King, Deputy Secretary of the Pennsylvania Department of Transportation, told committee members, "When coupled with reductions in state matching funds, the damage will actually exceed the $8.6 billion federal cut. It will delay important projects, extend to cities, counties and transit agencies, and reduce prospects for future transportation funding in next year's reauthorization of TEA-21."

Turning to other impacts, King added, "The issue is more than calculations and revenue projections and bricks and mortar . . . it's about people, it's about jobs, it's about people's lives, their safety and their mobility. It's about economic growth and vitality."

King's testimony resonated with Committee members, who criticized the Bush Administration's budget proposal which would provide a highway obligation ceiling of only $23.2 billion in FY 2003, a plunge of $8.6 billion from this year's $31.8 billion program.

Committee Chairman Kent Conrad (D-ND) called the funding proposal "irresponsible," adding, "We're not going to be cutting $8.6 billion; there's no support for that." Conrad said that while he didn't support the cut, he did not expect funding to be restored to FY 2002 levels. He agreed that the Congressional Budget Office should analyze how much tapping for replacement money the Highway Trust Fund balance could comfortably support.

Ranking Member Pete Dominici (R-NM) also said he did not support the reduction in funding. "This is no way to handle highway funding. It's not fair to our states to go back, not only on the formula, but on money they were expecting to get."

Sen Kit Bond (R-MO) said he supported higher funding for highways, given the need to restore economic growth. "Now is the time to put the foot on the accelerator, not the brake."

Administration Defends Proposal

Federal Highway Administrator Mary Peters told the Committee that under the revenue- aligned budget authority provision of the Transportation Equity Act for the 21st Century (TEA-21), highway funding can rise or fall with revenue flows into the Highway Trust Fund. She said the administration pegged the reduction on a "calculation based in law."

However, Sens. Conrad and Patty Murray (D-WA), Chairwoman of the Transportation Appropriations Subcommittee, noted a number of other areas in the transportation portion of the budget that stray from current law, such as a proposal to change the transit match. Peters and Donna McLean, assistant transportation secretary for budget and programs, acknowledged that the proposal does stray at some points, but said the department thought it essential to link highway receipts and spending as a fundamental principle of TEA-21, as Congress approaches reauthorization.

Peters noted that the Bush Administration faces many competing demands in FY 2003, including finding funds for the war on terrorism.

Governors Make Case to President, Press

NGA Chairman Gov. John Engler (R-MI) told a Monday news conference that one piece of pending legislation aimed at curbing the threat would restore about $4.4 billion. Engler termed it "a very good first step" but said NGA's member governors "would like to go all the rest of the way." Action needs to occur quickly because some states' fiscal years begin July 1, meaning the full force of the cuts will strike an estimated 30 states soon.

"A reduction in funding, just as the construction season is getting underway, would result in the loss of jobs and severely disrupt highway programs of all states. This is not only an issue of building highways, but also maintaining them and keeping them safe," Engler said.

Engler added that there is enough money in the reserves of the Highway Trust Fund to cover the current spending levels without impinging on other commitments for those funds. For Congress to authorize such use of the reserve funds - through one of several pending measures - will "create a win-win outcome," keeping projects alive and preventing another blow to a recovering economy, he said.

Alabama Gov. Don Siegelman, Chair of the NGA's Committee on Economic Development and Commerce, noted that the cuts would be "a staggering blow" with an estimated 350,000 jobs at stake. "It makes no sense to make cuts in transportation when the economy is showing signs of recovery," Siegelman said. Gov. Paul Patton of Kentucky agreed that the proposed cuts were "the wrong thing to do with a fragile economy."

The U.S. Department of the Treasury, which makes projections of flows into the fund, has determined that revenues are dropping, in part because of higher use of alcohol motor-fuel blends, which get a tax break compared with straight petroleum fuels, and a drop in sales of large trucks.

He said that the looming highway funding cut was a key topic among governors attending the NGA Winter Meeting, and during the governors' meeting with President George W. Bush on Monday. Engler said that the President "had no choice" in proposing the reduction, but that he believed a persuasive argument can be made to put the money back. "If we don't do something, we will experience massive cutbacks at a time when we need to move the economy forward," Engler said.

Engler delivered the keynote address to open AASHTO's Washington Briefing on Wednesday. He said that 46 governors had signed a joint letter to Congress to support the restoration of $8.6 billion in highway funding that is proposed to be cut by the administration's budget proposal. (See related article.)

"We are in a situation that is quickly going to be a crisis," he said, noting that with the FY 2003 budget year beginning in July for many states, "If we don't have an answer from Congress, we're going to have an immediate problem." Engler added, "America ought not slow down," asking "What better stimulus can there be than road money?"

Governor Engler said that the governors want to work with the House Transportation and Infrastructure Committee and the Senate Environment and Public Works Committee " to get this on the fast track. We can't wait. This needs to be done now, not waiting for the budget process. There may not even be a budget resolution this year."

Noting that Congress is looking at a deficit brought on by defense and security needs, Engler said, "The transportation priority needs to be remembered as well." He added that members should be reluctant to return to their home districts in an election year "and explain why the construction equipment is parked on the side of the road" when there is money available in the Highway Trust Fund to continue projects.

AASHTO President Brad Mallory, Secretary of the Pennsylvania Department of Transportation, expressed the appreciation of state transportation officials for the strong leadership being shown by the governors on the highway funding issue. He said, "the nation's governors won the day in 1998 when TEA-21 was enacted, and we look to them again to ensure that the strides we have made as a result of that legislation are not wiped away." He also credited action by House and Senate transportation leaders who have introduced legislation to address the shortfall, calling it a "welcome first step."

The administration's budget proposes highway funding of $23.2 billion for FY 2003, down 27 percent from the FY 2002 level, as a result of a provision of the Transportation Equity Act for the 21st Century that adjusts obligation limits according to receipts to the Highway Trust Fund. Engler said efforts should be made to "fix RABA" to avoid funding swings, while being sensitive to the principle of "putting trust back in the Highway Trust Fund."

AASHTO President Brad Mallory joined in a letter to Congress and the President from the National Governors' Association, the U.S. Chamber of Commerce, the American Public Transportation Association, the Associated General Contractors of America, the American Highway Users Alliance, the American Road and Transportation Builders Association, and the International Union of Operating Engineers.

"This is not a time for any reduction in highway funding. We ask that the Administration and Congress maintain current highway investment," the letter states. It expresses support for the "Highway Funding Restoration Act" (H.R. 3694 and S. 1917) but adds, "We believe this legislation would be only the first action necessary to restore the total funding shortfall ... We strongly support a FY 2003 obligation limitation level for the federal-aid highway program equal to the current year."

State Legislatures Weigh In

The National Conference of State Legislatures wrote to members of the House and Senate to urge their support for the Highway Funding Restoration Act. The letter states: "Potential reductions in FY 2003 federal highway funding must be avoided. As the nation moves toward economic recovery, we must collectively support programs that maintain or boost employment and simultaneously address public infrastructure needs." The bill "accomplishes this by tempering a potentially destructive reduction in highway funding," NCSL wrote.

46 Governors Join in Letter

The National Governors Association made public a letter to Congressional leaders, signed by 46 governors, requesting speedy action to remedy the RABA crisis.

The February 25 letter, addressed to Senate Majority Leader Thomas A. Daschle(D-SD), Senate Minority Leader Trent Lott (R-MS), House Speaker Dennis Hastert (R-IL) and House Minority Leader Richard Gephardt (D-MO), stated in part: "The nation's governors support a Fiscal Year 2003 budget authority level for the federal-aid highway program equal to current year. Given the weak economy, this is not the time for a major reduction in highway funding.

"Governors believe the bipartisan, bicameral legislation (H.R. 3694 and S. 1917) to partially restore this funding is an important first step. 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."

The governors' letter continued: "We call on Congress and the Administration to maintain the current funding level as a key to economic security and to prevent any job losses, which would further hinder economic recovery. We need Congress to act now."

The letter was signed by NGA Chairman Gov. John Engler of Michigan and by Govs. Don Siegelman of Alabama, Tony Knowles of Alaska, Jane Dee Hull of Arizona, Mike Huckabee of Arkansas, Gray Davis of California, Ruth Ann Minner of Delaware, Roy E. Barnes of Georgia, Benjamin Cayetano of Hawaii, Dick Kempthorne of Idaho, George H. Ryan of Illinois, Thomas Vilsack of Iowa, Frank O'Bannon of Indiana, Bill Graves of Kansas, Paul Patton of Kentucky, M.J. "Mike" Foster Jr. of Louisiana, Angus King Jr. of Maine, Parris Glendening of Maryland, Jane Swift of Massachusetts, Jesse Ventura of Minnesota, Ronnie Musgrove of Mississippi, Bob Holden of Missouri, and Judy Martz of Montana.

Speaking to the issue of FY 2003 highway funding were Peter Rogoff, majority clerk to the Senate Appropriations Committee's Subcommittee on Transportation; Mitch Warren, majority professional staff member for the Senate Environment and Public Works committee's Subcommittee on Transportation, Infrastructure and Nuclear Safety; Duane Gibson, senior professional staff member for the House Transportation and Infrastructure (T&I) Committee's Subcommittee on Highways and Transit; and Ward McCarragher, minority chief counsel for House T&I.

The funding levels in the Highway Funding Restoration Act - which would restore a minimum of $4.4 billion of the $8.6 billion proposed highway funding cut - were calculated to bring aboard the maximum number of cosponsors, which in turn is hoped to make an impression on key committees, Gibson said. Thus far the bill has attracted 260 cosponsors in the House and 50 in the Senate.

While some lawmakers favor restoration only to levels authorized in TEA-21 ($4.4 billion), others agree with AASHTO and the National Governors Association that more funds should be added from reserves in the Highway Trust Fund, Gibson said. If so, those changes can be made through amendments.

All four speakers agreed that support for averting the crisis was strong in the committees they work for. But there were differences of opinion among them about whether restoration supporters should press for the full $8.6 billion.

Gibson termed it "a little unreasonable" to seek the full $8.6 as a continuum when RABA levels during the first three years of TEA-21 were unusually bountiful due to a burgeoning economy. He urged AASHTO members to "go out and try to sell $4.4 (billion)."

However, Rogoff disagreed, saying he believes there is support in Congress for seeking more than $4.4 billion, notably from Senate Appropriations Committee Chairman Robert Byrd (D-WV) and Chairman Patty Murray (D-WA) of the Senate Appropriations Subcommittee on Transportation.

"I don't see any reason to limit yourselves to $4.4 billion," he told the AASHTO audience. Ultimately, the limit may be set by what available funding sources will accommodate, he said.

One hallmark of the work on the Highway Restoration Act was the bipartisan approach, the staff members agreed.

"In this whole RABA debate, it was a pleasant experience to work with the minority (party) and the Senate ... where we came up with a product that was exactly the same, from the get-go, to show there was some strength to this issue," Gibson said.

Baucus Plans Changes in Ethanol Taxation

Also addressing the Washington Briefing was Dawn Levy, professional staffer for Sen. Max Baucus (D-MT) who chairs the Senate Finance Committee. Levy discussed Baucus' legislation (S1306) to return 2.5 cents of the 13.1-cent federal tax on fuels blended with ethanol, now diverted to the general fund, to the Highway Trust Fund - and Baucus' intention to seek a general fund replacement for the estimated $1.5 billion impact on the Highway Trust Fund of the differential taxation of ordinary motor fuels and those blended with ethanol.

Baucus does not seek to end the tax break on ethanol fuels, Levy said, but does want to keep the differential from taking a bite out of the Highway Trust Fund.

Addressing AASHTO's Washington Briefing, Jackson described state transportation agencies as "laboratories" generating "on-the-ground experience" that is indispensable as the U.S. DOT develops its reauthorization recommendations. He highlighted the principles that have been laid out by Secretary of Transportation Norman Mineta as a starting point. These include:

• A predictable source of funding;
• Preserving flexibility;
• Building on intermodal approaches;
• Expanding innovative financing;
• Security and safety;
• Simplification of environmental regulations;
• Building on a basis of fact, by funding research and analytical needs; and
• Using technology effectively.

Jackson emphasized Mineta's commitment to the concept of "one DOT" saying that the approach is being implemented internally through restructuring of the policy office, purchasing, accounting and other initiatives, to make the DOT operate in an more integrated fashion.

Addressing the future of Amtrak, Jackson, who represents U.S. DOT on the Board of Directors of the Amtrak Reform Council, said the council had made a good inquiry into structural issues surrounding the passenger-rail agency, but had failed to address core issues, including "what do we need, what can we afford, and how do we fund it." He noted that Mineta had already rejected suggestions that the Highway Trust Fund be tapped to solve Amtrak's financial woes. He said that the states would have a role to play, as well as increased fares and cuts in operating costs. But he added "it is a tough problem, and will be a lively debate."

Addressing the Washington Briefing, Peters emphasized her personal commitment to streamlining and stewardship. She cited evidence of the advances made by states noting that 34 had interagency agreements, noting that:

• 34 states have interagency agreements for concurrent reviews;
• 29 states have a merged process for wetland permits with the Army Corps of Engineers;
• 24 states have adopted context sensitive design approaches; and
• 41 states have some level of delegated authority for historic resources.

The average time for processing an EIS, she said, has decline by 18 percent, from five and a half years to four and a half. She noted efforts underway to secure commitments from other federal agencies to also work to advance project reviews, but added that legislative action may be needed regarding historic preservation reviews.

Turning to the issue of rural consultation, Peters urged state officials to take action to collaborate with rural elected officials in transportation decision making. She said it is an area of concern to Congress, and that unless states voluntarily complied some other mandatory action may result.

Peters echoed the belief that reauthorization will be evolutionary rather than revolutionary, adding that key priorities will be protection of the firewalls and RABA, stable and predictable funding and enhanced flexibility.

Addressing AASHTO's Washington Briefing, Henry said, "it's an election year and everything has to be looked at keeping this in mind, especially everything that's going on in Congress right now," This was Edward Henry's response to the $8.6 billion cut in highway spending proposed by the Bush administration's FY2003 budget.

Henry acknowledged that the state governors were very strong when they came to Washington to say that states need this money. "I think that there are going to be a lot of people hard pressed on Capitol Hill, when they (Congress) are up for re-election, to not being in favor of giving you that $8.6 billion in highway spending," said Henry. He noted that obviously there is a lot of uncertainty with the budget, but more important he said, "we are at a crossroads with the political landscape." The fact that who is going to be running the country from coast to coast is all up for grabs, has "a huge effect on what happens to any legislative business in Congress," said Henry.

Henry noted, that there is so much uncertainty about who is going to be in charge, not just on party control but, down to the specific issues and committee chairmen. "We don't know whether they will be back next year," said Henry. For example, Henry said that Senator Bob Smith (R-NH), Ranking Minority member of the Senate Environment and Public Works Committee, is up for a big primary challenge this year, then, considering he makes it pass the primary, may have a huge Democratic challenger in the general. "We could very well have a situation where Senator Jim Jeffords (I-VT) is writing the first half of the reauthorization, this year in the Senate and next year it very well could be Bob Smith. Or maybe its another Republican, and all of this is going to matter to us."

"Amtrak has become synonymous with passenger rail policy in America. (The Subcommittee) doesn't necessarily think that's the right framework," said John Scheib, Counsel for the House Railroads Subcommittee. Scheib made the distinction between passenger rail policy and the functioning of Amtrak as a corporation.

Scheib noted that the committee is looking at passenger rail policy from two angles: infrastructure and operations. He said there is a consensus in Congress that the passenger rail infrastructure problem needs to be addressed, and that money must be spent to get the infrastructure "up to snuff". However, Scheib said there is far less agreement on the House side on what to do about the operation of Amtrak as a corporation.

With regard to infrastructure, the bill "Ride 21: The Railroad Infrastructure and Development Act for the 21st Century," introduced last year by Chairman Don Young (R-AK) has three components. First, it proposes $ 36 billion in state issued federal tax exempt bonds for the development of high speed rail infrastructure, makes $35 billion available in loans and loan guarantees through the "Railroad Rehabilitation and Improvement Financing Program", and proposes $35 million per year through 2009 for the development process. Scheib said while a few issues in this bill are currently under negotiation , the bill is a top priority for Chairman Young this year.

Amtrak operations is a different and more complex matter, he said. Citing the recent report of the Amtrak Reform Council's (ARC), Scheib said the report: focuses on Amtrak's continuing management and operational problems; outlines a number of important policy goals that include promoting intermodalism and creating potential for competition;, and makes some concrete suggestions, such as separating the infrastructure from the operations.

The House Railroads Subcommittee is in the midst of three hearings on Amtrak . The first focused on the ARC report. The second is set for March 6th on the successes and failures of Amtrak and the 1997 reform law, and the third will be April 11th on what inner city passenger rail in America should look like.

Currently there is only one bill introduced in the House which deals with Amtrak and Amtrak reauthorization. Sponsored by Congressman John Mica (R-FL), one of the provisions in the bill include transferring the Northeast Corridor to the Department of Transportation (DOT) and ultimately allows the DOT to franchise out maintenance, ownership and operation of the Northeast Corridor. Scheib doesn't believe that there is a consensus in the House about how to address Amtrak, and is skeptical that this legislation will pass the House this year.

Scheib indicated that the President's budget includes a placeholder of $521 million dollars for FY03 for Amtrak, but noted Amtrak's announcement that it would need $1.2 billion or else it would have to shut down long distance routes.

Debbie Hersman, Professional Staff Member of the Senate Surface Transportation and Merchant Marine Subcommittee, noted that Subcommittee Chairman Ernest Hollings (D-SC) introduced 'Rail-21' which has many of the same features as "Ride 21". These include cleaning up the Railroad Rehabilitation Innovative Financing Program , and an increase from $3.5 billion to $35 billion in its authorization amount.

Although the committees agree on a number of issues in the ARC report, Hersman said that Senator Hollings is not interested in separating operations and infrastructure, adding "Senator Hollings is skeptical of the British model. . . and not in favor of privatization."

Hollings supports Amtrak's $1.2 billion budget request, and is currently working on a bi-partisan letter of support, which currently has 30 signatures. "We feel that it is very important for us to make a strong showing that Amtrak needs the money," said Hersman, "and that we support long distance trains, that we support funding for the North East Corridor and that we support Amtrak. Until we can figure out what changes we're going to make or what's going to happen to the system we need to make sure that Amtrak stays healthy." Hersman noted that Amtrak has already made substantial cuts to meet their financial needs this year, including recently laying off 1,000 employees.

Hersman noted that basically Senator Hollings "wants to maintain the existing system - maintain Amtrak." She quoted the Senator as often commenting, "the reason why other modes of infrastructure in the U.S. have succeeded is because the federal government took a strong interest and a strong leadership role and a strong financial position in making sure those things happen.

Joe McHugh, Vice President of Government Affairs for Amtrak, added his concerns for Amtrak's current state, and hope for it's future. McHugh said that Amtrak had a history of making things work with a limited number of resources. "The company seemed to stretch a lot out of very little." Now, despite being proud of Amtrak's legacy, he notes that with lack of adequate capital it is just too difficult to keep up the service.

Chet Lunner, a U.S. DOT spokesman, said the ultimate decision will rest with the White House, the Secret Service and other agencies whose security concerns have governed the level of activity at the airport thus far. "It's a proposal - it's not a guarantee," Lunner said. The secretary will argue that airport security is "becoming more robust all the time," Lunner said.

Reagan National was kept closed for three weeks following the attacks, and when reopened was held to a smaller flight schedule, new flight paths for aircraft going in and out and the tightest security procedures in the nation. Some federal security officials had opposed reopening Reagan at all, due to its close proximity to significant federal structures such as the White House and Congress.

However, officials of the adjacent state and local governments had sought its full reopening, citing impacts on jobs and the local economy. Currently Reagan National is operating at 61 percent of its pre-Sept. 11 schedule and is cleared to raise that to 77 percent this week.

HR 3347, a general aviation bill containing the provisions, won approval on a voice vote, according to the CQ Daily Monitor. Rep. John L. Mica, R-FL, chairman of the T&I Subcommittee on Aviation and sponsor of the measure, termed general aviation "a forgotten victim of the tragedies of Sept. 11," as hundreds of small airports and related firms suffered from weeks of closure following the attacks, in the name of national security. Small-craft flights still are not allowed from Reagan National Airport, which serves the nation's capital.

The Davis Administration had in March of 1999 called for a full ban on the additive effective next December, on grounds methyl tertiary butyl ether is a potential cause of cancer. However, a report made public this week indicates that Implementing the ban all at once might prompt gasoline shortages and gas-price spikes to as much as $3 a gallon. The new information prompted Davis' advisers to urge the review of the policy, in part because Davis is campaigning for re-election, the Times reported.

Last year, in an attempt to forestall such distortions in California motor-fuel markets, the Davis Administration sought a waiver from U.S. Environmental Protection Agency regulations requiring use of oxygenated fuels in California for air-pollution prevention. EPA rejected that request last June. Taking MTBE out of the equation leaves ethanol as the only fuel-oxygenation agent that could come close to meeting demand, the Times reported, but little ethanol is produced within the state and the physical properties of ethanol prevent its movement through pipelines. In states where it is used, it is usually mixed with fuel near the sites where it is sold.

The report that prompted the review was prepared by Stillwater Associates of Irvine, California, on order of the state energy commission. It recommended that MTBE still be allowed through 2005, citing lack of storage capacity for ethanol and imported gasoline and unique specifications for motor fuel used in California that can meet EPA guidelines.

Montana

David Galt, Director of the Montana Department of Transportation, outlined for the state transportation commission a $60 million list of the most likely projects to be hit, if proposed federal highway cuts take place. That list includes a $10.5 million reconstruction of U.S. 93 between Stevensville and Florence, $9.3 million in improvements to Highway 212 east of Crow Agency, $8.9 million for rebuilding highway 78 south of Colombus, and $8.4 million reconstruction of the same highway near Absarokee, according to the Billings Gazette. Galt said he would not make recommendations for specific action, however, until it is determined how large the drop in federal funds may be. Montana currently faces a potential $66 million loss unless Congress acts to restore the cuts proposed by the administration.

Another concern for the state is the fact that Montana has not passed legislation to lower the legal drinking age, ban open containers and increase penalties for repeat offenders. Galt said about $115 million could be affected if action is not taken by 2007.

Rally held in Michigan

Transportation advocates rallied in Detroit Monday to protest a potential $222 million reduction in federal highway funding to that state under the administration's proposed budget. Representatives of 60 groups, from state legislators and road pavers to the League of Women Voters, expressed concern about the impact of the cut on economic recovery, according to the Detroit Free Press.

Gary Naeyaert of the Michigan Road Builders said the move could "doom state motorists to years of congestion, potholes and deteriorating bridges." Labor representatives said the cuts could eliminate 10,000 jobs in Michigan.

The article stated that Kansas authorities are considering elimination of tax increases agreed to in 1999 to finance a $13.5 billion, 10-year transportation program.

Addressing the AASHTO Washington Briefing, Jeff Squires of the Senate Environment and Public Works Committee said that "irrespective of what you think the right number is" the near unanimous support shown by members for restoring highway funds illustrated the principle of "strength in unity" he hopes to see continue into next year.

Squires noted that Committee Chairman Jim Jeffords (I-VT) has scheduled an extensive program of hearings to prepare for reauthorization and wants to capture a wide range of perspectives. He said the goals Jeffords is seeking to achieve in the next bill are: a balanced transportation system; a clean environment, a participatory approach to planning and adequate funding levels. But he added the bill will not be one of "revolution" but one of "refinement and evolution" of the principles established in TEA-21 and in the Intermodal Surface Transportation Efficiency Act.

Megan Stanley, Minority Counsel for the Senate Committee, said that the committee would work in a bipartisan way to put our a unified committee bill in February of next year, about the same time the Administration's bill is expected. She cited as areas of emphasis: program and project delivery; environmental streamlining, freight movement and capacity; air quality conformity, and innovative finance.

Jurisdiction over transit issues falls to the Senate Banking, Housing and Urban Affairs committee which will hold their kick-off hearing on transit reauthorization on March 13. Among the committee's concerns are predictability of funding, flexibility and providing a balanced transportation system.