Adjusting to Fiscal and Political Realities

Posted by Ken Orski on Monday, June 20th, 2011

Innovation NewsBriefs

Vol. 22, No. 17

While we do not know the exact level of funding the House Transportation and Infrastructure Committee will propose in its draft legislation expected to be released in the second week of July, we do know it is going to be far less than the current (FY 2010) funding of $41 billion for highways and $11 billion for transit. What will be the consequences?

That the Federal Government “must learn to live within its means” has become the fiscal conservatives’ elliptical way of stating their opposition to deficit financing. This principle found its way into the House T&I Committee’s “Views and Estimates for Fiscal Year 2012” report and has been reaffirmed since in countless statements and briefings by congressional sources.

The practical implications of this policy for the federal-aid transportation program are unambiguous: federal budget authority in FY 2012 and beyond will be limited to tax receipts flowing into the Highway Trust Fund. Those revenues (plus interest) will amount to an estimated $36.9 billion in 2011 according to the Congressional Budget Office (CBO)— $31.8 billion will be credited to the Highway Account and $5.1 billion to the Transit Account. Over the next ten years, CBO estimates these revenues will grow at an average rate of a little more than one percent per year, largely reflecting expected growth in motor fuel consumption. (“The Highway Trust Fund and Paying for Highways,” testimony of Joseph Kile, Asst. Director of CBO, before the Senate Finance Committee, May 17, 2011).

Thus, over a six-year period, 2012-2017, tax receipts credited to the Highway Trust Fund (plus interest) could be expected to amount to approximately $230 billion— about the same sum as the 5-year SAFETEA-LU authorization of $238.5 billion.

Limiting future budget authority to tax revenues flowing into the Highway Trust Fund will cause a significant drop from the current funding level. However, current spending has been inflated by a massive injection of stimulus funds from the American Recovery and Reinvestment Act of 2009— a total of $48 billion ($27.5 billion for highways, $6.8 billion for transit and $8 billion for high-speed rail). The stimulus almost doubled the annual amount of funding available  for transportation, making baseline comparisons misleading. A more accurate measure would be to compare the expected FY 2012 funding with pre-stimulus funding levels. In this comparison, the highway program would suffer a drop of 17% — from an average of $38.6 billion/year during SAFETEA-LU (FY 2005-2009) to $32 billion/year in FY 2012 and slightly more in subsequent years. (SAFETEA-LU data from www.fhwa.dot.gov/safetealu/safetea-lu_authorizations.pdf,  4/6/2006) (Adding the estimated uncommitted HTF funds remaining at the end of Fiscal Year 2011 would enable the annual highway allocation to be raised to $36 billion — a drop of only seven percent from the SAFETEA-LU level).

Such reduction, while not insignificant, would not be catastrophic. The cut in budget authority  could be absorbed by streamlining and narrowing the scope of the federal-aid program. Its primary mission would need to be refocused on traditional “core” highway and transit programs and on keeping existing transportation assets in a state of good repair. Discretionary awards such as the TIGER and high-speed rail grants would have to be eliminated. Proposals for major infrastructure funding (such as envisioned through an Infrastructure Bank) would have to be dropped. So would programs that are deemed of little national significance or that do not serve the national need — such as various “transportation enhancements,” set-asides, and “livability” projects that cater to narrow constituencies. Most of these Trust Fund “hitchikers,” as Sen. James Inhofe calls them, will have to be handed off to state and local governments.

Will states and local governments be willing and able to pick up the slack? Some will, others may not. Many states and localities have been willing to approve significant transportation improvement programs– provided the objectives are clearly spelled out. In fact, voters approved 77 percent of local transportation ballot measures in 2010, according to the Center for Transportation Excellence.

While the above prospect may sound alarming when set against the current inflated spending levels distorted by the stimulus spike, many fiscal conservatives view it as an opportunity to return the federal-aid program to its original roots. Greater spending discipline would refocus the federal mission on legitimate federal objectives, restore the program’s lost meaning and sense of purpose, and give states and localities more voice and responsibility in managing their transportation future.

Let us also not forget that the federal contribution constitutes only about 25% of the nation’s total surface transportation budget (40% of the capital budget). The rest is provided by state and local governments. The nation would still be spending more than $150 billion/year to preserve and improve our highways, bridges and transit systems— $50 billion short of the level recommended by the National Transportation Policy and Revenue Commission, but still a respectable level of funding.

What about major new infrastructure investments? Undoubtedly, they will be necessary in the long run because of the need to replace aging facilities and to accommodate future growth in population. But major capital expenditures can be, and will need to be deferred for a few years —until after the recession has ended, the economy has started growing again and the federal budget deficit has been reined in. At that more distant moment in time, perhaps toward the end of this decade, the nation might be able to resume investing in new infrastructure and embark on a new series of “bold endeavors” — major capital additions to the nation’s highways, bridges and rail systems. For now, prudence, good judgment and the compelling need to rein in the budget deficit, dictate that government should live within its means. And that means spending no more than what we pay into the Trust Fund.

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.

Tags: ,

Comments are closed.

Follow InfraUSA on Twitter Facebook YouTube Flickr

CATEGORIES


Show us your infra! Show us your infra!

Video, stills and tales. Share images of the Infra in your community that demands attention. Post your ideas about national Infra issues. Go ahead. Show Us Your Infra!  Upload and instantly share your message.

Polls Polls

Is the administration moving fast enough on Infra issues? Are Americans prepared to pay more taxes for repairs? Should job creation be the guiding determination? Vote now!

Views

What do the experts think? This is where the nation's public policy organizations, trade associations and think tanks weigh in with analysis on Infra issues. Tell them what you think.  Ask questions.  Share a different view.

Blog

The Infra Blog offers cutting edge perspective on a broad spectrum of Infra topics. Frequent updates and provocative posts highlight hot button topics -- essential ingredients of a national Infra dialogue.


Dear Friends,

 

It is encouraging to finally see clear signs of federal action to support a comprehensive US infrastructure investment plan.

 

Now more than ever, our advocacy is needed to keep stakeholders informed and connected, and to hold politicians to their promises to finally fix our nation’s ailing infrastructure.

 

We have already engaged nearly 280,000 users, and hoping to add many more as interest continues to grow.

 

We require your support in order to rise to this occasion, to make the most of this opportunity. Please consider making a tax-deductible donation to InfrastructureUSA.org.

 

Steve Anderson

Managing Director

 

SteveAnderson@InfrastructureUSA.org

917-940-7125

InfrastructureUSA: Citizen Dialogue About Civil Infrastructure