Innovation Briefs, now in their 20th year of publication, are published by Ken Orski. Cascadia Prospectus reprints them with permission. The content of Innovation Briefs does not necessarily represent the view of Cascadia Center of Discovery Institute.
March 11, 2011
This year’s annual legislative conference of the International Bridge, Tunnel and Turnpike Association (IBTTA) took place against a background of unprecedented uncertainties concerning the future of the federal-aid transportation program. With Transportation Secretary Ray LaHood unable to explain to a skeptical Senate Budget Committee how the Administration would fund its ambitious $556 billion six-year transportation program, and with Congress bent on reducing the federal budget deficit and cutting discretionary spending, the assembled audience was reduced to speculating how to “do more with less.” Easing restrictions on tolling, encouraging public-private partnerships, expanding federal credit instruments, improving project delivery and cost-benefit analysis were some of the suggested means of leveraging and supplementing reduced federal dollars. Admittedly, these could only partly compensate for impending cuts in federal funding.
As in the past, the IBTTA meeting drew an impressive roster of speakers including transportation journalists, congressional staff members, toll agency executives and policy analysts. Luncheon speakers included Secretary Ray LaHood and former Pennsylvania Governor Ed Rendell, who delivered a spirited plea for more investment in infrastructure. “The next highway bill must clear the way for more expansive use of public-private partnerships and lift the prohibition on tolling interstate highways,” Rendell said.
One of the highlights of the conference was a concluding panel discussion involving some leading transportation policy analysts. The panel was asked to speculate about the future of the transportation policy agenda. Predictably, members of the panel split between advocates of a strong federal role and more generous funding for transportation, and those who felt that the federal presence in transportation should be curtailed and focused on infrastructure of national importance. No surprises there.
An earlier session, titled “The Look and Feel of the New Congress,” focused on the congressional outlook for transportation legislation. The panel, moderated by former Member of Congress from Michigan, Bob Carr, included Jennifer Hall, Counsel, House Committee on Transportation and Infrastructure; Alex Herrgott, Minority Staff Member, Senate Committee on Environment and Public Works; Peter Loughlin, President of Loughlin Enterprises and formerly with the House Transportation and Infrastructure Committee; and your editor, Ken Orski. My prepared remarks can be found below.
In my 22 years of covering the transportation scene, I cannot recall a time when we’ve been faced with a more unsettled and volatile policy environment. In the past, the trajectory of the federal surface transportation program was fairly predictable: with each reauthorization, the program was expanded in scope and increased in funding. This time it’s different. In the months ahead, Congress is likely to cut discretionary spending and this, I believe, will profoundly alter the scope of the federal role in transportation and the character of the federal transportation program.
A New Surface Transportation Bill
Sometime in the late summer, we shall hopefully see a new Surface Transportation bill reported out of the House Transportation Committee. With Chairman Mica making the authorization his top priority, there is a good chance that a six-year transportation bill will be passed by Congress and signed by the President by the end of the year.
How big a bill can we expect? Certainly not as big as the $500 billion bill proposed by former Rep. Oberstar or the $556 billion transportation bill proposed by the Administration– a 62 percent increase over the last authorization, but without a hint as to where the money would come from.
More likely, future funding will be limited to the revenues collected through the gas tax. Rep. Mica calls it “stabilizing” the Trust Fund, i.e. reconciling expenditures with revenues. Making sure that spending does not exceed tax receipts is essential if we are to avoid another bailout of the Trust Fund with general revenue.
According to the Congressional Budget Office, gas tax revenues are expected to average about $38 billion per year for the next several years. Thus, assuming that fuel taxes remain at their current rates — a pretty safe assumption–a six-year program could be funded at $230 billion– or about six percent lower than the SAFETEA-LU authorization (other congressional estimates range from $215 to 250 billion).
Can We Live Within a $230 billion Authorization?
Keeping spending within those limits will require a narrowing of the scope of the federal transportation program. Every one agrees that the first claim on the Trust Fund resources should be to keep the nation’s existing transportation assets – both highways and transit- in a state of good repair. Discretionary awards such as the TIGER grants, should have a lower priority. So should programs that are deemed of little national significance–such as local community enhancements, set-asides catering to narrow constituencies and “livability” projects that more properly belong in HUD’s community development program than in the U.S. DOT budget.
Most of these Trust Fund “hitchikers,” as Sen. James Inhofe calls them, will have to be handed off to state and local governments– simply because the resources of the Trust Fund will be needed in their totality to take care of the legitimate federal objectives of maintaining, preserving and modernizing the nation’s transportation infrastructure.
Rahm Emanuel liked to say “Don’t ever let a crisis go to waste.” Well, the funding crisis may finally do what conservatives have always hoped, but failed to accomplish through legislative reform: a de facto devolution of “non-essential” portions of the federal-aid program to states and localities.
Will states and local governments be willing and able to assume the added responsibilities? Some will, others may not. An example of a state that is aggressively moving to address its transportation needs without waiting for uncertain federal assistance, is the Commonwealth of Virginia. Last week, it passed a new budget that includes a $3 billion transportation program. The bill calls for the creation of a new State Infrastructure Bank (SIB) and a 900-project transportation improvement program. The SIB will provide local agencies and private entities low interest loans to finance multi-modal investments. The bill does not include new revenues. Instead it relies on borrowing money and speeding up previously-approved bonds.
Many other states and localities have been wiling to do the same. In fact, voters approved 77 percent of all local transportation ballot measures in 2010 according to the Center for Transportation Excellence.
The End of the Line for HSR
One program whose future looks particularly precarious is the Administration’s $53 billion High-Speed Rail initiative. Its fate may have been effectively sealed when Florida’s Gov. Rick Scott turned down a $2.4 billion federal grant to construct a high-speed rail line between Tampa and Orlando, and the state supreme court unanimously affirmed his right to do so.
With Gov. Scott joining two other governors in rejecting HSR grants as a potential burden on local taxpayers; with House Majority Whip Kevin McCarthy telling reporters that spending federal money on high-speed rail is not a “smart investment”; and with President Obama’s vision lacking any suggested source of funding, the prospect of continued congressional support for the program appears dim. “It’s one less program we’ll need to worry about when allocating dollars between the modes,” one senior congressional aide quipped.
A Fresh Beginning
While the scenario I have painted may sound depressing and defeatist to some, to others it sounds like the dawn of a new era. Many fiscal conservatives in and out of Congress, see the current fiscal deficit crisis not as a debacle but as a fresh beginning. They welcome it as an opportunity to return the federal-aid program to its original roots, refocus its mission on legitimate federal objectives, restore its lost sense of purpose, and give states and localities more voice in managing their transportation future.
In time, the recession will end, the economy will start growing again, and the federal budget deficit hopefully will come under control. That will be the time, perhaps ten years hence, when this nation will once again be in a position to resume its tradition of what Felix Rohatyn has called “bold endeavors” — major investments in new infrastructure. For now, prudence, good sense and the common welfare dictate that we, as a nation, learn to live within our means.