Testifying at a field hearing held in Bismarck on Wednesday by the Senate Budget Committee, Sprynczynatyk outlined the devastating effects the state would suffer as a result of the proposed 27 percent reduction in federal aid highway funding below the current year level.

The Administration's budget proposal calls for reducing the federal-aid highway program from the current $31.8 billion to only $23.3 billion, as a result of a negative swing in the Revenue Aligned Budget Authority provision of the Transportation Equity Act for the 21st Century (TEA-21). Legislation has been introduced in both the House and Senate (H.R. 3694 and S. 1917) to restore funding for the federal-aid highway program to "no less than" the level authorized in TEA-21 for FY 2003, some $27.7 billion.

Sprynczynatyk told Chairman Kent Conrad (D-ND) that the legislation was a "welcome and important first step in addressing the problem." He added, however, that "$27.7 billion level was set by Congress years ago as a kind of non-binding baseline level for the highway program for FY 2003." He said he hoped that the TEA-21 authorization would be viewed "solely as a floor, and that active consideration is given to providing the greater benefits of a higher program level."

In describing the impacts of a 27 percent cut in federal highway funds, Sprynczynatyk said, "A reduction of this magnitude in federal highway assistance would have extremely painful consequences for our state, county, city, and reservation roadway systems. It would cost jobs. It would interfere with economic development and tourism. It would lead to increased vehicle repair bills and fuel consumption." He noted that "North Dakota is already losing ground when it comes to maintaining its roadway systems," falling some $93 million short annually of the investment needed simply to maintain current conditions. He said, "A reduction in federal aid of $45 million would mean an even more rapid decline in our systems."

The director noted that because North Dakota is a "donee" state, receiving more in highway funds than it contributes to the Highway Trust Fund, it would be particularly hard hit by the reduction. He added that the reduction would turn strategic highway planning into "crisis management."

He said that the most serious impact, however, would be on people. "The expectation of devastating reductions in the highway program can impact behavior well ahead of the actual reductions. For example, across the nation, contractors and engineering firms are reevaluating their capital spending plans and considering cutbacks. Some construction job cuts could also be taking place as businesses plan for the possibility of this shocking program decline."

Sprynczynatyk concluded by urging that as the Budget Committee prepares the FY 2003 budget resolution "we ask that you make every effort to craft it so that Congress can avoid the devastating reductions called for in these calculations. We respectfully request that the budget facilitate enactment of a strong, consistent highway program level that will help North Dakota not only in FY 2003 but in the future as well."

Second Hearing Set for Tuesday

The Senate Budget Committee has scheduled another hearing on highway funding issues in Washington on Tuesday, February 26th. AASHTO President Brad Mallory, Secretary of the Pennsylvania Department of Transportation, has been invited to testify.

Senate Majority Leader Thomas A. Daschle (D-SD) brought up the energy bill on the Senate floor on February 15th, calling the bill a "comprehensive, balanced energy plan that will strengthen the economy, reduce our dependence from foreign oil, protect the environment, and provide energy security for the nation for decades to come."

But many corporate and environmental interest groups dispute the majority leader's view, and are raising concerns about the strong push it gives to increase the use of gasohol. The 5.3 cents-a-gallon tax subsidy for gasohol, a blend of ethanol and gasoline, already costs the government nearly $1 billion a year in lost gasoline excise taxes, according to the American Highways Alliance. The figure could rise to $2.5 billion under Daschle's proposal to require refiners to increase ethanol production from the current 1.7 billion gallons a year to 5 billion gallons, reported The Washington Post.

"We are concerned about the impact on the highway trust fund," said William Fay, president of the Highway Users Alliance.

Under current law, gasohol comprised of 10 percent ethanol is taxed at 13 cents per gallon, compared to 18.4 cents per gallon for gasoline. Of that tax, 2.5 cents is deposited into the General Fund, rather than the Highway Trust Fund. As a result the Highway Trust Funded loses more that $400 million per year in revenue that could be used for road and bridge repair, Fay said. Further growth in its use, as proposed by Daschle, would greatly impact Highway Trust Fund revenue.

Another of Daschle's provisions would allow refiners in California, where Governor Gray Davis has already announced the ban of MTBE effective January 1, 2003, greater flexibility in meeting smog-reducing requirements without ethanol. The Washington Postreports that oil industry officials want changes in Daschle's provision that would require gasoline made with ethanol to meet the same clean-air standards as regular gasoline, but environmentalist groups say the industry modifications would add at least 35,000 tons of pollutants to the air annually.

Earlier this month, the Senate Finance Committee released 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. Such a move would generate some $400 million annually in Highway Trust Fund receipts.

Controversial Provisions Expected

Most observers expect that the debate on the bill will last well into March, in part because some of the most controversial issues, such as drilling in the Arctic National Wildlife Refuge, were not worked out in committee markup.

According to the February 14 Government Executive Magazine Biden is using Senate rules to place holds on the nominations of Emil Frankel as Assistant Secretary for Transportation Policy and Jeffrey Shane as Associate Deputy Secretary of Transportation. The Administration had made the nominations in September and October respectively.

On the agenda for action is a policy resolution calling upon Congress to sustain federal highway funding at the FY 2002 level of $31.8 billion. An interim policy to that effect was adopted by the Executive Committee on February 12th, "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.

On the security front, Governor Tom Ridge, director of the federal office of Homeland Security, will address the governors on the issue of guarding against and responding to bioterrorism and other terrorist threats. The governors will then make a trip to the White House to meet with President Bush and members of his cabinet. Dr. Tara O'Toole, M.D., MPH, director of Johns Hopkins Center for Civilian Biodefense Strategies, will discuss legislative priorities of interest to governors, which according to NGA will likely include bioterrorism and homeland security measures. Furthermore, a news conference is expected to be held to address NGA policies and to announce a policy academy on homeland security during the meeting.

Also addressing the governors is Harvard Business School Professor Michael Porter, who will discuss how governors can build "clusters of innovation" as part of their economic development strategies. Porter is a leading authority on the foundations of economic competitiveness and the theory behind the success of regions such as Silicon Valley and Research Triangle Park, North Carolina.

The Iowa Transportation Commission was informed that, absent some corrective action by Congress, that state will lose $82 million for the fiscal year beginning July 1. Of that amount, $54 million would be lost for state highway projects and $28 million of the cut would fall on Iowa cities and counties, according to the February 13 Des Moines Register.

Iowa Transportation Commission Chairman Tom Aller outlined some positive signs for state highway revenues. Tax collections for the past seven months for the primary road fund were $23.7 million ahead of projections. Collection of taxes on the sales of cars, trucks and other vehicles were up by 17 percent. Spurred by warm weather, gasoline tax collections are up by 5.2 percent, while vehicle miles traveled increased by six percent.

On the down side, however, looms the cut in federal funding and also a proposal by Governor Tom Vilsack to spend $60 million in state vehicles and on public safety programs. The state also still faces an $8.5 million shortfall in the highway construction budget for the current year, as a result of higher than expected project costs.

Oklahoma Sees "Double Whammy"

According to Gary Ridley, Director of the Oklahoma Transportation Department, the state could lose some $110 million in federal funding as a result of the proposed $8.6 billion cut in highway funding. Ridley told The Oklahoman that the reduction would affect the state's Garvee bond program, which uses federal funds to pay off road construction bonds. The state has programmed $1 billion in road projects to be financed by the bonds, and was prepared to issue the first $100 million. But while the state had intended to pay off the bonds in 10 years, it may now have to extend that to 20 years, making the bond debt more costly. In addition, projects on the state's five-year program will likely be extended to a six or seven year program, officials said.

The federal funding cuts are looming at a time when Governor Frank Keating has proposed a reduction of nearly $50 million in transportation funding for FY 2003. The combination, Ridley said, represents a "double whammy" for transportation.

AASHTO is conducting a survey of the impacts on state transportation programs of the proposed $8.6 billion cut in federal highway funding. It is scheduled for release on Monday at the Winter Meeting of the National Governors Association.

Kansas legislators are considering cutbacks to the state's $13.5 billion ten-year transportation program, concerned that revenue to support it may come up $1.6 billion short of projections.

According to the February 15 Topeka Capital Journal, a six-member special committee has been named to review and possibly scale back the transportation program, which was adopted in 1999. That package included $1 billion in bonding authority, as well as an escalating set-aside of sales tax revenues. Arguments are now being made to halt the tax increases, or eliminate them entirely. At the same time, the state is facing a $539 million shortfall in its FY 2003 budget.

Depending on the State Legislature's decision on public funding, construction to make safety improvements to the Tacoma Narrows Bridge and State Route 16 (Tacoma Bridge Project) could begin later this year. WSDOT and UIW agreed in December 2001 on an approach to build the Tacoma Narrows Bridge Project. However, before construction can actually begin, the state legislature must approve bonds backed by the State of Washington to finance the project. The partnership is prepared to proceed with whichever course the State Legislature decides on for funding.

Pethtel, who served as the VDOT Commissioner from 1986-94, was called upon by Governor Mark R. Warner to "reshape the six-year plan because the previously approved program had unrealistic assumptions, overly optimistic revenue estimates and greatly understated costs." Warner, the newly elected governor, called for a "realistic and achievable transportation program."

Transportation Secretary Whittington W. Clement said in a statement that "This will involve deep and significant cuts, but this must be done in order to bring credibility and reliability back into the transportation program."

The Director of the Office of Asset Management position is located in Washington DC and has a salary range of $125,972 - $138,200 per year. The Director provides executive program direction and strategic planning is assisting States to systematically develop, implement, evaluate, and upgrade highway and related transportation assets efficiently and cost-effectively.