When President Bush held tight last year to his $256-billion proposal for a new six-year highway and public transportation bill, many in the construction industry worried that he would never budge in the future.
The industry relentlessly told the White House that the country needed much more. Fortunately, Bush budged. The Administration raised the amount to $283.9 billion in its Feb.7, 2006, budget proposal, saying this represents a 42 percent increase over the guaranteed funding in the previous “TEA-21” bill, which expired Sept. 30, 2003.
Construction groups expressed relief, even though the proposal was a $91.1 billion less than what the U.S. Department of Transportation (USDOT) said in 2002 was the minimum needed just to maintain the nation’s highway and transit system at current levels.
Congress is now expected to pass a much-delayed and desperately needed new six-year highway and transit bill by May or even earlier, providing a foundation for long-term planning by state DOTs.
The House on Feb. 9 introduced its “Transportation Equity Act: A Legacy for Users” at exactly the same $283.9-billion funding level as the President’s. The Senate is expected to bring its own new measure to the floor shortly after the Easter Recess in March. A conference committee is then expected to iron out differences and approve a final bill for the President’s signature before the end of May.
The Administration’s reauthorization proposal is called SAFETEA (Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2003).
A Long Road
A new Highway Bill has been a long time coming.
The House Infrastructure and Transportation Committee had originally wanted $375 billion (and a five-cents-per-gallon increase in the gas tax) but the House leadership brought this down to $279 billion in a bill that the House passed last year.
The Senate proposed $318 billion, with a guaranteed level of $301 billion. The two houses couldn’t work out a compromise in conference committee. Congress has funded federal highway, bridge and mass transit programs since Sept. 2003, through six temporary extensions, the last of which expires on May 31.
Observers say passing a bill soon is critical to the nation’s transportation program.
“This uncertainty about the funding from Washington really affected a lot of big DOTs,” said Brian Deery, senior director of the Highway and Transportation Division of the Associated General Contractors of America (AGC) in Washington, D.C.
“We’re hearing that they are not letting any real long-term contracts. They are mostly doing just maintenance, paving and things like that. They’re not doing any major multi-year contracts if they can put them off. This indecision in Washington has been disruptive. Many states will have to raise their matching share in some way when the new federal money comes out. They can’t do that until they know what the amount of money will be.”
“A new highway bill will be a real positive for the construction industry,” said William Buechner, vice president of economics and research of the American Road & Transportation Builders Association (ARTBA) in Washington, D.C., and added, “I can’t see how they’ve gotten anything done in this atmosphere [without reauthorization of the six-year bill] but states and contractors have done a pretty phenomenal job.”
Commented Jennifer Gavin, a spokesperson of the American Association of State Highway & Transportation Officials (AASHTO) in Washington, “In a perfect world, $375 million would have been a lovely number to be going for. The back-and-forth between the House, Senate and White House last year demonstrated that this was probably not in the scope of reality for this season because of things like the war in Iraq, deficit concerns, and other federal demands that were not on the table when we entered this process three years ago. We’re grateful for the fact that the White House came up a bit after strongly sticking by its earlier numbers because it indicates a willingness to compromise and work with folks.
“The full panoply [of work] obviously is not going to get done,” Gavin added. “Perhaps it never really is able to be done because the needs are always piling up and changing as time goes by.”
Gavin said there’s “a possibility that some creative additional financing may be brought through; we don’t know yet … something along the lines of additional bonding outside the scope of the regular reauthorization bill, which will allow more projects to be targeted, worked on, and completed.”
Gavin said AASHTO is very hopeful that a new bill will be passed before May 31, and added, ”There are signs that people in the leadership have been making a priority out of this in the last few weeks. You can’t plan a multi-year building program just based on extensions. Once states see that they really have a multi-year program, they will feel more comfortable about laying out plans for really-large projects with more jobs and work.”
Covers Two-Thirds of Needs
“I think it’s quite encouraging that the president has shown some flexibility and willingness to increase funding,” ARTBA’s Buechner said, “but the process still must continue. Congress still must do the work. I don’t think $284 billion is necessarily the final figure. What the president has proposed really only covers about two-thirds of what really needs to be done. Congestion and road conditions will keep getting worse.”
Buechner added that, “The $284 billion doesn’t provide a lot of extra growth; the amount funded in fiscal 2004, 2005, and 2006 is pretty much at the same level; then you get a small increase in 2007; the Administration backloads a couple of billion dollars increase in 2008 and then there’s an increase in 2009. We’re really talking about an Administration proposal that doesn’t really provide much new money. We would absolutely support a higher appropriation. We still support what the Senate passed last year, which is a guaranteed amount of $301 billion.”
Buechner sees both houses passing their bills in March for final resolution in conference committee.
“Of course, May 31 is one deadline because the extension of current funding expires then,” he told Construction Equipment Guide (CEG). “Even more important is getting something done before they pass the budget resolution, because, once Congress passes the resolution, which usually happens about the middle of April, that will pretty much set a cap on the highway program. We might not have much flexibility after that. The resolution sets the total for the year that Congress can work with. It may turn out that, when they divvy-up all the money, the amount they give the Department of Transportation may not be enough.”
(Sources pointed out that the resolution is non-binding but acts as a blueprint that is not easy to overcome.)
AGC’s Deery commented, “I think we will get a bill sooner rather than later. I think there’s every possibility that we can get it done before the extension expires on May 31. The House intends to approve its bill before the Easter recess, which begins on March 18. The Senate won’t approve their bill that quickly, but they plan to have a bill marked up and out of committee before the recess. The Senate will probably be on a dual track to get its bill completed at the same time as the budget resolution is being considered. Then it will probably go to the Senate floor right after the recess. By mid-to-late April, we should be in conference committee and hopefully Congress can work it out.”
Deery pointed out that the Administration’s proposal is higher than the $279 billion that the House approved last year, though it’s not as high as the Senate’s proposal last year.
“We view it [the Administration’s budget proposal] as a very positive development,” he said. “We think that the president obviously has shown a willingness to work with Congress to try to come up with a bill that can get passed. This moves in the right direction. He obviously has come a long way [to $284 billion] from where he started, originally at $247 billion and then to $256 billion. I think the Senate will make a case that the president should be working toward a higher number, but I think it will be tough to get him higher. The House is pretty well locked in at the president’s number; that’s the number that the leadership in the House wants to see passed.”
Senate Wrestles With Donor-Donee Issue
Matt Jeanneret, vice president of communications of ARTBA, said the $318-billion ($301 billion guaranteed) level “did not have enough support in the Senate to pass last year and the primary reason it was the donor-donee issue, which is still very much front and center this year, still an obstacle.
“The political dynamic has not changed,” Jeanneret said. “It will still be a challenge in the Senate to try to get up to a minimum guarantee of 95 percent level [95 cents back on every dollar that each state sends to the Highway Trust Fund] and they can’t do that with the $284 billion. This is still early in the process. It’s still way too soon to say how this will all turn out. Getting it done soon is not as important as getting it done right. Obviously they must do something before the May 31 deadline, which will be here before you know it.”
Jeanneret said the president’s figure “is a step in the right direction, a good starting point for this year’s reauthorization debate but it’s clearly not enough to meet the transportation needs that have been documented by the Department of Transportation Report and the question remains whether it’s enough for Congress to solve the donor-donee issue.
“It [the Administration’s proposal] is clearly not sufficient overall,” Jeanneret added. “The Senate bill from last year, at $301-billion guaranteed funding, was the best proposal out there and offered a real down-payment toward addressing the nation’s transportation needs.”
Christian Klein, Washington, D.C., counsel for the Associated Equipment Distributors (AED), told CEG said the Administration’s proposal “is certainly a move in the right direction; it certainly signals that there’s some willingness on the part of the Administration to compromise on this issue, and is getting us closer to where we’d like to be.”
Klein added, however, “We would like to be at $318 billion. If you look at some of these ambitious goals of trying to get a 95 percent return on the money that the states send to Washington, you need a minimum of $318 billion to do that. Certainly we’re pushing for the bigger program.”
Would Improve Oversight
The Department of Transportation section of the budget proposal says that “DOT needs to improve its oversight of the tens of billions of dollars in highway and transit grants made to states and localities each year.” The budget includes funds for additional personnel to oversee large highway construction projects.
SAFETEA would require that states submit project management plans for all federal aid projects costing more than $1 billion. It would request that states prepare annual financial plans for all projects receiving more than $100 million in federal aid funds.
The bill also would establish a new highway pilot program in which states could manage funds, as a block grant, for programs like interstate maintenance, the National Highway System, surface transportation and highway safety.
Upturn in Contract Awards
Already Under Way
Progress toward finally passing the Highway Bill comes as the pace of highway construction, albeit hampered by lack of certainty, nevertheless has been picking up.
“2004 turned out to be quite a good year,” said Buechner. “The value of highway construction work put in place during the year was up more than six percent over last year. Of course, we don’t know how much of that reflects higher costs rather than a real increase in highway construction work, and we know that the costs of construction materials went up a lot more than usual last year.”
Buechner said the upturn in contract awards, which began last July, “seems to be holding up; since July the volume of new contract awards for highway and bridge projects is up about $2.5 billion over the same six months of last year; in the first half of last year the volume was down about $3.5 billion.
“Things seem to have loosened up a bit in the last six months of 2004,” Buechner added. “Steel prices appear to have topped out. Cement prices will keep going up. Who knows what will happen with petroleum? Maybe the big problem is behind us and we’ll go back to seeing modest increases as we saw up until last year.”
(Information on the Administration’s budget proposal is available on www.gpoaccess.gov)