SPECIAL REPORT ON TRANSPORTATION

PRESIDENT SUBMITS FISCAL YEAR 2005 TRANSPORTATION BUDGET

February 5, 2004

Setting up a potential clash over transportation funding levels with Congress, the Bush Administration on February 2 unveiled its fiscal year 2005 budget.  The budget proposal outlines a six-year transportation reauthorization bill at $256 billion – much lower than the Senate's $318 billion plan and the $375 billion plan proposed by House Transportation and Infrastructure Chairman Young.

For fiscal year 2005, the budget proposes a funding level of $58.96 billion for the U.S. Department of Transportation (DOT), an increase of only $962 million over the FY 2004 level.  The budget contains a proposed funding level of $7.266 billion for the federal transit program, the same level as fiscal year 2004.  The federal highway program would receive a $300 million cut, with a funding level of $33.3 billion.

The financially beleaguered Amtrak would received only $900 million, but that amount would be increased to $1.4 billion should the Administration's structural reforms be enacted.  The budget also requests $14 billion to support the work of the Federal Aviation Administration, including $3.5 billion in grants for airport capacity, safety, and environmental improvements. FAA's facilities and equipment budget – which funds safety and security upgrades at airports – would be reduced by 13 percent.

The big winners in Bush's transportation budget are several safety-related programs.  Motor carrier safety would receive a 25 percent increase in funding to $455 million, and highway safety a 131 percent increase in funding to $689 million. 

In his message accompanying DOT's "Budget in Brief" document, Secretary Norman Y. Mineta stated that the budget is a "major investment [that] will fund programs that move the American economy."  However, the American Public Transportation Association expressed disappointment in the President's proposal, noting that it "runs counter to the U.S. Department of Transportation's most recent annual Conditions and Performance Report that concludes that $20.6 billion needs to be invested annually in public transportation."

The next step in the budget process is the drafting of the Congressional Budget Resolution by the House and Senate Budget Committees.  House Budget Committee Chairman Jim Nussle (R-IA) has expressed a desire to cut even more discretionary spending out of the budget – and transportation spending would likely be on the chopping block.

TEA-21 REAUTHORIZATION MOVES FORWARD IN HOUSE AND SENATE

 

Facing a February 29 deadline, when current authorization for highway and transit spending expires, the House and Senate moved on separate tracks to approve legislation to reauthorize the Transportation Equity Act for the 21st Century (TEA-21).  However, on February 3, the Bush Administration issued a formal veto threat in an effort to reduce the funding level of the final reauthorization measure.

House bill increases TEA-21 spending to $375 billion...

 

In the House, Transportation and Infrastructure Committee Chairman Don Young (R-AK) is pushing a bipartisan reauthorization bill, known as TEA-LU, that would spend $375 billion on highway and transit programs over six years.  This legislation has the support of both Democratic and Republican committee members, but is opposed by the Republican Leadership of the House. Also, the House Ways and Means Committee, which has jurisdiction over the financing of transportation programs, is reportedly writing a reauthorization measure in the range of $285 billion to $310 billion.

According to Chairman Young, TEA-LU would create 1.7 million new jobs by 2009.  It would increase federal funding for highway projects to $298 billion and transit to $69.2 billion (TEA-21 provided $174 billion for highways and $41 billion for transit).  Chairman Young had scheduled a committee markup of TEA-LU for February 2.  However, this markup was postponed.

...as the Senate moves to the Floor

 

Also on February 3, the Senate began debating a six-year reauthorization that would fund highway and transit programs at $318 billion.  Cloture was achieved on February 2 after Majority Leader Bill Frist (R-TN) and Minority Leader Tom Daschle (D-SD) reached an agreement with Senate Finance Committee Chairman Charles Grassley (R-IA) to include increased funding levels for transit in the tax title of the bill.  Senate Democrats and Banking Committee Chairman Richard Shelby (R-AL) had threatened to vote against cloture unless guaranteed funding for transit was included in the bill.

As a result of this agreement, the version of the reauthorization bill marked up by the Senate Finance Committee would fund transit at $56.5 billion over the six years. Of this amount, $47 billion would come from the Mass Transit Trust Fund Account, which is "paid for" with offsets. The remaining amount – $9.5 billion – would come from the General Fund and would be guaranteed and firewalled. During floor debate, the leadership of the Senate Banking and Environment and Public Works Committees will offer an amendment to add the guarantees and firewalls for both highways and transit. Also, the Senate Finance Committee version increases the transit commute benefit from $100 to $120 a month.

While this bill enjoys bipartisan support, there is concern felt by both Republican and Democratic Senators that, like last year's Energy bill, this bill will become a "Christmas Tree" and attract a number of extraneous amendments that have nothing to do with transportation.  In fact, many provisions of the stalled Energy bill may be offered as amendments.

President's veto test

 

Meanwhile, the President's veto message looms over both chambers of Congress, setting up a potential showdown over the final size of the TEA-21 Reauthorization bill.  In a letter to Congress, Treasury Secretary Snow and Transportation Secretary Mineta stated they would recommend a veto if the final bill violated any of three "important principles." First, the letter said, transportation infrastructure spending should not rely on an increase in the gas tax or other federal taxes; second, the spending should not be funded through bonding "or other mechanisms that conceal the true cost to federal taxpayers;" and third, highway spending should be financed through the Highway Trust Fund, not out of general revenues.

At this juncture, it appears unlikely that a reauthorization bill will be enacted before February 29.  As a result, Congressional leaders are now discussing the possibility of enacting a one-month extension of TEA-21 to ensure a continuation of existing highway and transit programs.

 
During their retreat in Philadelphia on January 29-30, Senate and House Republicans

debated funding levels and revenue options for TEA-21 programs.  In particular, Republican members of the Appropriations Committees characterized the cost of the reauthorization bill as the great threat to efforts to reduce the budget deficit.

The fate of TEA-21's reauthorization remains uncertain at this critical juncture.  Proponents of increased transportation infrastructure spending and opponents of gas tax increases and increased discretionary spending seem far apart at this point in the debate.  With the election fast approaching, there appears to be little time to work out a deal.  Nevertheless, highway and transit programs are popular with constituents at home, and legislators always enjoy touting home-state projects around election time.  Momentum toward enactment is increasing, but faces many hurdles in the coming weeks.