's a very large hole going back to the states," said Olver "Nobody is announcing surpluses these days. It's all a question of how large the deficit is."

Jackson added that reauthorization allows an opportunity to diminish the effect upon states of such a shortfall. He added, "We believe as an Administration that it will be important in the reauthorization to look at mechanisms that we could put in place to diminish the variability that has taken place, in this particular year the $4.4 billion dollar drop from the projected level, and we think that we should take that on as part of TEA-21 reauthorization."

Chairman Rogers added that there needs to be annual oversight, given that since TEA-21 was passed almost five years ago "there have been no adjustments and that's where we got in trouble," said the chairman. "But when you get in trouble, then you come to the appropriators to get you out of the mess that TEA-21created. So if we're going to have to bail you out in the bad times, we'd like to say so in the good times."

Rural Consultation Proposals to be Unveiled Soon

During the hearing Rep. Joanne Emerson (R-MO) noted her concern over implementation of TEA-21 with regard to rural consultation. Emerson developed report language inserted into the Department of Defense appropriations bill in December directing the U.S. DOT to issue regulations on state consultation with rural officials in transportation planning.

The Deputy Secretary said that some progress had been made and that the Department should make an announcement on the status "within the next several weeks."

Debate was set to begin in the Senate today on a comprehensive energy package that could have far-reaching impacts on truck and auto fuels, income to the Highway Trust Fund and new fuel economy standards. Also contained in the bill is a provision to transfer receipts from a 2.5 cent per gallon tax on gasohol from the General Fund to the Highway Trust Fund.

The bill, S. 1766, is likely to be hotly debated on the Senate floor, since several of its most controversial provisions have not been aired in Senate committees. Senate Majority Leader Tom Daschle (D-SD) yanked the bill out of the Senate Energy and National Resources Committee, when it appeared that the committee might approve provisions to allow oil and gas exploration in the Alaska National Wildlife Refuge. That issue is certain to be raised.

Another contentious issue will be consideration of substantial increases in the current corporate average fuel economy (CAFE) standards. The standards have not been revisited since their adoption in the 70's, and currently set a fuel economy standard of 27.5 miles per gallon for cars and 20.7 MPG for light trucks. Senator John Kerry (D-MA) has proposed a bill to increase the standard to 35 mpg by 2013, while Senator John McCain has proposed in S. 1923 to up the standard to 36 mpg by 2016. The Senate Commerce, Science and Transportation Committee lost their chance to debate the measures when Daschle announced he would bypass the committee to take the bill to the floor on Friday. Automakers, labor organizations and others are strongly opposed.

Finance Title Contains Baucus Ethanol Bill

On Wednesday, the Senate Finance Committee reported out the tax provisions to be inserted in the energy package, including a proposal by Chairman Max Baucus (D-MT) which would transfer to the Highway Trust Fund the revenue from 2.5 cents of the gasohol tax that now goes to the General Fund. The 2.5 cent per gallon tax generates about $400 million per year. Those receipts are expected to increase as the market for gasohol increases, with the ban that has occurred in many states on the use of MTBE. MTBE is the only other "oxygenated fuel" that meets the Clean Air Act requirements for use in metropolitan areas with the greatest air pollution. Problems with the contamination of ground water have resulted in a ban on the MTBE fuel.

Both sides indicated that the pressure of a strike threat would be necessary to reach an agreement, and that presidential intervention might take away that pressure.

President Bush could ask Congress to extend a cooling-off period already in force. However, members of Congress were slated to leave for a 10-day recess late Thursday, so a strike called during that period could last at least a few days before being externally halted.

The 13,000 mechanics at the airline voted on Tuesday to reject a contract proposal with a 37 percent pay increase urged by a presidential emergency board - and also voted, by a large margin, to strike if the company does not better that proposal by February 20. The mechanics, who have been working at 1994 wage rates as a result of concessions made when an employee stock-ownership plan was initiated, would see a senior United mechanic's hourly pay rise to $35.14, with increases to $37.54 by mid-2004. The union, whose top mechanics now make $25.60 an hour, seeks top pay of $39.27 per hour.

The new guidance, which was published in the February 7 Federal Register, clarifies that expenses for right-of-way acquisition and design activities, which had been approved prior to a conformity lapse, can be reimbursed during a lapse. However, no new ROW acquisition or final design approval can occur until a new conformity analysis and conforming plan and Transportation Improvement Program are adopted.

FHWA's Office of Highway Policy Information is hosting a special conference March 7-8 on "Motor Fuel Estimation Models,"

"While the bill may not reflect the entire solution to our state's transportation problems, it is a very positive and significant step forward," said Missouri Governor Bob Holden (D).

Last year, Holden proposed to raise taxes for improvements to roads and public transit, but the bill died in the Republican-led Senate. Only one member of the committee voted against the bill, and Republicans who voted against the tax increase last year not only support the bill, but also voted to increase the size of the fuel tax increase in the bill by one penny to 6 cents a gallon. Which took the bill from $436 million to around $480 million.

Because the bill still has to be approved by voters, it is reported that the $480 million figure is making the bill's sponsor Senator Morris Westfall (R) uncomfortable. "I think we're pushing the upper limits when we get up around the $500 million mark," said Westfall. "I think the odds are the people will defeat it, but the issue needs to be addressed."

The bill would allocate at least $443 million for other modes of transportation such as public transit, rail and ports. The bill would also reclaim for highway use $197 million of highway user fees that now go to state agencies for purposes other than highway construction.

Engler, President of the National Governors' Association, will elaborate on a recently adopted interim NGA policy supporting full restoration of the $8.6 billion cut in federal highway funding for FY 2003. In addition, he will discuss the governors' priorities in preparation for the reauthorization of the Transportation Equity Act for the 21st Century.

AASHTO is working with NGA and members of Congress to restore an $8.6 billion drop in federal funding to states for highway use, triggered by a recent U.S. Treasury analysis of fuel tax receipts into the Highway Trust Fund. An element of the current highway financing legislation - known as "revenue-aligned budget authority" or RABA, pegs highway funding to those receipts.

Engler is to receive the President's Award for Pavement Preservation Excellence of the Foundation for Pavement Preservation during the Washington Briefing. The Virginia-based foundation will recognize Engler's support for the Michigan Department of Transportation's Capital Preventive Maintenance Program, which saved the state $700 million during the first five years of the program's inception

Also at the Washington Briefing, staffers of key transportation committees and officials of the U.S. Department of Transportation including Deputy Secretary Michael Jackson and Federal Highway Administrator Mary Peters will address participants. AASHTO President Brad Mallory, Secretary of the Pennsylvania Department of Transportation, will head up a discussion of the outlook for transportation funding in Fiscal Year 2003, and AASHTO Vice-President James Codell, Secretary of the Kentucky Department of Transportation, will deliver a report from the Congressional authorizing committees.