Budget Resolutions Open Door to Increase

Action on the FY 2003 budget resolution is the first step necessary to restoring all or part of the $8.6 billion reduction from current year highway funding proposed in the Administration's budget proposal. Although the Congressional budget resolution is non-binding, it does establish the spending blueprint for the year, setting levels which cannot be exceeded in appropriations bills.

The Senate Budget Committee on Thursday by a 12-10 party line vote reported out a proposed budget resolution that would increase transportation outlays by some $1.54 billion in FY 2003, triggering a possible hike in the obligation limitation for federal-aid highways of $5.7 billion. That would allow appropriators to set the highway limitation at $28.9 billion, some $1.2 billion above the TEA-21 baseline of $27.7 billion, but still nearly $3 billion below the FY 2002 level.

The Senate Budget Committee's proposed budget resolution is highly controversial, however, because of major rifts over defense spending and tax cuts.

The House on Wednesday passed its version of the budget resolution (H.Con.Res. 353) on a party-line vote of 221-209. Based largely on the Administration's requests, the resolution projects a $66 billion deficit in FY 2002 and $46 billion in FY 2003. The House resolution increases outlays by $1.18 billion, which would permit appropriators to restore $4.4 billion to the federal-aid obligation limitation, bringing the amount to the level provided in TEA-21.

Most observers doubt that the House and Senate will be able to agree on a budget resolution for the year, because of the wide split in philosophy. In that case, each body would be guided in crafting its spending bills by the resolution which it had enacted individually.

Administration Backs $4.4 Billion Remedy

Addressing the annual meeting of the American Road and Transportation Builders Association in Las Vegas Tuesday, Federal Highway Administrator Mary Peters said the Bush Administration has decided to support efforts to restore $4.4 billion to FY 2003 highway funding. Peters said, "The White House recognizes the impact on the economy and local economics and transportation projects. That has to be good news to you."

Mallory Welcomes News, Thanks Partners

AASHTO President Brad Mallory, who also was in Las Vegas to address both the ARTBA and Associated General Contractors' annual meetings, welcomed the Administration support for increased RABA funding in FY 2003 and thanked members of ARTBA and AGC for their mobilization and support in making the case for RABA restoration.

With U.S. population increases and rising vehicle miles traveled - not to mention an array of necessary but costly security measures stemming from the September terrorist attacks on the United States - Mallory said growing the transportation program must be combined with good management and ever-improving customer service to meet the nation's needs.

Mallory also called for increasing environmental stewardship, coupled with a speedier approach to the environmental aspects of highway regulatory approval.

The House Highways and Transit Subcommittee held a hearing on Wednesday on ensuring the integrity of the Highway Trust Fund (HTF). Witnesses addressed alternatives to the $8.6 billion cut to highway spending proposed in the Bush Administration's budget proposal, as a result of the implementation of the revenue-aligned budget authority provision (RABA). That provision adjusts highway spending up or down, depending on income to the Highway Trust Fund. After three years of steadily increasing RABA funding, the FY 2003 calculation resulted in a reduction of $8.6 billion from FY 2002 levels, some $4.4 billion below the baseline authorization of the Transportation Equity Act for the 21st Century (TEA-21).

As they considered how to remedy the proposed spending shortfall, Congressional leaders asked CBO to determine what level of highway spending could be sustained by the Highway Trust Fund. Kim Cawley of the Congressional Budget Office provided different FY 2003 funding scenarios for highways and their impacts on the balance in the trust fund.

Cawley said CBO has determined that:

• the balance in the trust fund could support $30.1 billion in FY 2003 highway spending without triggering cutbacks in future funding;
• if the FY 2002 highway spending level of $31.8 billion were projected over the next 10 years, the cash balance of the Highway Trust Fund would be depleted by FY 2006, based on current numeric assumptions.
• if highway programs are funded at the $27.7 billion baseline level authorized in TEA-21, the balance of the Highway Trust Fund would drop from the current $18 billion to about $11 billion in FY 2005 before gradually increasing.

Cawley projected an improving picture for Highway Trust Fund revenues in FY 2003, with net revenues expected to be 6.2 percent higher than FY 2001 and 2.9 percent higher than FY 2002.

Subcommittee Chairman Thomas Petri (R-WI) said options to direct more revenue into the Highway Trust Fund would be examined during the reauthorization of TEA-21, including the possibility of indexing the federal motor-fuel tax to the rate of inflation. He also asked the

U. S. Department of Transportation to examine whether there were other highway-related taxes that were currently going into the General Fund rather than the Highway Trust Fund.

Ranking Member Robert Borski (D-PA) discussed the status of the Mass Transit Account within the trust fund. Current accounting procedures assume that the full amount provided for transit in a given fiscal year is spent. Borski noted that does not actually occur -- that funding is spent out over a period of years.

FY 2003 RABA Calculation "Reasonable"

Along with reviewing highway funding alternatives for FY 2003, the Subcommittee also heard testimony on the calculation of RABA for FY 2003, options to even out the RABA calculation, and the negative impact to Highway Trust Fund revenues due to the subsidy for ethanol.

JayEtta Heckler of the U.S. General Accounting Office (GAO) provided a preliminary report on the agency's review of the RABA calculation for FY 2003, calling the calculation "reasonable." A complete audit should be completed by GAO this summer, Heckler said.

"The FY 2003 RABA calculation appears reasonable based on the information we reviewed," Heckler testified. "While the RABA adjustment is clearly severe, it largely is a reflection of the multiple ways a downturn in the economy affects the calculation."

She noted that 80 percent of the reduction stemmed from correcting an estimate made in FY 2001 on trust fund revenues, along with correcting for the actual revenues collected in calendar year 2001 versus what was estimated in TEA-21. The GAO audited nine months' worth of HTF revenue in 2001 and concluded that the Treasury's accounting was well documented.

The remaining 20 percent was attributable to adjustments made to expected future revenues, based on the Treasury's model economic assumptions. Heckler said that these assumptions were "on track."

The GAO provided three options on how to reformulate the RABA calculation to help smooth out the giant swings in highway funding:

• Eliminating the "look ahead" portion of the RABA calculation;
• Averaging the "look back" portion of the calculation over two years; or
• Distributing the RABA adjustments over two years. That option would have provided more funding and no negative RABA over the last four years, Heckler said.

Donna McLean, Assistant Secretary for Budget and Programs for the U.S. DOT, said that despite the negative outcome for FY 2003, the RABA adjustment process has been beneficial to the highway program, with a cumulative gain of some $4.7 billion since the beginning of TEA-21. She added that the Administration is examining possible adjustments to the RABA formula, and will include recommendations in its reauthorization proposal. She stated in written testimony, "Guaranteed funding is one of TEA-21's biggest success stories and should be retained and refined in reauthorization. We want to work with you on that."

Ethanol Impact Examined

Subcommittee members discussed the effect of the ethanol tax break on the Highway Trust Fund. Currently, ethanol is taxed at 13.1 cents per gallon, compared to 18.4 cents per gallon for regular gasoline. In addition, 2.5 cents of the ethanol tax is deposited in the General Fund.

Heckler said the GAO estimated that the ethanol subsidy has cost the HTF $6 billion in potential revenue over the past four years. If the current tax structure remains in place, the trust fund could lose $20 billion over the next 11 years in potential revenue.

The Senate Environment and Public Works Committee held another in a series of hearings in preparation for the reauthorization of the Transportation Equity Act for the 21st Century (TEA-21). Tuesday's hearing covered congestion, mobility and intermodalism.

While large urban areas are highly congested, the problem has spread to smaller urban areas across the country where time spent stuck in traffic has grown rapidly, according to Dr. Tim Lomax of the Texas Transportation Institute.

"Over the last 20 years our cities have not been able to keep pace with the demand increases brought on by population and job growth," Lomax said. In 76 of the most congested areas across the country, travel demand increased 86 percent while road capacity increased only 37 percent.

Transportation expert Alan Pisarski told the Committee that "we need to look at the next reauthorization period through the lens of the changes likely to occur between now and the end of the cycle." He said during that time, the nation is in store for dramatic changes, including more than 300 million additional people. The United States can expect 10 million more immigrants, for 13 percent of the population to be over 65 years of age, and establishment of another 10 million households.

"In many respects our world and the transportation system that serves it will be a different place," Pisarski said.

Adding more road capacity will help alleviate congestion, but all funding for congestion relief should not be funneled to more road construction, Lomax said.

"Roads can definitely help, but realistically they aren't the 'wonder drug' prescription because cities have not been able or willing to add them quickly enough," he added. Transit improvements can help, but cannot solve the problem alone, he added.

Throughout the hearing panelists offered ways to better manage congestion in urban areas. Kenneth Orski of the Urban Mobility Corporation said that better operations, increased capacity and addressing key bottlenecks nationwide can offer some relief. He also supported dedicated bus-travel lanes, which could serve as a rapid transit system, along with expanding HOV lanes to encourage car pools while charging drivers who go solo in their vehicles.

Separate Funding for Urban Areas Supported

King County Executive Ron Sims told the Committee there is "frustration among his peers from metropolitan areas" with the specific "stovepipes" and categories of federal funding being targeted at congestion. "We can't develop a comprehensive system because we have to chase the funding available under the different categories," he said.

In written testimony, Sims said his colleagues recently formed a metropolitan congestion coalition, the purpose of which "is to bring together metro elected officials and business leaders in metropolitan areas to address these ideas for the reauthorization of TEA-21." Among the recommendations the coalition is considering are:

• Encouraging and promoting flexible funding approaches: "Funding must be predicated on the notion that metropolitan economies in partnership with their constituents are most familiar with residential growth patterns, commercial development needs, freight mobility and the many other demands on local and metropolitan areas," Sims said;
• Creation of a metropolitan transportation system that geographically defines the boundaries of metro areas within which federal transportation funds will be targeted; and
• Creation of a metropolitan congestion program to funnel federal dollars directly to the metro transportation system, sized at a minimum equal to the National Highway System program.

The request sent to Congress on Thursday requests $5.5 billion to aid New York in recovering from the September 11 terrorist attacks, including $2.8 billion for disaster relief efforts, $1.8 billion to replace transportation infrastructure, and $750 million for replacement of utilities.

Included in a $5.2 billion request for homeland security is a proposed $4.3 billion for operation of the Transportation Security Administration, $260 million for the Coast Guard and $190 million for motor carrier border enforcement. Other funds requested include $14 billion to cover military costs of the war in Afghanistan, and $1 billion to assist allies in their efforts against terrorism.

Rep. Quinn and Federal Railroad Administrator Allan Rutter briefed participants from 28 states at the March 18-19 meeting of AASHTO's Standing Committee on Rail Transportation in Washington, D.C.. The committee, chaired by Joe Boardman, Commissioner of Transportation for the State of New York, also got updates from the consultants who are preparing reports on both freight and passenger rail and discussed TEA-21 reauthorization issues with representatives of the Association of American Railroads.

Quinn made a status report on Amtrak reauthorization and pending rail legislation, including RIDE-21 (HR 2950) which would provide up to $71 billion in rail investment for passenger and freight over 10 years. Quinn said agreement is near on a compromise version of RIDE-21, which is a priority for Rep. Don Young, Chairman of the house Transportation and Infrastructure Committee. Quinn noted, however, that because of the few legislative days remaining in this session of Congress, it is possible action on Amtrak reauthorization will not be completed this year.

Rutter discussed the set of issues the Bush Administration is addressing in its work to develop a more detailed position on Amtrak reauthorization, which he hopes to present at an April 11 House hearing. He also described steps being taken to address problems in the administration of the Railroad Rehabilitation and Improvement Financing program, which have made it difficult to approve loans for short-line improvements. Rutter briefly discussed TEA-21 policy development, and safety and security initiatives.

A panel comprised of House and Senate staff and representatives of the Class 1 freight railroads, the short-line railroads, Amtrak, and the Amtrak Reform Council shared its views on prospects for rail legislation in this Congress.

Dorn acknowledged the benefits received as a direct result of TEA-21 and prior programs and funding. She said between 1997 and 2000, the number of transit vehicles increased by 10.3 percent, track mileage grew by 3.6 percent, the number of stations increased by 2.3 percent, and the number of maintenance facilities grew by 4.1 percent.

Dorn also noted that TEA-21 investment in the nation's transit systems has given transit the highest growth in ridership - 28 percent since 1993 -- of any form of surface transportation. However, she said challenges remain in that many communities still have limited public transportation, or none at all..

Subcommittee Chairman Harold Rogers (R-KY) termed transit "obviously a large part of (the) solution" in finding ways to help Americans avoid gridlock and receive their money's worth from federal transportation taxes. Security Issues Outlined

Dorn noted that the Federal Transit Administration (FTA) is proposing $8.4 million for security, compared to the $1.3 million budgeted in 2001 prior to September 11th.

Dorn outlined five major security initiatives developed after September 11th. They include security assessments, security and emergency response planning, emergency-response drills, security training, and research development.

Representative Martin Olav Sabo (D-MN) asked whether the $23.5 million supplemental amount approved in the Defense Appropriations bill last year to replace buses, and other facilities at the World Trade Center, and to provide technical security assistance and training had been obligated.

Dorn explained that not all of the funds have been obligated because New York has not yet determined whether or not federal funds will be needed for the bus service.

Dorn added that FTA is aggressively assessing the top 30 transit agencies regarding threats and vulnerabilities. About half the assessments are completed, she said.

"I am confident that in the next few months that the $23.5 million will be effectively utilized, and a piece of that also goes for training and for providing funding for safety drills at local transit agencies," Dorn said. One key issue is access controls, to ensure that only appropriate personnel can be in security-sensitive areas, she said.

Activities included a training session for those new to 511, which will be a uniform nationwide dial-in number for traveler information. More than 150 people attended that session. The main program explored a vision for 511, what customers want, telecommunication carrier sessions, accounts from highway and transit officials in states that have already set up 511 systems, and a session asking participants "Where do we go from here?"

Hoellen will also direct AASHTO's new Center for Environmental Excellence, a program initiated in cooperation with the Federal Highway Administration to provide expertise and best practices information to state departments of transportation. Hoellen will also lead AASHTO's efforts in environmental stewardship and streamlining.

Since joining TRB in 1999, Hoellen has served as Study Director for two National Research Council studies, the first directed at developing a national agenda of energy, environment and planning research for surface transportation. The second focused on exploring the scientific and regulatory bases for establishing environmental windows for dredging projects for the Army Corps of Engineers.

Hoellen served as Legislative Director for the Association of State and Territorial Solid Waste Management Officials for eight years. She is a graduate of Emory University with a bachelor's degree in history, and also holds a master's degree in environmental science and policy from Johns Hopkins University.