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Southeast Anxiously Awaits Verdict on TEA-21 Funding

Fri August 08, 2003 - Southeast Edition
Giles Lambertson



State transportation officials, general contractors and political leaders in Washington, D.C., are about to run out of time to authorize transportation funding for another six years.

What that means is extra hours will be added to the clock until the job gets done.

Few contractors and transportation leaders in the Southeast who have followed negotiations closely believe a bill will pass by Sept. 30, which is the expiration date for the Transportation Equity Act for the 21st Century, commonly called TEA-21.

Months of huddling in the Capitol have moved Congress closer to resolving differences over new funding levels and priorities. Yet key issues are unresolved and a vote to reauthorize funding probably will not happen soon.

“I dearly hope we get a bill with more funding by Oct. 1,” said Therol Brown, executive director of the Georgia Highway Contractors Association. “There are some serious, serious players who are going to try to make it.”

Washington luminaries trying to line up the stars in a glittering new six-year funding package include Senate Majority Leader Bill Frist of Tennessee, House Majority Leader Tom DeLay of Texas, and Missouri Sen. Kit Bond and Alaska Rep. Don Young, who chair their respective Transportation and Infrastructure committees.

Yet numerous rivalries complicate the matter. These include mass transit versus highway funding, pressures to increase revenue versus commitments not to raise taxes, and various interstate turf battles.

A good example of the latter is the issue of states receiving a reasonable return on tax money sent to Washington.

The TEA-21 bill, which was passed in 1998, guaranteed that each state would get back at least 90.5 percent of its share of motor fuel tax funds deposited in the Highway Account of the federal Highway Trust Fund.

That is, for every dollar of motor fuel tax revenue sent to Washington, each state was to receive back at least 90 to 91 cents in federal aid for highway projects.

“For 20 years or so, Georgia had one of the worst rates of return,” Brown said. The state typically got back 75 to 80 cents of its dollar.

TEA-21 improved the situation. Nailing down an exact return rate is difficult because a few of formulas are used to calculate it. But Brown said he believes Georgia is close to having 90.5 percent of its money returned.

So are most Southeastern states, at least by some calculations. Florida officials insist Washington is sending back just 86 cents of each dollar.

Regardless, this much is clear: The region is comprised of “donor states,” each of them sending away more than it gets back. Hence, state leaders are pushing for a smaller “donation.”

An organization that goes by the acronym SHARE (States’ Highway Alliance for Real Equity) is campaigning for a 95-percent return rate.

Note that SHARE is not pushing for a 100-percent payback. That’s because it recognizes that some states with low populations or extremely high infrastructure demands cannot generate enough tax revenue to meet their needs.

Such states — which are “donees” — must in effect be subsidized by donor states to ensure an uninterrupted national highway network. Among donee states are New York, Pennsylvania and West Virginia in the east and Montana and Wyoming farther west.

But the SHARE philosophy is that most states, given a higher return rate, should be able to meet their own infrastructure needs “merely by using the funds that those citizens and industries paid in the first place.”

Unfortunately, not everyone agrees with that view. A rival organization going by the acronym FAIR (Fair Alliance for Intermodal Reinvestment) said that 17 states and the District of Columbia will lose $1 billion in federal-transportation funding if the guaranteed minimum return rate is raised to 95 percent. Consequently, FAIR is fighting SHARE.

An obvious answer to ending the fight is to fatten up the Highway Trust Fund. Then every state could draw from it as needed.

“The only way to get to 95 percent is that you have got to increase revenue,” said Kent Starwalt, the executive vice president of the 400-member Tennessee Road Builders Association. “So the issue becomes, are you going to have a tax increase or not?”

Maybe not. A North Carolina Department of Transportation (NCDOT) official who has been gearing up for the TEA-21 reauthorization debate for two years said few are talking about raising the motor fuel tax.

“No one wants to hear about tax increases,” said Moy Biswas, who is manager of research and policy studies for the NCDOT.

What everyone wants, said Biswas, is “to increase revenue without raising taxes, which is kind of hard to imagine.”

There indeed is little overt discussion about increasing motor fuel taxes, but it is not out of the question. Another idea pushed by some is indexing gas taxes so they can automatically inflate over the life of the bill. And a 20 to 30-year bond also has been proposed as a revenue source.

Which of the proposals is more likely to prevail?

“All of the above,” said Brian Deery, a contracting industry representative who monitors the TEA-21 debate from his office in the Washington area.

Deery is senior director of the Highway and Traffic Division of the Associated General Contractors of America. He believes the final revenue picture could include parts of the foregoing proposals as well as a shifting of ethanol tax revenue into the Highway Trust Fund and other accounting tricks.

Somehow, said Deery, “They have got to increase money to the donor states and not take any from the donees.”

The view from Georgia is that that kind of struggle could turn into an old-fashioned knock down and drag out fight.

“It’s a tough, tough fight,” said Brown, the executive director of the Georgia contractors group, “with everybody wanting more money. You just have to stand toe to toe and swing.”

The revenue discussion revolves around three sets of figures.

The Bush administration has proposed spending $247 billion for transportation over the next six years. Even administration officials have indicated the final authorization level probably will exceed that.

The House bill is calling for $375 billion over six years, with approximately $300 billion of that designated for highway projects. In the Senate, a middle range figure of $311 billion is the point of discussion.

Those figures compare to $218-billion authorized in 1998 in the expiring TEA-21.

Besides equity, state transportation officials also would like to see more flexibility in use of the federal funds coming home. Efforts are being made in this round of negotiations to loosen some strings.

“Money coming back can be so heavily earmarked,” said Biswas, the NCDOT research manager. He noted that a provision in one bill creates a pilot project in which five as-yet-unidentified states are given total flexibility in disbursing the funds.

However, more funding and more flexibility are of little value to states unless a bill with those features actually is signed into law. That, quite likely, won’t happen anytime soon.

“All I can say is that it is not likely to happen by Sept. 30,” said Biswas.

“It has never happened in the past, plus this year there are a lot of other bills caught up in Congress.”

DOT’s point man in North Carolina for the reauthorization process said he has come to understand that House and Senate will move at their own pace.

“One thing we have learned is that the schedule of Congress is not set by others,” Biswas said. “They have their own schedule up there.”

What is not at all clear at this point is whether it will be a long extension of TEA-21 or a short one. “What I’m hearing is six months to a year,” Biswas said.

Berry Jenkins, who is the director of the Heavy Highway Division of Carolinas Associated General Contractors, has similar expectations.

“It’s going to be a slow process,” he said with a tone of resignation in his voice, “not by Oct. 1. But we’d like to think they can do it with a short extension.”

He added, however, that “no one will be shocked if it’s a year extension.”

His AGC counterpart in Washington is even less optimistic. “My best assessment at this point,” said Deery, “is that it won’t get done before the August recess of Congress. The Senate wanted to, but it is very difficult to get a bill passed and signed by the president by the Sept. 30 deadline.

“So the question is how long the extension will be. It could be for a month or so, or it could be for a year.” said Deery.

“Or,” he said, “it could be for two years.”

Deery believes reauthorization could be that far away because the political prospects of funding an expanded transportation bill might be much better then.