House Budget Threatens Construction Industry

Analysis of the non-binding House budget resolution shows how unfriendly House Budget Committee chairman Paul Ryan and his Republican colleagues are to the construction businesses in this country. The budget cuts transportation funding 36% from its already inadequate levels, to a mere $31.5 billion, and cuts natural resources and environmental construction funding by 10% to $3.5 billion.  According to National Association of Clean Water Agencies Legislative Affairs Director Pat Sinicropi, the Clean Water and Safe Drinking Water State Revolving Fund would have to significantly reduce the number and value of water related construction projects in the coming years.

With unemployment in the construction sector of our economy still running at more than double the rate of overall unemployment, and with skilled tradespeople being driven into other lines of work in order to feed their families, the impact of these cuts on construction businesses will be felt painfully in both the short and long term. While Senate appropriation measures could prove somewhat more generous that this depressing House blueprint for federal construction funding, the Ryan budget measure is one more example of the preference our elected leaders have for election campaign rhetoric over real solutions to the country’s very real economic difficulties.

If our Senators and Congressmen spent half as much time doing real work towards development of some real job creating legislation as they spend on the floors of their respective chambers slashing each other’s meaningless proposed bills embodying campaign talking points, we might see some job creation and rising economic activity years sooner than is likely in the present gridlocked condition of government in Washington, D.C.

Federal Budget Legislation – Lines In the Sand

The gulf between the House passed budget plan and President Obama’s speech to the Associated Press in response represents the same sort of gridlock which has prevented any sort of legislative solution to America’s fiscal problems during Obama’s first term: Republicans seek to slash the size of the federal government by cutting expenditures and cutting revenue, while the Obama administration seeks to eventually balance the federal budget by cutting expenditures and increasing revenue. It’s election year politics at its worst.

President Obama castigates the House budget plan as “thinly veiled social Darwinism,” pointing out that the House bill reduces the deficit by $5.3 trillion over ten years, while “spending” $4.6 trillion on lower tax rates for millionaires in the same decade. Meanwhile, the Senate has not passed any budget at all for the last three years. The irresponsibility of our elected leaders from both political parties, in their refusal to work towards compromise, and use of the budget process to create political talking points rather than solutions to national problems, is simply mortifying.

GOP Budget Plan Draws Sharp Battle Lines

House Budget Committee Chairman Paul Ryan released the GOP budget plan yesterday, reflecting a continuation of gridlock and partisan attacks by each party on the opposition’s core constituencies.  The Obama administration budget attacks the Republican Party’s core constituency by proposing significant tax increases on the very rich, while the House plan attacks the Democratic Party’s core constituencies by proposing draconian cuts in Medicare and Medicaid and repeal of Obama’s signature health care law.

While neither plan stands any chance of getting passed into law this session, the stark contrast signals another year of government by continuing resolution without any significant tax or spending reforms. Once again, election year politics has taken precedence over any hope of legislative solutions to any of America’s many significant economic problems.

Federal Construction Budget Tradeoffs

No matter where you may believe the federal Highway Trust Fund spending level will ultimately rest on the spectrum between the House measure’s $34.6 billion annually and the Obama administration’s $79.2 billion annually, the sad fact is that these appropriations are offset by dramatic cuts to other federal construction spending programs, to the ultimate long term continuing injury to this important sector of the American economy. Obama’s own budget proposal cuts $450 million a year from transit construction funding in Illinois alone.

HR 7 takes us “back to the dark ages,” according to Transportation Secretary Ray LaHood, eliminating all funding for building bike paths, bike lanes and pedestrian safety projects. With the current Highway appropriations expiring March 31, 2012, the industry is undoubtedly looking at another series of short term extensions, making government and industry planning impossible until a long term funding measure is ultimately passed through both houses.

Meanwhile, even the comparatively generous Obama budget slashes Defense Department construction spending by 20%, Corps of Engineers civil construction projects by 13%, clean water state revolving funds by 20%, drinking water state revolving funds by 8%, Veterans Administration construction by 10%, and airport improvement grants by 28%. While the heavy civil sector of the US construction economy will feel these cuts most severely, resultant price increases in construction materials and equipment, due to the loss in sales volume, will impact all construction businesses across the country. Our national elected leadership continues to fail our industry.

Goldilocks And The Obama Budget

Today the Obama administration sent the House a $3.73 trillion budget proposal which would give the United States a first ever four consecutive year run of trillion plus deficits. Like Goldilocks and the beds in the three bears’ house, Congressional Republicans characterize the administration’s proposed spending cuts as too soft, Congressional Democrats say they are too hard, and the Obama White House says they are just right. By the time appropriations legislation passes through the Capitol, however, it won’t likely look like a bed at all. The White House proposal falls far short of Obama’s blue ribbon deficit commission’s recommendations for a $4 trillion deficit reduction.

The Obama budget proposal goes nowhere near the entitlement “third rail” of electoral politics. And, it contains a mixed bag of the bitter and the sweet for the construction sector of our economy. On the positive side, Obama proposes doubling the nation’s share of clean energy electric power by 2035; building high speed internet connections to reach 98% of American homes and businesses; $328 billion in additional funding for transportation infrastructure construction, from sources other than motor fuel taxes; and dropping cap and trade taxes on greenhouse gas emissions. In the negative ledger column, the budget would eliminate home mortgage interest deductions for households with income more than $250,000; $1 billion reduction in grants for airport construction; and another billion dollars cut from water treatment and other infrastructure construction programs.

House Budget Committee Chairman Paul Ryan (R. Wis.) is expected to unveil an alternative budget in April that will take a meat axe to entitlement spending. House Budget Committee Ranking Member Chris Van Hollen (D. Md.) defended the administration’s proposal: “Compared to the slash and burn Republican approach, [the administration’s] budget positions the president as offering a responsible approach to deficit reduction.

State Budgets Spiral Downward

Fifty states with a total of $89 billion in state budget deficits mean cuts this fiscal year of as many as 900,000 government employee jobs and jobs at companies doing business with state and local governments. Even with Obama's wished for $50 billion federal aid to state and local governments, which now appears doomed to nearly certain failure in Congress, state and local governments, and the businesses depending on them for survival, would lose nearly 395,000 government and private sector jobs in the last half of 2010 and the first half of 2011. State governments already cut 200,000 jobs in 2009 and the first half of 2010.

Employment losses have already meant drastic cuts in state and local tax revenues. In Illinois some sate government bills 8 months old still go unpaid, according to Illinois Comptroller's office spokesman Alan Henry. More layoffs will mean more revenue losses, and the downward spiral in state and local government employment and services will continue unabated for years to come.

Obama Budget Cuts Will Affect Few Construction Projects

President Obama has proposed $17 billion in cuts of "wasteful" programs in the details of his budget released earlier this week. While Republicans argue that the proposed cuts or elimination of 121 programs represent less that a fraction of 1% of the total budget, it seems the construction industry will be safe from major budget slashing. Two major water infrastructure construction programs will actually receive significant increases. The drinking water loan fund appropriation is proposed to increase from $829 million to $1.5 billion, and the clean water loan fund to increase from $698 million to 2.4 billion.

Meanwhile, legislators from West Virginia and Alaska are rising to the defense of two big federal highway construction projects Obama proposes to cut - $10 million for the Corridor H highway in West Virginia and $9 million for job training and construction of the Denali Access System in Alaska. Right now it looks like construction appropriations are reasonably safe from the budget knife in 2010.

FY2010 $3.5 Trillion Budget Passed on Obama's 100th Day

On a party line votes in the House of 233 to 193, and in the Senate of 53-43 the $3.5 trillion budget resolution passed both houses of Congress yesterday, on President Obama's 100th day in office. I'm not sure what the particular significance of the 100th day might be, but the good news for the construction industry is that every dollar of the $72.1 billion the Senate cut from transportation infrastructure spending was restored in the measure as passed.

Conference Committee Restores Transportation Funding

The report of the Conference Committee on the Budget Resolution was released by Senate Budget Committee Chairman Kent Conrad late yesterday, and it does contain good news for the construction industry. The proposed joint resolution, which will come to the floor of both houses for voting later this week, restores all the transportation construction funding which the Senate resolution had cut from the House version. Of course, year by year it will be up to Congress to actually appropriate the budgeted funds, but at least the present plan is favorable to a quicker recovery of the construction economy, particularly in the heavy civil construction sector.

House Budget Conferee Appointments Bode Ill For Transportation Infrastructure

The fiscal conservatism of the five House members named to the Budget conference committee today is another downer for construction industry businesses. Democratic conferees including Budget Chairman John Spratt, Rosa DeLauro and blue dog Allen Boyd, and Republican conferees Paul Ryan and Jeb Hensarling, former chair of the conservative Republican Study Committee, all seem unlikely to fully restore the $72.1 billion slashed by the Senate from the transportation infrastructure construction budget passed by the House. Appointment of Senate conferees is expected later today or early tomorrow, but since it was Senators who slashed the House's five year budget in the first place, the construction industry shouldn't hold out much hope in this regard.

Budget Conference Committee Members Not Yet Named

Although Congress reconvened yesterday, facing the task of reconciling the House and Senate budget resolutions for the next five years, it seems the members of a conference committee to work on that task will not be named by House and Senate leaders until next week. The big conflict will not be about the dollars, but rather about whether or not to include reconciliation instructions in the conference legislation, which would mean that Senate approval would only require 51 votes rather than the 60 otherwise needed under Senate rules.

Obama Demands $100 Million In Budget Cuts

Using the platform of his first formal Cabinet meeting Monday morning, President Obama insisted that the federal government's department heads come up with $100 million in cuts to the federal budget within the next 90 days. Republican leaders scoffed at the gesture, with House Budget Committee ranking member Paul Ryan pointing out that $100 million represents only 13 minutes of federal spending. President Obama's response to the criticisms after the cabinet meeting was: "What we're going to do is, line by line, page by page, $100 million there, $100 million here, pretty soon even in Washington, it adds up to real money."

Is Now The Time For Infrastructure Budget Cuts?

In a speech today at the Department of Transportation in Washington, D.C., President Obama stood next to Vice President Biden and Transportation Secretary Ray LaHood and spoke about the early successes of infrastructure appropriations in stimulating the economy towards recovery. Highlighting award of the 2,000th infrastructure project awarded with the $48.1 billion in funding provided in the American Recovery and Reinvestment Act, the president noted that "[T]hese projects are getting approved more quickly than we thought ... and because these projects are costing less than we thought, we can utter a sentence rarely heard in recent years: This government effort is coming in ahead of schedule and under budget."

Transportation Department officials say that competition for stimulus projects is driving down costs by 15% to 20% of total cost estimates on major infrastructure projects. So, if this sort of spending is buying taxpayers more bang for the buck, at the same time it is creating and saving jobs and stimulating the economy, why does the U. S. Senate want to cut the House proposed five year budget for infrastructure improvements by one and a half times the amount of money which was appropriated in the stimulus bill?

In the budget resolutions now pending in conference committee, the Senate version lags way behind the House version in every year 2010 through 2014 with respect to the spending Senators expect to authorize for road, bridge, railway, transit and waterway construction projects. The Senate version of the resolution cuts down the infrastructure spending authority provided in the House bill by $12.9 billion for 2010, by $13.7 billion for 2011, by $14.1 billion for 2012, by $15.1 billion for 2013 and by $16.1 billion for 2014. These cuts represent a total slashing of over $72.1 billion from surface transport construction over the next five years.

Hopefully President Obama's speech today was just the beginning of administration efforts to preserve the budget levels of infrastructure spending included in the House resolution once the conference committee sends a final version to the floor of both houses for approval. Call your Senators and ask them what they intend to buy with the $72.1 billion they have slashed from construction spending, and whether whatever it is will do as much to create jobs and stimulate the economy as infrastructure construction will do. When they can't give you any satisfactory answer, mention that restoring spending levels to match the House version of the resolution would be a good way to make sure our country continues the economic gains the stimulus package was designed to initiate.

Conflicting Budget Resolutions Go To Conference

Late Thursday afternoon the House passed its version of the five year budget resolution, and just before midnight Thursday the Senate passed its conflicting version. As far as the construction industry is concerned, the major conflict is the difference in approach to transportation infrastructure funding. The Senate version slashes over $72 billion from the amount budgeted by the House for surface transportation infrastructure construction over the next five years, completely negating all the appropriations passed in the economic stimulus package for transport infrastructure construction. The Senate numbers will result in the stimulus appropriations representing mere acceleration of planned spending into the first year of a five year budget, rather than any additional investment in national highway, bridge, waterway, airport, railway and transit construction.

Both bills passed along strict party line votes, without a single Republican vote in favor of the bills in either house of Congress. They will now go to conference committee for reconciliation of the differences, and House Budget Chairman John Spratt said staffers from the House and Senate will begin talks during the upcoming two week recess to speed things along. Let's hope the conferees understand that failure to restore the $72.1 billion investment in transport infrastructure approved in the House budget is essential to avoid completely gutting the economic stimulus of the construction industry.

Senate Budget Resolution Stiffs Transport Infrastructure

Congressional Budget Committees have finally filled in the numbers in the 2010 budget resolutions, and sent the bills to the floors of the respective houses for debate. Although budget resolutions lack the detailed breakdown of spending that appears in appropriation bills with their attached earmarks, we can see in the differences between the House and Senate budget resolution proposals a dangerous trend for heavy civil construction over the next five years.

Both committee resolution proposals have essentially the same numbers for 2009 spending authority and actual outlays, since they include the appropriations already made in the stimulus legislation. However, the Senate version lags way behind the House version in every year 2010 through 2014 with respect to the spending Senators expect to authorize for road, bridge, railway, transit and waterway construction projects. The Senate version of the resolution cuts down the spending authority provided in the House bill by $12.9 billion for 2010, by $13.7 billion for 2011, by $14.1 billion for 2012, by $15.1 billion for 2013 and by $16.1 billion for 2014. These cuts represent a total slashing of over $72.1 billion from surface transport construction over the next five years.

Of course, as the legislative process works its way forward, the final result will likely fall somewhere between the present House and Senate versions, but it is frightening that more than $72 billion in construction appropriations is now at risk in the legislative arena.

Part of the reason for this is the way revenue has traditionally been raised to fund these transportation construction projects. In the last half century, road, transit, rail and waterway construction was primarily funded by cents per gallon taxes on the fuels burned by cars, busses, trucks, trains, ships and tugboats. For a long time, gallons of fuel burned was functionally equivalent to miles of road, rail, or water traveled, and the tax was a fair way of supporting infrastructure construction for transportation. Additional taxes, such as prorated truck license fees and highway tolls on express superhighways, also provided money for construction, maintenance and repair of transport infrastructure.

As fuel efficiency advanced, pushed by economic factors as well as government mandates, however, fuel taxes raised less and less money per mile traveled for infrastructure, and our transportation facilities began to suffer the effects of deferred maintenance. Now we face an era of shrinking revenues at the same time we have to do something about the accumulated maintenance and construction deficit.

Some congressional leaders and certain state governors have proposed taxing drivers on the basis of miles traveled, rather than just raising fuel taxes, as a way out of this mess. However, a whole new layer of bureaucracy would be required to assess and collect such a mileage tax, and public opposition to the idea is strong. President Obama at one point suggested the idea of breaking the "trust" status of the highway trust fund and instead funding transport infrastructure construction and maintenance out of general revenue, but so far that concept has not gained any traction. The fact remains that unless a new revenue source is found for supporting our transport infrastructure spending, increasing fuel efficiency and increasing the use of hybrid and electric cars will starve our road, waterway and rail systems to death. Any suggestions?

Half A Trillion Dollars Needed For Surface Transportation Construction

According to the testimony of two experts who testified yesterday before the House Budget Committee, the next five years will require an investment of half a trillion dollars to meet the country's expanding needs for surface transportation infrastructure construction. This is good news for the construction industry if Congress can find a way to fund the appropriations.

Robert Atkinson, chairman of the National Surface Transportation Infrastructure Financing Commission, and Debra Miller, of the American Association of State Highway and Transportation Officials, both told the committee that they estimate investments of at least $545 billion from 2010 through 2015 will be required to meet the long neglected needs of highway and mass transit construction and repair. This is about double the amount invested in the last five year period.

This year the federal highway trust fund, which consists of fuel and road use tax revenues designated for transportation infrastructure construction, required an $8 billion augmentation from general revenues simply to pay for work which was already under contract by state and federal highway and transit agencies.

Miller and Atkinson proposed increasing the gasoline tax by ten cents per gallon, and the diesel fuel tax by 15 cents a gallon, plus as doubling of truck road use taxes, to fund the massive new investment in roads, bridges and mass transit. They also discussed using part of the revenue from the proposed carbon emission cap and trade tax, and a new tax on vehicle miles traveled, to help raise the needed funds. Of course, howls and groans opposing new fuel taxes could be heard from Congressmen on the committee, who must run for reelection every two years, when the experts started speaking about fuel tax increases.

Budget Committees Begin '10 Resolutions

Next week House Budget Vice Chair Allyson Schwartz and Senate Budget Chair Kent Conrad expect to begin work separately on fiscal 2010 budget resolutions. Both committees await release of CBO's final estimates based on President Obama's proposals released earlier this month. CBO Predicts a budget deficit for '09 totaling about $1.7 trillion, including the recently passed economic stimulus appropriations.

Once CBO releases its final numbers, the Senate and House will insert numbers into their resolutions in preparation for April action on the full budget from the White House. Keep a close watch on the final budget presentation for more infrastructure construction spending, and for tax provisions which may be imposed on construction businesses. Also, some compromise will be included on treatment of highway and airport "trust fund" spending in the out years of the ten year budget Obama intents to present.

Are Transportation "Trust Funds" Really Held In Trust?

Obama Transportation Secretary Ray LaHood is backing off the administration's position that all federal highway and airport spending be adjusted annually in the president's budget legislation, rather than being committed long term. Senate Banking Chairman Christopher Dodd is attempting to broker some compromise between LaHood and congressional appropriators to preserve the dedication of fuel taxes to transportation purposes, rather than opening up this cash hoard to being used for advancing other types of investment which would possibly defeat long term transportation planning in the 50 states, and open the funds to being raided for other priorities of the administration. Count on construction industry lobbyists to back every move by Dodd to protect the trust funds from raids by other interests seeking a way to finance their pet expenditures without increasing taxes on everyone.

Obama '10 Energy Budget Has Billions For Construction

In March 11 testimony before the Senate Budget Committee, Energy Secretary Steven Chu described his department's plans to allocate the $26.3 billion in proposed appropriations for his department. Energy Department priorities for the near future include financial support for increasing energy efficiency of government buildings and private homes, construction of biofuel refineries, clean coal power plant projects, wind and solar energy construction, and upgrades to the electric power transmission grid.

Ranking Member Judd Gregg expressed exasperation that $50 billion in loan guarantees for nuclear energy construction had been stripped from the stimulus legislation, and accused the Obama administration of reducing financial commitments to the Yucca Mountain disposal site for spent nuclear power reactor fuel materials as a back door method of restricting construction of new nuclear electric power plants. Chu responded that nuclear energy, offshore oil drilling and clean coal power plants all have a place in the administration's plans, but that priority was placed on clean coal technology development because "India and China will not turn their backs on coal" as a source of energy for generating electricity.

Whatever differences there may be between the administration and congress regarding the nuances of energy development priorities, the construction industry will see substantial government investment in energy infrastructure throughout the Obama presidency.

Executive, Legislative Branches At Odds Over Budget Reconciliation

OMB Director Peter Orszag suggested to the Senate Budget Committee Tuesday that legislators could filibuster-proof the Obama initiatives in the '10 budget legislation by using the budget reconciliation procedure to pass the bill, rather than letting the legislation be considered in regular order. However, in discussing the expected climate change and renewable energy package of legislation, leaders of both parties in both houses have expressed opposition to eliminating the possibility of amendments from the floor.