When the U.S. Senate failed in September to enact six-year transportation legislation or to extend the existing funding authority in a responsible way, it created a billion-dollar-a-month hole for the construction industry.
“The baseline for the federal highway account is reduced by a billion dollars each month we have a continuing resolution,” said Tony Dorsey, media spokesman of the American Association of State Highway and Transportation Officials (AASHTO). “It will cost our members one billion dollars every month we have a resolution.”
While the huge loss is mostly on paper — so far — it nonetheless is a drag on the construction economy. Here’s the deal:
Though the Senate agreed with the House at the very last moment to a one-month extension of existing transportation funding authority, senators failed to include a provision to roll back funding rescissions stipulated in the last six-year bill. The $8.7 billion in rescission money was a bookkeeping method of understating the true cost of SAFETEA-LU, which was passed in 2005 (two years into the six years of its effective authority). The sleight of hand was needed to help win legislative support. However, the scheduled rescissions never were voided, as planned, and inadvertently became effective Oct. 1.
“For most states, it is not hard cash money, just promise money,” said Jim Berard, communications director of the House Transportation Committee and a veteran of the congressional legislative process. “We gave the rescissions to them [opponents of a more expensive transportation bill] in 2005. We wanted to finally pass a bill, so we decided to give it to them and fix it later. We never fixed it.”
This cynical process of making law and establishing funding authority doesn’t inspire confidence in the executive offices of general contractors, where budgets are figured and books are kept less imaginatively. Inspiring or not, the process ultimately is responsible for most funding for highway projects, so state departments of transportation and contractors now anxiously await a resolution of the dilemma.
Colorado is one of the states where the rescission of funding authority has DOT officials scrambling. The state had about $115 million pulled back by the bookkeeping reversal.
“We definitely are going to be affected,” said the Colorado DOT communications director, Stacy Stegman. “A variety of projects will be touched. We are trying to get a handle on it.” She noted the rescissions undoubtedly will impact work in the Denver metro area.
Stegman said the possibility of rescission was known all along and the state planned accordingly. Still, she said, tentative decisions were made on the assumption the money would be available: Money was allocated, partnerships with communities and counties were established and contracts were worked up — all of which must be revisited now.
From any perspective, it is a reversal of an orderly contracting process and will slow transportation projects going under contract and breaking ground. This comes at a time when speeding up of construction activity is the top priority in every state.
Such inexplicable decision-making is becoming characteristic of a Congress that remains distracted by the push for new health care rules. The enormity of revamping health care, with its huge fiscal implications, has sidetracked most other legislative activity including enactment of a new transportation bill.
AASHTO’s Dorsey said that “rumblings” and “things going on under the radar” constitute most of what is happening at the moment with a transportation bill. “There is a lot of talk about getting a six-year bill done sooner rather than later,” Dorsey said. “There’s talk about a second stimulus and some movement to repeal the rescissions. It really is a lot of speculation at this point — but people at least are talking and trying to resolve this whole funding crisis.”
The funding crisis for transportation — and, by extension, for transportation contractors — has numerous facets.
First, the highway trust fund is shaky. It twice has been depleted and re-infused with cash by Congress while lawmakers debate the best formula for guaranteeing trust funds in the future. Gas tax money no longer can be banked on to fund the nation’s infrastructure needs. Just solving this piece of the transportation puzzle so far has eluded Congress.
Passage of a six-year transportation bill before a previous bill expires repeatedly has proven too great a task for Congress. September’s last-minute passage of the one-month extension — flawed by the Senate’s failure to stop the rescissions — was the latest legislative misstep in that series.
So once again in 2009, House and Senate members not only are debating what to include in a six-year transportation bill, they have yet to decide whether to even pass a bill this year or to defer it till next year … or perhaps till the year after that. Industry observers can be forgiven for chewing their nails to the nubs.
While AASHTO is actively monitoring the congressional debate, it is not taking a position on the length of extensions — that is, whether to extend the current law for a month at a time, for three months, for 18 months or for some other period. “All we want is dependability in a funding system, a highway program that states and contractors and people who work on these projects can rely on,” Dorsey said a few days after the first extension took effect.
Members of Congress wanting relatively quick passage of a new bill fear that extensions several months in length will only reduce the sense of urgency about getting the job done. Irresolution is a crisis in itself, they said, and giving Congress a generous amount of time to come to agreement will only worsen it.
The Obama administration wants an 18-month extension of SAFETEA-LU for tactical reasons: Any discussion now of new taxing programs to generate billions of dollars in transportation money would muddy the discussion about coming up with billions of dollars for a health care program. Hence, shelving the transportation bill is the whole idea.
In June, the House Transportation and Infrastructure committee openly opposed the administration’s extension. Committee members expressed in a letter their “profound disappointment” in the administration’s “business-as-usual approach.”
“That is the failed experience of the past,” wrote committee Chairman James Oberstar of Minnesota and nine other committee members. “An 18-month extension of current law and temporary restoration of the Highway Trust Fund will leave states without the certainty and reliable funding source that they need to plan, design and construct significant multi-year highway and transit projects. States will slow investments — as they have done during past extensions — and this slowdown will offset much of the benefit of the increased transportation investment provided under the American Recovery and Reinvestment Act of 2009 [stimulus bill].”
The letter was not persuasive, so in September the House committee offered its three-month extension of SAFETEA-LU. Senate transportation leaders support the administration’s request for a longer extension, but when crunch time arrived in September they couldn’t muster voters for a three-month extension, let alone an 18-month extension.
As a fallback position, both houses then quickly attached the one-month extension to a continuing resolution budget bill; unfortunately, the continuing resolution didn’t contain language addressing the rescissions.
Missouri Sen. Christopher Bond is ranking member of the Senate transportation subcommittee and a member of the Senate Appropriations Committee. Earlier in 2009, he had offered an amendment to a bill to cancel the rescissions, but it was defeated. He was assured a fix would occur before Sept. 30.
“Today’s inaction [to cancel the rescissions] took the shovels out of the hands of American workers across the country,” Bond said after the September vote. “This rescission will translate into the loss of thousands of jobs and the canceling of transportation infrastructure projects throughout the country, which is equivalent to pouring salt into the wounds of those seeking employment during the economic downturn.”
What Congress takes away, of course, it also can give and that’s what observers on and off Capitol Hill believe will happen eventually. The question is, when?
“I talked to our staff yesterday about this,” House Transportation Committee spokesman Berard said a few days after the vote. “There are no talks yet about what happens at the end of October. It is sort of like when you are in college: You wait until the last moment and then ask for an extension.
“It is possible that at some point within the next 12 months Congress may decide it wants to rescind the rescission,” he added. “That is not the committee’s position. Our position is we are going to try to push for a six-year bill to solve that problem and others. If we pass it, the states will be getting more money than they are losing.”
There is no question that the House bill would up the ante for transportation. Its price tag is $450 billion, a 57 percent increase over the current $285 billion funding authority. It virtually doubles the amount of money set aside for the Highway Trust Fund — $87 billion — and reorganizes the bill into four funding categories.
How to pay for all that is not spelled out, which is precisely the discussion that Department of Transportation Secretary Ray LaHood and the rest of the Obama administration wish to defer until 2010.
However, with construction unemployment in the range of 17 percent, deferring a decision about new highway funding is not what the industry is after. Berard said the House committee is aware of the need to get construction people to work.
“This is something that Chairman Oberstar talks about every chance he gets,” Berard said. “He talks all the time about unemployment in construction and how we need to move the bill. It’s one of the things we point out to convince the administration we need to move. The transportation bill can act as another stimulus package.”
Dorsey at AASHTO credited the administration’s stimulus package with ramping up work. “I think the stimulus bill has had a positive impact on construction. Jobs have been created. What we can’t let happen now is for the industry to move one step forward and two steps back by not getting extensions as necessary or not getting a six-year bill. AASHTO would prefer a six-year bill sooner rather than later.”
The “sooner-or-later” decision for a transportation bill seems inextricably tied to passage of a health care bill. Senate leaders have indicated they believe the priority debate for now is health care. Just how quickly and decisively that issue is resolved will determine how soon or how late transportation funding will receive its due deliberation. CEG