Senate Passes Highway Trust Fund Reauthorization Measure

Late Wednesday morning, March 14, 2012, the Senate voted 74-22 to pass a two year, $109 billion Highway Trust Fund reauthorization bill, just a mere 17 days before the taxing and spending authority for federal surface transportation programs runs out on March 31, 2012. The spending level, according to Transportation Secretary Ray LaHood, a former congressman, is far below the level needed to maintain America’s surface transportation facilities and expand them to meet the needs of population growth. In his remarks, LaHood described federally funded highways as “one big pothole.”

Under the Senate measure, programs for construction of bicycle paths, hiking trails, safe routes to schools, and rails to trails construction will now have to compete for funding for other so called “congestion mitigation” projects. The bill also includes toughened safety requirements for the long distance and tour bus industries, which together transport aoughly the same number of passengers annually as the nation’s airline industry. The legislation also includes a tenfold increase, to $1 billion, for funding of the credit assistance program designed to leverage private investment in revenue generating transportation projects. Past estimates show this program can generate as much as $30 in private capital for every dollar of government participation.

The ball is now in the court of House Speaker John Boehner of Ohio, whos own chamber’s larger version of a Highway Trust Fund reauthorization measure fell apart earlier this session. It remains to be seen whether the Senate legislation, which does not address the long term solvency of the Highway Trust Fund, will fare in the House. Senate passage was completed only after competing Senate amendments, one to prohibit new tolls on existing interstates, and one to expressly permit states to impose new tolls on existing interstates, were both withdrawn. With the House in recess until next week, the suspense lingers.

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?

Senate Overrules Republican Appropriation Amendments

Fiscal '09 appropriations legislation is moving through the Senate with Republican efforts to reduce the $410 billion in spending defeated in vote after vote. Amendments aimed at deleting specific earmarks, as well as those designed to restrict overall spending levels to the '08 funding amounts have been voted down, and it looks like the bill will get to the Oval Office before the weekend.

American Recovery And Reinvestment Act Passes

By a vote in the House of 246-183, and in the Senate of 60-38, Congress has passed President Obama's economic stimulus legislation. Obama was watching on C-Span at his Hyde Park home as the Senator from Ohio returned to Washington, D.C. following his mother's wake to cast the deciding vote on the Senate floor at 10:47 p.m. Washington time.

The bill will be promptly enrolled, and delivered to President Obama, who is expected to sign it Tuesday in Colorado. His pen on the paper will begin the clock ticking on all the time limitations in the measure for awarding of construction contracts and expenditure of funds appropriated in the bill. The construction industry will be receiving contracts worth over $145.6 billion funded by this legislation, which the provisions of the bill require to be completed and paid for within two years.

President Obama also signed an executive order Friday encouraging federal agencies which will be spending this money to use project labor agreements on the major projects funded by the bill, favoring union contractors on those projects. The legislation also requires all contractors building any projects funded by the measure to pay Davis Bacon prevailing wages, to hire only citizens and aliens here legally to work on the projects, and to buy American steel and manufactured goods for use on these jobs.

Every estimator who has been paying attention is going to be unusually busy for the next five months or so putting sealed envelopes into the hands of federal, state and local contracting officers all over the country. Good luck to you all.

School Modernization Funding Restored In Part

At the urging of House Democrats, the Conference Committee has restored funding of $6 billion for school modernization and repairs to the total $789.5 billion cost of the American Recovery and Reconstruction Act, slated to be voted on in the House tomorrow and in the Senate Friday, and likely to be signed by President Obama as soon as the bill can be enrolled and delivered to the Oval Office. Total appropriation for construction projects of all sorts is $145,632,000,000.00.

The cost figure was held in large part by cutting President Obama's middle class tax cut from $500 per individual or $1,000 per family down to $400 per individual and $800 per family. Other tax measure reductions include elimination of the deductibility of car loan interest, and restrictions on availability of the home purchase tax credit and business loss tax carry backs.

The airwaves will undoubtedly be filled to overflowing for the next two days with analysis and commentary respecting the details of this legislative measure, as well as steamy political rhetoric from the extremes of both parties regarding what they had to give up to get a bill which can pass both houses of Congress. Economists of various stripes will debate ad nauseam whether or not this particular formulation of spending and tax relief will reinvigorate the American economy.

To me, passage of the bill will mean at least this: there is a profit opportunity of $7.25 billion or more out there for businesses in the construction industry which position themselves to take advantage of it.

Construction Stimulus Totals $145.632 Billion

The conferees have agreed on a breakdown of the American Recovery and Reinvestment Act, to be voted on Thursday in the House and Friday in the Senate, including total appropriations of $145,632,000,000 for construction projects.

Stimulus Bill Goes To Conference

Tuesday afternoon, February 10, the Senate passed the Nelson-Collins version of the American Recovery and Reinvestment Act by a vote of 61-37. As expected, Senators Collins, Snowe and Specter crossed the aisle to support the measure. The Congressional Budget Office prices the Senate version at $838.2 billion, somewhat more than both the House version costs, at $819 billion, and the cap Collins, Snowe and Specter say they will accept in a final bill, at $800 billion.

House and Senate conferees to be named will meet as soon as possible in efforts to hammer out the differences between the two versions of this legislation, in hopes of presenting an agreed bill on the floor of both houses Friday for a final vote, before the recess scheduled to begin Saturday.

The most contentious issues to be faced by the conference committee are:

SPENDING:

School construction funds of $20.1 billion, completely gutted in the Senate.

State fiscal stabilization appropriations which the Senate cut severely.

TAXES

Alternative Minimum tax patch added by the Senate.

Full repeal of the 3% tax on government contractors.

The Senate added "golf cart" tax credit.

OTHER

E-verify requirement.

H-1B visa ban for TARP recipients.

Buy American requirements.

Broadband open access requirements.

Senate Majority Leader Harry Reid and House Majority Leader Steny Hoyer have both promised to keep Congress in session until a bill is sent over to the Oval Office for signature. Meanwhile, President Obama takes Air Force One from one economically depressed community to another, stumping in support of quick passage of the package.

If you are interested in perusing the text of the 778 page Senate version of this legislation, you can find a link to it at the lower right hand corner of the front page of my website:
James G. McConnell - Home.

Nobody Is Talking About This

What happened behind the closed doors of that Senate caucus room last week to provoke three particular, desperately needed Republican Senators to cross the aisle and pledge their votes in favor of the Nelson-Collins compromise version of the Senate's stimulus bill? Buried deep in the middle of the measure, under Title VI, Homeland Security, is a $450 million appropriation for construction of land side facilities in support of a new Coast Guard icebreaker. The legislation does not specify, but I'm willing to wager dollars to doughnuts that this new seaport will be built somewhere along the rocky coast of Maine [Senators Collins and Snowe], and though there is nothing in this bill for construction of the icebreaker vessel itself, my money says it will be built in the Philadelphia shipyard [Senator Specter]. So much for President Obama's "no earmarks" pledge.

As for the ultimate outcome of politics as the art of the possible, we will have to await the conference committee version of the bill later this week, but it seems certain that no matter what other tweaking the conferees may do to the particulars of the measure, the Coast Guard is going to be getting a new icebreaker based in Maine.

If you are interested in the changes made to the House version of the appropriations by the Nelson-Collins compromise, this link will take you to Senator Nelson's detailed spreadsheet: http://bennelson.senate.gov/documents/Nelson-Collins Stimulus Final.xls

Senate Explores Stimulus Compromise

After three days of floor debate on 568 proposed amendments to HR 1, the House version of the American Recovery and Reinvestment Act, it appears Senate leaders have the 60 votes required to pass their compromise version, now known as the Nelson - Collins amendment. Senate debate continued Saturday, February 7, and will resume Monday, February 9, with a Senate floor vote expected late Tuesday evening. The 58 Democratic Senators are expected to be joined by Republicans Susan Collins of Maine, Olympia Snowe of Maine, and Arlen Specter of Pennsylvania expected to vote in favor of terminating debate, and of passing the measure. The Senate and House versions will then go to a Conference Committee, and the Conference Committee version will go back for floor votes in both houses before being sent to the Oval Office for signature.

The Nelson - Collins compromise cuts total cost of the measure from the $819 billion in the House version down to $780 billion. Construction appropriations in the Nelson - Collins amendment have been cut from the $153.3 billion voted by the House, down to $126.7 billion.

The Nelson - Collins construction appropriations reduce cash for state and local government construction by $25.28 billion, increase construction funds to federal agencies by $11.51 billion, and cut power grid construction funding by $12.9 billion, making up the net construction appropriation reduction of $26.67 billion. Of course, some, all or more may yet be added back in the conference committee version.

Construction categories increased by the Nelson - Collins compromise include agriculture, up $0.66 billion, defense up $5.15 billion, highways and surface transportation up $2.56 billion, passenger rail up $7.50 billion for high speed rail corridor construction, and a new category of "emergency preparedness" construction adding $2.04 billion for FEMA and the Coast Guard.

Construction appropriation cuts in the Nelson - Collins amendment include airport construction down $1.90 billion, general federal buildings down $0.02 billion, federal health construction down $0.39 billion, local transit construction down $0.50 billion, power grid construction down $12.9 billion, public housing construction down $5.94 billion, school and college construction eliminated entirely for a cut of $20.10 billion, and water and environmental construction down $2.83 billion.

There could be a surprise or two still down the road, but right now these numbers look pretty solid, and the measure seems to be still on track for passage before the President's Day recess. The good news is there is room for almost all of the construction appropriation cuts to be restored in conference without busting the $800 billion ceiling which it seems Senate psychology has put on the total cost of this measure.

Senate Debates Stimulus - House Prepares For Conference

While floor debate on President Obama's economic stimulus measure proceeds amendment by amendment in the Senate, House Majority Leader Steny Hoyer announced today that the House will be in session Monday to begin work on a joint House/Senate Conference Committee version of the legislation. Speaker Pelosi says the bill is still on track to reach the Oval Office before Valentine's Day.

Senators Ben Nelson of Nebraska and Susan Collins of Maine will be offering a bipartisan amendment aimed at stripping non-stimulative appropriations out of the spending side of the bill, such as Interior Department and Agriculture Department new computers, along with funds for HIV screening, wildlife management and NASA. As it stood late Wednesday afternoon February 3, the cost of the Senate version of the measure exceeded $900 billion. The major additions approved thus far have been an $11 billion tax credit for car purchasers, and $6.5 billion for National Institutes of Health research projects.

Senators Patty Murray and Diane Feinstein are preparing another attempt to increase spending for construction by $13 billion for highways, $7 billion for water and sewer construction, and $5 billion for transit construction, to be offset by cuts in other programs.

Senator Charles Schumer wants an even bigger increase for transit funding, of $6.5 billion rather than the $5 billion Feinstein and Murray will propose.

Domestic steel mills are fighting to keep the "buy American" requirements for construction steel in the measure, while other interest are assuring trading partners the protectionist requirements will not exceed those already in existence in general Congressional appropriation measures.

Senator Johnny Isakson of Georgia will offer a proposal to double the home buyer tax credit from $7,500 up to $15,000, and remove the restriction to first time buyers, at a cost of $20 billion.

President Obama, at a White House meeting Wednesday afternoon, urged key Senators not to "make the perfect the enemy of the essential" in finalizing the measure, and remarked that the recession will turn into "a catastrophe" if legislation is not on his desk before Presidents' Day.

Senate Rejects Infrastructure Increases

By a vote of 59 to 39 during the floor debate, the Senate this afternoon rejected a proposed amendment to the economic stimulus bill which would have added $25 billion in infrastructure appropriations. The amendment, offered by Senator Patty Murray of Washington, would have added $13 billion for highway construction, $5 billion for transit construction, and $7 billion for EPA water and sewer construction projects. It also would have increased the total cost of the measure to $1.1 trillion. According to House Majority Leader Steny Hoyer, the goal is to keep the price of stimulus under $900 billion.

Hoyer also suggested that when the measure goes to a Conference Committee, the Senate's strong "buy American" language may be cut back to match the House provision limiting the restriction to steel used in construction projects. Foreign trading partner nations that purchase a lot of U. S. exports are already threatening retaliatory legislation against American made exports should the bill become law with the stronger Senate protectionist provisions.

Another floor battle is brewing as immigrant advocates press for the Senate to remove the House provision requiring businesses awarded contracts paid for by these appropriations to use the federal E-verify system to eliminate illegal immigrants from their work forces. Representative Jack Kingston of Georgia, who sponsored the E-verify requirement in the House measure, said: "We cannot allow for illegal aliens to benefit from this deficit spending. The American taxpayer will one day be forced to pay it back so it should be them that benefit."

Two other controversial amendments still being debated would temporarily reduce the corporate tax rate on repatriated foreign earnings from 35% to 5.25%, in hopes of spurring investment of these earnings in American jobs and investment; and grant an above the line tax deduction for interest on new car loans up to $49,500 for families earning under a quarter million dollars a year, in hopes of spurring new car sales.

General Public Closed Off From Stimulus Debate

In typical Washington fashion, the last version of the stimulus legislation available to the general public is H.R. 1 passed by the House last month. Although three different Senate committees have debated the legislation, and two have voted on proposed amendments to it, the bill is being debated on the Senate floor without any text of the legislation under consideration being available to the public. And Senate Minority Leader Mitch McConnell is busy discussing his "alternative" proposals without having released any text of amendments he may propose, or revealing his floor strategy to anyone.

Should the Senate pass its version of this legislation, the bill will go to a House-Senate Conference Committee, and once the differences between the two versions are resolved, both the Senate and the House will vote the final version of the bill up or down. Your representatives in Congress will be lucky if they see the text of the bill 24 hours before they cast their votes, and the likelihood is that it won't be available at all to the general public until a few days after it is signed by President Obama. So much for transparency and accountability in government.

The truth is that even if you were to keep your eyes glued to C-Span throughout the Senate debate on this legislation, you won't know what it includes until after it is passed and signed into law. Even in this age of computers and instantaneous communication via the internet, it is quite likely that the text of the legislation as passed will not be seen by anyone outside Washington until days after President Obama signs it. And even then it will be weeks more before the actual construction projects to be funded by these appropriations begin to be posted in the Recovery.gov website for the general public to peruse.

We do understand that the current price tag on the Senate's version of the legislation is $888 billion, and that various Senators will likely propose amendments to increase spending on highways by another $27 billion, schools and colleges by $20 billion, and broadband expansion by $9 billion. This could push the construction industry's share of the appropriations as high as $209 billion from the $153.3 billion in the House version.

Infrastructure Stimulus Appropriations Likely To Increase

The Sunday interview shows were populated by Senate leaders from both sides of the aisle, talking about the stimulus legislation coming to the floor the first week in February. Republican and Democratic leaders don't agree on much, except that infrastructure spending in the bill needs to be increased. It's difficult to predict what other changes we may see in the legislation on the Senate floor or in the Conference Committee, except that tax cuts will also likely change in form and increase in overall amount.

It looks at the present moment like the final package may include as much as $200 billion for the construction industry over the two years provided for in the legislation. There is little doubt that the industry can absorb this much activity in two years' time, the real question is whether federal, state and local bureaucracies can handle the work in such a short time. Besides positioning themselves to bid promptly and responsively on this much work, businesses in the construction industry need to do everything they can to assist the politicians and bureaucrats with the paperwork required to move so much money through the pipelines promptly. And union hiring halls need to gear up for an unprecedented demand for building trades workers.

All workers hired for these projects will have to be screened through the federal E-verify system for checking a worker's legal right to be employed in this country. Some of these projects will be on military bases and other government installations where security regulations will also mean drug testing and criminal background checks, even if union/employer labor agreements do not already call for such checking in a particular trade.

If your business is seeking to participate in this bonanza of government spending, it needs to get ready now to be in a position to promptly, effectively and smoothly comply with all the paperwork requirements which will be imposed before payment will forthcoming on these projects.

Republican Governors Lobby For Stimulus Legislation

Breaking ranks with their party's Senate leadership, a chorus of Republican governors can be heard in Washington pressing for passage of President Obama's economic stimulus legislation in the Senate. Sarah Palin of Alaska [yes, that Sarah Palin] is meeting over this weekend with Minority Leader Mitch McConnell and other Senators to explain how much her state needs these appropriations. Florida's Charlie Christ has been on the telephone with that state's Congressional delegation, and Jim Douglas of Vermont, who is also Republican Vice Chairman of the National Governor's Association, will be in D.C. Monday, February 2, to deliver that organization's call for Senators to pass the bill promptly.

Three Republican governors have hinted they may not accept the federal appropriations for their states due to "strings" attached to the money. Haley Barbour of Mississippi, Mark Sanford of South Carolina and Bobby Jindal of Louisiana have opposed the legislation, but all three will be hard put to turn down the money once the bill passes and 47 other states start spending the cash and creating high paying construction trade jobs across their borders. Tim Pawlenty of Minnesota put it best, saying "If we are going to go down this path, we are entitled to ask for our share of the money."

President Obama once again used his Saturday morning radio address to press for quick passage of the stimulus bill in the Senate, reminding the nation that this measure may not be the last one required to get the American economy back on sound footing. With white collar unemployment at 4.6% and blue collar unemployment at 11.3%, the working families who elected Obama are feeling the pinch all across the country. The Congressional Budget Office conservatively estimates that as the legislation is now formulated, $525.5 billion would be injected into the economy in the next two years, including the entire $153.3 billion for construction which the law requires to be spent or returned to federal coffers for redistribution within 24 months after the bill is signed into law.

CBO predicts the federal bureaucracy will become clogged up with cash and have trouble pushing so much out into the real world in just two years. Go figure! I predict the demonstrable organizational skills of the Obama team will be brought to bear on that problem, and the profit opportunity of $7.5 billion or more for the construction industry will be absorbed significantly more quickly than the not for profit CBO can presently comprehend.

Senators Still Tinkering With Stimulus Legislation

The Senate's $900 billion version of the stimulus bill will come to the Senate floor for debate next week, and some proposed amendments will be offered there. Senate Budget Committee Chairman Kent Conrad wants top do more about the housing crisis, and is proposing extension of a $7,500.00 tax credit to all home purchasers, not just first time buyers. He may also seek to add mortgage cram down provisions to help homeowners whose houses are now worth less than the balance owed on their mortgages.

Senate Finance Committee member Maria Cantwell might ask for acceleration of the low income housing investment income tax credit from the present 10% each year to 20% per year for the first three years and 5.71 percent for the last seven years. She claims this would cost an additional $1.0 billion, but critics claim it won't produce any new jobs.

Vice President Joe Biden said after the House passed its version of the bill that the Senate could increase the infrastructure spending approved in the House version, and the Senate Committees have already approved addition of a $70 billion patch to the alternative minimum tax. Senator Ben Nelson will likely offer a proposal to cut the income tax on repatriated earnings of foreign subsidiaries from the current 35% to 5.25% .

Meanwhile, Senate Minority Whip Jon Kyle of Arizona, along with Senators Jeff Sessions and Tom Coburn, threatens to "explore" the possibility of a filibuster on the stimulus measure when it comes to the floor, unless Democrats slash spending and increase tax cuts in the bill.

Laws and Sausages

Bologna, Italy is famous for its law school, and more famous for its sausages. And the folks in Bologna say that it's best for people never to see how either laws or sausages are made. The progress of the economic stimulus legislation through Congress proves them absolutely right.

Senate Appropriations and Finance Committees are busy marking up their versions of the economic stimulus tax and spending bills, and they don't agree on very much with the House version, which will go to the House floor Wednesday afternoon January 28 for a vote. The senate version of the spending part of the package allocates about the same total dollars as the House bill, but distributes it a little differently from the House version. The good news for the construction industry is that total spending for construction projects is about the same in both houses of Congress. And things may get even better. It would not be unheard of for the conference committee which will be formed to reconcile the two versions during the next couple weeks to increase total spending so that each agency gets whichever total is higher between House and Senate appropriations.

If that does happen, the total spending for construction projects will increase from about $153.3 billion up to as much as $168.7 billion.

Without accounting for the ongoing committee markups which will change these totals, the principal differences between House and Senate appropriations for construction look like this:

The Senate version gives $2 billion more for elementary school construction, but takes away $2.5 billion for colleges.

The Senate cuts $450 million from defense energy efficiency projects, but adds $900 million for defense family housing and child care facilities.

The Senate adds $6.3 billion for cleanup of old military bases and weapons production facilities.

The Senate adds $2.5 billion for VA hospitals and medical clinics.

The Senate cuts $3.4 billion from water navigation and flood control projects, and cuts $1.1 billion from drinking water projects.

The Senate cuts $3 billion from highway construction, adding $400 million to public transit construction and $4.5 billion for purchase of light rail and bus rolling stock.

The Senate cuts $1.7 billion from airport construction.
The Senate cuts $400 million from Section 8 housing construction, and cuts $1.6 billion from neighborhood stabilization.

The Senate adds $300 million to Superfund.

It also looks like the Senate version will roll back the Customs and Border Protection directive that lumber, steel and cement suppliers repay anti-dumping finds they received earlier this decade under the Byrd Amendment.

Senate Finance ranking member Charles Grassley wants to increase tax credits for wind energy from $13 billion to $20 billion as part of the economic stimulus package, and tax breaks for the construction industry may also include lifting of the tax on debt restructuring for two years, and eliminating the repayment requirement from homebuyer tax credit, as well as increasing the credit from $7,500 up to $20,000, and eliminating the restriction to first time buyers.

Finally, the Senate version could contain a $70 billion alternative minimum tax patch, and a 75% exclusion of capital gains tax on sale of shares in small businesses if the shares have been held over 5 years.

There will undoubtedly be more changes in the Senate markups, and the Conference Committee report in the next couple weeks. Bottom line, in all likelihood there will be a bill on President Obama's desk before Valentine's Day, and it will still include more than $150 billion for construction projects.