A long-delayed new six-year highway and public transportation bill, very important to motorists, the nation’s road system, the economy and contractors, must pass before this summer to push forward this year’s construction season, and avoid delays in planning for future projects.
It’s not a sure thing that the bill will make it into law by the May 31 deadline. There have already been six extensions of the last highway bill, which expired Sept. 30, 2004. Congress must work out major differences, especially on the formula for distributing funds to the states, and the Bush Administration is signaling that it would veto amounts higher than its $283.9-billion proposal earlier this year.
If a new six-year highway bill isn’t signed by May 31, when the present extension expires, another continuing resolution would be required to fund the highway and mass transit program. Funding would otherwise lapse and the construction season would be mired in delays and confusion.
Crisis in Construction
The construction season is already moving along, although not at full power, in much of the nation, and is to get into higher gear in the Northeast in the next month or so as spring and summer prevail over winter.
“The earlier a new highway bill is passed, the better,” said Jennifer Gavin, a spokesperson of the American Association of State Highway and Transportation Officials (AASHTO) in Washington, D.C. “It’s not as if they can switch work on and off like a switch. My guess is that most states are getting in position to leave the gate as soon as they see the money coming forward.”
Said Brian Deery, senior director of the Highway and Transportation Division of the Associated General Contractors of America (AGC) in Washington, D.C., “The President of AASHTO spoke at our convention recently and basically said ’Don’t let anybody tell you that this [delay] isn’t destructive to the states, because it is.’ He said states are putting off long-term, multi-year projects because they don’t know what their funding is going to be. They are not doing as much design work as is necessary, so the program is getting further behind every day that they don’t pass the bill.”
Deery added that delay would disrupt construction, “I think it is very important for this construction season that they get the bill done. It will not cancel the season. There will still be lots of projects going out for bid, but I think it disrupts their program in that states would have to re-juggle their projects. It also disrupts the market because the uncertainty causes states to do really short projects, like repaving jobs, instead of the really big projects, because they don’t know what their money will be.”
Will the Bill Pass in Time?
By a vote of 417-9, the House on March 10 approved a $284-billion measure that guarantees, over the six years, $225.5 billion for highways, $52.3 billion to the Federal Transit Administration and more than $6 billion for safety programs.
The House bill represented a 42 percent increase over the previous highway bill, passed in 1998.
The next week, the Senate Environment and Public Works (EPW) Committee (for highways) and the Senate Banking, Housing and Urban Affairs Committee (for transit) “marked up” (or reported out) their portions of a bill that would likewise add up to $284 billion. They couldn’t go higher than that. Senate Majority Leader Bill Frist, R-TN, had warned that he wouldn’t bring the bill to the floor if it were above this.
“Now the question is, ’Will there be an effort on the Senate floor to raise the funding higher?’” said Deery. “Hopefully, it [the Senate version] will be on the Senate floor by the end of April.”
There are major differences between the House and Senate versions. It’s no slam-dunk that a conference committee for the two chambers can agree on a bill before May 31.
“I think they are going to be hard-pressed to get it done by then, to be honest with you,” Deery said.
Commented William Buechner, vice president of economics and research of the American Road & Transportation Builders Association (ARTBA) in Washington, D.C., “The issues, which kept them from getting a bill last year, including the donor-donee issue, the total level of funding, and new programs, are not going away.”
AASHTO’s Gavin pointed out that the Commerce Committee and the Finance Committee of the Senate still must report out their portions of the Senate’s $284-billion proposal.
“It [the Senate bill] seems to be moving along at a good pace,” she said. “We hope these latter committees will get their work done sometime in April, and that the bill can be acted on by the full Senate in late April.”
Could Funding Be Raised?
Despite White House opposition, many senators are trying to raise their proposal to at least $300 billion.
Said David Bauer, ARTBA’s senior vice president of government relations, “A majority of senators on the two committees reporting out spoke critically about what they termed inadequate funding levels that they are being required to move forward in order to get a bill on the Senate floor. At the same time, they made it clear in no uncertain terms that, once the bill is brought to the floor, there will be an effort to increase the measure’s overall funding level. They hope to consider the bill during the last two weeks of April. That would give them a month to try to reconcile the House and Senate versions.”
Commenting on possible Senate efforts to raise the appropriation, AGC’s Deery said, “The $284 billion really isn’t enough money to address all problems, including the donor-donee issue, which is the over-riding issue in the whole debate.”
“We’re pleased that the President has come up to a more reasonable number — from $256 billion [the original Administration proposal] to $284 billion,” Deery added. “That’s a number we can at least start negotiating on. At $256 billion there was just no happy medium. The President’s proposal includes some additional revenue increases that were not included in the House and Senate bills, so we’re hopeful that there are some other revenue options out there that would allow Congress to get closer to $300 billion.”
Deery pointed out that the Administration works from Office of Management and Budget (OMB) projections while the Congress works from Congressional Budget Office (CBO) projections. Because these two projections are not the same, revenue figures differ.
Deery said that a $300-billion bill “would go a long way towards addressing a lot of needs” adding, “It’s a lot better than $284 billion. We would love to have $375 billion [the original House proposal] but that might entail increasing the gasoline tax, which the President is adamantly opposing and which Congress is not enthusiastic about.”
Don Young, R-AL, chairman of the House Transportation Committee, said the House bill didn’t go far enough in combating a congestion problem affecting one-third of all highway travel and costing $67 a year in lost productivity and wasted fuel.
The Associated Press quoted him as saying, “We probably need $500 billion to make sure this country keeps moving.”
“Even Mr. Inhofe [Sen. James M. Inhofe, R-OK, chairman of the Senate EPW Committee] is talking about an amendment to raise the figure,” said ARTBA’s Bill Buechner. “At our meeting this morning, someone said that one of the worst-kept secrets in Washington is that the Senate will bring this $284-billion bill to the floor and then someone will offer an amendment to raise it to $300 billion, which would be overwhelmingly adopted. That would be the game plan. What needs to be done is well above $284 billion. That goes back to the 2002 road conditions report that formed the basis for the original House proposal of $375 billion.”
A delay would not be helpful to the construction season, Buechner said, but added, “It would be better for us to have a bill, but it would be even better to have a well-funded bill. If the tradeoff is between just a bill by May 31 and a bill that was well-funded, I don’t know that we would be necessarily all that well-served by passing an inadequate bill by May 31. Our members at our recent board meeting in Las Vegas were pretty much unanimous that a good bill takes precedence.”
Some members of the House indicated they could try to increase funding next year. The White House, however, said it would veto any bill allowing Congress to reopen the legislation for additional funding.
AASHTO’s Gavin said her organization is encouraged by an amendment offered by several senators that would allow more to be spent if additional money enters the Highway Trust Fund above and beyond what is projected. “We hope that will stay in the Senate bill,” she said.
The big battle is over the return states should receive on the money that they contribute to the Highway Trust Fund (HTF) through the federal gasoline tax.
States are now guaranteed a return of 90.5 cents for every dollar they contribute.
Donor states, that pay more than they get back, want the minimum guaranteed return to be 95 percent. Many of these states are in the Southeast and Southwest. Donee states, which receive more than they contribute, are attempting to obtain a 15 percent increase over last year.
The House and Senate need to reconcile different approaches.
“The House bill retains current-law rate-of-return requirements for each state at 90.5 percent,” said ARTBA’s Bauer. “It would, however, increase the amount of highway funds to which this rate of return would apply to 92.6 percent. Last year’s House bill basically guaranteed states a 90.5 percent return on 84 percent of the bill’s highway fund. This year’s bill guarantees that return on 92.6 percent of the fund.”
Bauer said the Senate bill, on the other hand, would increase the guaranteed return to 92 percent by 2009.
“The Senate is able to do that because they don’t create a number of the new discretionary programs that the House does, allowing more funds to be distributed by formula,” he explained.
Bauer advises not to get too wrapped up in the present plans “because they are going to be completely rewritten in conference. If history is any guide, the formulas will be one of the most significantly reworked parts of this bill once they get to the process of reconciling the House and Senate versions.”
The Highway Bill legislation foundered last year when Congress couldn’t agree on a formula for dividing funds among the states and when the White House threatened to veto spending levels which it said would worsen budget deficits.
The House bill includes an estimated 4,128 “earmarks” requested by individual legislators as high-priority highway or mass transit projects. These total $12.4 billion.
Alaska received more than $204 million in special projects, or approximately $326.51 per person.
Besides individual bridges and highways, the projects include various undertakings such as graffiti removal, interpretive centers, bike trails, museum improvements, landscaping around freeways, and three new ferries between Manhattan and the Rockaway Peninsula in Queens, NY.
The bill also earmarked continued construction of a rail link from Long Island, NY, to Grand Central Terminal in Manhattan. One proposal would include a new tunnel under the East River. A rail link would also connect Lower Manhattan and Kennedy International Airport.
Critics charge that the earmarked projects unnecessary spending.
ARTBA’s Buechner said, however, that “the vast majority are earmarked highway construction projects.”
“A tiny bit of that money is being siphoned off and it is giving the whole bill a bad name,” Buechner added. “A few bad apples are spoiling the whole barrel.”
A Lot on the Plate
“There are many issues between the House and Senate versions that have nothing to do with money,” said Bauer. “There are 1,000 pages in each bill and a lot of differences between the two. They take radically different approaches to trying to make the environmental review and approval process for transportation projects more efficient. They have different proposals for improving safety. The House bill would create a number of new discretionary programs which the Department of Transportation (DOT) would administer. The Senate bill would pump almost all the highway funds through the formulas and not increase the DOT’s piece of the pie. It also includes a lot of innovative financing.”
Although there’s a lot on the plate, a lot is at stake for the construction industry that can’t afford further delays. A study just released by New York University declared, for instance, that New York State needs to spend at least $9 billion over the next five years to prevent further deterioration of highways and bridges and reduce traffic congestion in Manhattan and its suburbs.