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?

Environmentalists Push 25% Renewable Power Mandate

The Union of Concerned Scientists is distributing a new analysis to key members of Congress arguing that a legislative mandate for producing 25% of American electric power from renewable sources like solar, wind and biofuels would create 300,000 new jobs and save consumers $64.3 billion in lower electric and natural gas bills, over the next ten years.

Will Open Access Stall Stimulus Broadband Construction?

Consumer advocates are pressuring the Commerce Department to make open network access a condition attached to disbursement of economic stimulus appropriations for construction of expanded of broadband networks. Wireless carriers say requiring them to permit all carriers use of their newly built towers will be counterproductive to universal service by slowing investment in construction of new networks. The Commerce Department is weighing the opposing arguments as it formulates the details of spending this $7 billion appropriation.

Experts Predict Stimulus Construction Spending Effect Late This Year

Economists for the AIA and the AGCA predict improvement in the state of the construction sector of the economy as a result of the economic stimulus appropriations, but not until the third quarter, and perhaps not as much improvement as hoped for. Kermit Baker, chief economist for the American Institute of Architects told Reuters News Service in an interview that the appropriations "will put some people to work as soon as next month, but will not be a major factor until the third quarter. ... contractors will use existing workers before they bring back people who have been laid off, or start to hire new people."

Ken Simonson, chief economist for the Associated General Contractors of America, told his organization that the appropriations are "not going to be enough to bail out construction right away ... but it's a start."

Gasoline Tax Indexing Compromise Proposed

Yesterday Senate Environment and Public Works Chair Barbara Boxer proposed indexing the gasoline tax to inflation at a meeting of the Subcommittee on Transportation and Infrastructure, as compromise between the administration's resistance to gasoline tax increases, defended by Transportation Secretary Ray LaHood, and ranking member George Voinovich, who insists on a gas tax increase, which would be the first since 1993.

Legislators predict the need for investment of half a trillion dollars in highway and bridge construction over the next six years, and the gasoline tax will fall far short of raising that much money at present rates. LaHood said the administration had not considered indexing the tax to inflation, but would be open to evaluating the idea.

Indexing the tax to inflation would be good news for highway contractors, but bad news for others in the construction industry who would have to pay the tax but who get no direct benefit from the increased highway spending appropriations which would follow.

Stimulus Spending Strains Energy Department

According to Energy Department Inspector General Gregory Friedman, in a memo sent to Energy Secretary Steven Chu Friday, March 20, 2009, the $165 billion in stimulus cash to be distributed by the Department so dwarfs the annual Department budget of $27 billion that the resources of the agency for getting the money spent while avoiding fraud and abuse will be sorely tested. Friedman wrote that "the infusion of these funds and the corresponding increase in effort required to ensure that they are properly controlled and disbursed in a timely manner will, without doubt, strain existing resources."

In the last four fiscal years the Department of Energy investigations into misspent federal funds have resulted in about 150 criminal convictions, and fines and recoveries of more than $190 million. This represents a little over 17.5% of budget money, and suggests the Energy Department can expect more than $29 billion in waste and fraud just within its slice of the stimulus pie. As Friedman wrote in his memo: "This history suggests that the Department's Recovery Act efforts to establish an effective set of safeguards or internal controls to prevent fraudulent activity should be a priority." You mean it wasn't a priority already?

Friedman's memo acknowledges that low income home weatherization is the program most at risk for fraud, so if you intend to be working on projects of that nature, expect a lot of extra paperwork and figure your bid overhead accordingly.

Meanwhile, Vice President Biden announced the appointment of Edward DeSeve, Bill Clinton's Deputy Director of OMB, as chief adviser to Biden and OMB Director Peter Orszag in the coordination of stimulus package spending across federal departments. According to Biden's announcement, DeSeve's "management efforts inside the Executive Office of the President will complement the oversight work led by the independent Accountability and Transparency Board chaired by Earl Devaney." Watchers watching the watchers!

Stimulus Funded "Green Jobs" Begin Sprouting

Announcements of green job creation from around the nation last week were poking up like the jonquil sprouts in my back garden. Conservation Services Group, an energy efficiency consulting firm headquartered in Westborough, Massachusetts has begun hiring 200 employees, a 50% increase in its workforce, for stimulus funded projects in 22 states. California's Governor Schwarzenegger announced the creation of California Green Corps, a 1,000 person pilot program to train young adults for solar panel installation and wind turbine manufacturing jobs over the next 20 months. Indiana Governor Mitch Daniels has begun distributing $132 million in stimulus money to not-for-profit organizations for low income homeowner weatherization projects, an 11 fold increase in that state's energy assistance program. Steven Horsford of Nevada, Senate Majority Leader, announced that his state will devote $37 million in stimulus appropriations to weatherization of low income housing, schools, and other public buildings in his state.