Because of the downturn in the economy and reduced income to the Highway Trust Fund, the annual Revenue Aligned Budget Authority adjustment of highway spending as included in the President's budget proposal would have resulted in a drop in highway funding of $8.6 billion from the current level. The Administration has since endorsed the restoration of $4.4 billion, to the level authorized under the Transportation Equity Act for the 21st Century.

The nation's governors had urged Congress to restore the full $8.6 billion, citing the detrimental impact such a loss would have on employment and transportation projects. But they also urged that Congress act quickly because of the coming highway construction season, and because the fiscal year begins for many states at the end of June.

Although appropriators and authorizers were in agreement on the amount to be restored in highway funding, $4.4 billion, disagreement had arisen over the actual approach. Appropriators included language in the supplemental that would actually declare RABA "null and void." However, in a compromise, it is reported that the language will be replaced by the authorizers' approach, which simply declares RABA to be "zero" for FY 2003. Authorizers also have reportedly agreed not to raise objection to certain highway projects that had been included in the last appropriations bill.

AASHTO Executive Director John Horsley said, "We are pleased to see the House act quickly to alleviate the potential loss of highway funds for FY 2003. Many state fiscal years begin only in a few months, and the proposed cuts to highway funding would have serious impacts nationwide on highway construction and employment. By attaching a funding provision to the supplemental appropriations bill it reported today, the House Appropriations Committee has taken a major step to restore funding cuts." He added, "AASHTO is appreciative of this action by the Appropriations Committee and looks forward to working with them and other transportation leaders to ensure that funding is, in fact, restored."

The House Transportation and Infrastructure Committee's bill, H.R. 3694, would place the additional $4.4 billion behind the budgetary firewall to ensure that it is spent for highway purposes, and specified that for purposes of FY 2003, the RABA adjustment would be "zero." The legislation also includes a "sense-of-Congress" provision that states RABA should be "amended in the future to more accurately align highway spending with highway revenues while maintaining predictability and stability in highway funding levels." It currently has 317 cosponsors.

The House mark-up of the supplemental is expected to resume next Tuesday.

Senate Bill Awaits Action

The Senate has been preparing its version of the supplemental appropriations bill, and will likely introduce it once the House action has been completed. Consideration is being given to combining in one package the supplemental, a debt ceiling extension and an extension of expiring "pay-as-you-go" budget enforcement provisions and spending caps.

"The 40 percent increase we saw in TEA-21 has been put to good use," said AASHTO President Brad Mallory, Secretary of the Pennsylvania Department of Transportation. "But our economic productivity demands continued improvement in our transportation system. States are proposing an achievable investment increase and are also offering a sensible approach to finding the funding."

To achieve the proposed program levels, AASHTO has advanced the concept of a new federally-chartered Transportation Finance Corporation, that would issue bonds to leverage funds collected in the Highway Trust Fund. "The TFC is a new financing approach that takes the innovative financing strategies of TEA-21 to the next level, enabling all states to benefit from a national initiative," said Executive Director John Horsley.

AASHTO Executive Director John Horsley said, "The U.S. DOT estimated in 1999 that $94 billion was needed annually in capital expenditures to improve our highway system. That's nearly twice what is available. Plus the purchasing power of the current federal gas tax will have dropped by 26 percent by FY 2009 from the 1996 level when the gas tax was last increased. We must have a significant increase in transportation funding to meet the monumental needs being faced by state and local governments."

TFC Proposal Aired

At its Spring Meeting, the Board of Directors directed AASHTO to explore the menu of options, subject to further development and discussion, both internally and with other interests. AASHTO has been briefing Congressional staff, federal officials and news media. "We want this to be thoroughly vetted," said Horsley, "to determine if it is feasible and how we can improve upon it."

While innovative finance provisions of TEA-21 have been successful in selected states, their expansion would not necessarily increase the size of the pie for all states. The TFC was envisioned as a method to leverage funding at the federal level, with the proceeds to be distributed to all states in the same fashion that current funds are apportioned.

Through the creation of a federally-chartered corporation which would issue bonds, some $18 billion in Highway Trust Fund revenue could be leveraged into $47.5 billion over six years. AASHTO has suggested that the funding be used to provide an additional $34 billion for highways, $8.5 billion for transit and $5 billion for a capital revolving fund and for credit support.

Horsley concluded, "There is a wide range of options for increasing investment, including the transfer of gasohol taxes now going to the General Fund, tapping Highway Trust Fund reserves and interest, indexing and fuel tax increases. AASHTO is not recommending any specific funding method at this time. But we do want to carefully examine the potential of this new concept for achieving our overall program goals."

AASHTO's other reauthorization objectives include:

• Maintaining funding guarantees and budget firewalls, while retaining and repairing the Revenue Aligned Budget Authority to avoid dramatic swings;
• Retaining the basic program structure of TEA-21;
• Increasing flexibility to meet priority needs including security, safety, congestion relief, freight needs, system preservation and capacity enhancement; and
• Improving environmental stewardship and streamlining.

At a hearing Thursday by the Senate Finance Committee, Baucus also said he would propose making changes to the calculations of the Revenue Aligned Budget Authority (RABA) to eliminate the large swings in the RABA calculations. Baucus has already included in the energy bill a proposal to transfer the 2.5 cent per gallon gasohol tax that now goes into the General Fund. He said yesterday that he would also seek to obtain reimbursement to the HTF of the 5.3 cent per gallon exemption from the 18.3 cent federal fuel tax which is now granted to gasohol. That is expected to add xxx annually to the Trust Fund.

At the hearing, the committee also heard from Andrew Lyon, Deputy Assistant Secretary of the Treasury for Tax Analysis; JayEtta Hecker Director, Physical Infrastructure Team, General Accounting Office; Kim Cawley, Unit Chief National and Physical Resources Cost Estimates unit at the Congressional Budget Office. Baucus chaired the hearing, and Senators Charles Grassley (R-IA) and Jim Jeffords (I-VT) attended.

Grassley discussed making better use of technology to allow for electronic reporting of excise taxes, expressed concern about fuel tax evasion and supported the transfer of the 2.5 cents of the ethanol tax from the general fund to the trust fund.

Jeffords expressed his concern about the impacts of reducing highway spending in FY 2003 transportation spending, and noted that his bill to correct the RABA calculation, S. 1917, would restore the fiscal year funding to the authorized level. He added that he supports the $5.7 billion restoration of transportation funding anticipated in the Senate Budget Committee version of the budget resolution.

Lyon provided details on the factors that go into Treasury's calculation of fuel tax receipts, noting the impact in the decline of RABA of reduced heavy truck sales and the taxes generated by those sales. He also discussed the importance of improving compliance with excise tax collection, saying that the Treasury Department is developing proposals to simplify and improve the process.

Hecker addressed possible improvements to that calculation and the impact of the ethanol subsidy on the Highway Trust Fund. Regarding RABA reforms, Hecker suggested two options, eliminating the "look ahead" calculation which attempts to forecast receipts to the Highway Trust Fund. Another option would be to average the "look-back" at actual Highway Trust Fund receipts over two years. A third suggestion is to average the distribution of RABA over two years.

The bill, titled the North American Wetlands Conservation Reauthorization Act (H.R. 3908) would ramp up funding over five years from $55 million in FY 2003 to $75 million in FY 2007. The bill calls for an even match of federal dollars from non-governmental partners, but advocates indicate that partners frequently exceed the requirement by as much as three to one.

In both cases the bills approved were offered by Subcommittee Chairman Jack Quinn (R-NY) as substitutes bills originally introduced. They were the result of negotiations involving Quinn, Bob Clement (D-TN), the ranking minority member of the Subcommittee, the full Committee Chair Don Young (R-AK) and ranking minority member, Jim Oberstar (D-MN).

For FY03, the Amtrak bill authorizes $800 million for capital, $200 million for operating and $200 million for payment to the Railroad Retirement Fund. It also authorizes $375 million for security improvements and $400 for tunnel safety improvements on the Northeast Corridor and detailed accountability provisions governing Amtrak spending and accounting.

Rep. Clement declared that the bill "represents the beginning of a new era of passenger rail service." A view shared by most of the members present, with the exception of Rep. John Mica (R-FL) who said, "At best this is a Band-Aid and will only stave off the inevitable."

The substitute for RIDE 21 approved by the Subcommittee authorizes a total of $59 billion dollars in financing over ten years, combining tax credit and tax exempt bond financing for high speed corridors -- authorizing up to $1.2 billion of each annually for ten years. The bill also contains authority for $35 billion in loans and loan guarantees for the Railroad Rehabilitation and Infrastructure Financing program and reauthorizes the Swift Rail Development Act at $100 million per year.

Quinn said that the bill did not include the labor provisions that are still under discussion but that he was confident that agreement could be reached on an amendment to be offered at the full committee markup which he expects within the next two weeks.

Aimed at beefing up the safety and security of oil and gas pipelines, (HR 3609) the Pipeline Infrastructure Protection to Enhance Security and Safety Act, would reauthorize the Transportation Department's Office of Pipeline Safety (OPS) through fiscal year 2005 at $262.8 million.

(HR 3429) the Over-the Road Bus Security and Safety Act, would authorize $200 million in grants to bus operators in fiscal 2002 to reimburse Sept. 11-related security costs. It is reported that the grants would be paid out of a 25-cent passenger surcharge for each bus trip if the cost of the trip is more than $5. The fees would be imposed from fiscal 2002 to 2004.

(H.R. 3298), is a bill designed to waive certain limitations in the case of use of the emergency fund authorized by section 125 of Title 23, United States Code, to pay the costs of projects in response to the attack on the World Trade Center.

Mineta Grilled on Security Costs

Meanwhile, Transportation Secretary Norman Mineta answered to members of the Senate Appropriations Committee, about airport security costs at a hearing last Thursday.

During the hearing, Senators questioned Mineta about whether the use of Airport Improvement Program funds for security improvements will keep airports from building new runways or hangers, reported the Washington Post. Committee members urged Mineta to tell them what extra money the Transportation Department needs in order to do a good job creating the Transportation Security Administration (TSA), including reimbursing individual airports for new security measures.

"If you need additional funds, let us know, and soon," said Committee Chairman Robert Byrd (D-W.VA)

(HR 3130) would authorize the director of the National Science Foundation (NSF) to award competitive grants to universities to increase the number of students studying and receiving associate's or bachelor's degrees in established or emerging fields within science, mathematics, engineering and technology, reported CQ Daily Monitor.

Stephens provided the Statewide Perspective at the opening plenary session, "Transportation and Economic Development: A Relationship Under Stress," focusing on the importance of TEA-21 funding and program structure. Warner joined with Bill Scott, Oregon's economic development director, to describe how transportation and economic development are coordinated in Oregon.

The conference was organized by the Transportation Research Board (TRB) and sponsored by AASHTO, FHWA, the Appalachian Regional Commission, and the Rahall Transportation Institute at Marshall University. It brought together government officials, business logistics specialists and academic researchers to explore both the theoretical and practical issues relating to the relationships between transportation and economic development.

Dwight Bower, Idaho, reappointed as the Chair of the Standing Committee on Research.

Wes Lum, California, appointed as the Chairman of the Research Advisory Committee and Vice Chairman of the Standing Committee on Research.

Mike Ryan, Pennsylvania, reappointed to the Standing Committee on Research representing Region 1.

Gary Allen, Virginia, reappointed to the Standing Committee on Research representing Region 2.

Gary Taylor, Michigan, reappointed to the Standing Committee on Research representing Region 3.

Dave Huff, South Dakota, appointed to the Standing Committee on Research representing Region 4.

Richard McReynolds, Kansas, appointed to the Standing Committee on Research representing Region 3, to complete the term of Ian MacGillivary, who has retired.

Randy Halverson, Minnesota, appointed to the Standing Committee on Research representing Region 3, to complete the term of Wayne Teten, who has retired.

Susan Martinovich, Nevada, appointed to the Transportation Education and Management Institute Steering Committee, representing Region 4.