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Obama Budget Hikes Transportation But Cuts Other Construction Programs

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Highways, transit and passenger rail are the big winners among construction programs in President Obama’s $3.7-trillion fiscal 2012 budget request, which calls for sharp increases in those sectors next year, kicking off a proposed $556-billion, six-year surface transportation bill. But many other major construction accounts would suffer cuts under Obama’s plan to help meet his goal of freezing overall non-security-related discretionary funding.

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Among programs that would be trimmed are Environmental Protection Agency water infrastructure, Army Corps of Engineers civil-works construction and General Services Administration new buildings construction.

The Associated General Contractors calculates that the Obama budget seeks a total of $164 billion for construction programs, up $36.3 billion, or 28% from enacted 2010 appropriations. But if a proposed $50-billion 2012 infusion for highways, transit, rail and airports is subtracted, construction accounts are down $13.7 billion from 2010 levels.

Even the huge proposed transportation bill—nearly double the last multiyear authorization—is not as promising as it sounds, transportation and construction industry officials say, because the White House did not identify any new funding source or recommend hiking existing taxes and fees to pay for the measure. “They’re willing to talk about construction but not particularly willing to invest more in it,” says Jeffrey Shoaf, AGC’s senior executive director for government affairs. “They beef up the highway account without providing any revenue to fund [the] beef purchase.”

The release of Obama’s budget blueprint on Feb. 14 intensifies an already heated Capitol Hill debate over federal spending. Republicans, who now control the House and increased their minority in the Senate, have been pushing hard to cut non-defense funding. House Budget Committee Chairman Paul Ryan (R-Wisc.), a major GOP voice on spending issues, blasted Obama’s plan, saying, “The President’s budget spends too much, taxes too much and borrows too much.”

But Democrats, who still control the Senate, defended the White House plan. Senate Majority Leader Harry Reid (D-Nev.) said, “The President’s budget offers a long-term plan to responsibly cut the deficit in half in his first term while investing in things that grow our economy, such as education, innovation and infrastructure.”

As construction officials study the budget request, a major focus is the proposed outline of a $555.9-billion, six-year surface transportation bill. The long-awaited framework would combine authorizations for highways and transit and, for the first time, passenger rail as well as a national infrastructure bank.

According to the Dept. of Transportation, of the $555.9 billion, highways and bridges would receive $336.4 billion—up 48% from the last multiyear authorization—in the 2005 Safe, Accountable, Flexible, Efficient, Transportation Equity Act: a Legacy for Users. Transit would get $119.2 billion, up 127% from SAFETEA-LU. The measure also has $52.6 billion for intercity passenger rail, $30 billion for the envisioned National Infrastructure Bank, $29.8 billion for safety programs, $2 billion for a new National Infrastructure Investment grant program and $3.4 billion for aviation infrastructure.

Under the administration’s plan, annual funding would peak in 2012, the bill’s first year, with a total of $112.5 billion. That would include the one-time infusion of $50 billion above current funding levels for highways, transit, rail and airports.

The $112.5 billion for 2012 would include $69.7 billion in obligations for highways, $22.2 billion for transit, $8 billion for passenger rail and $5 billion for the infrastructure bank.

The budget repeats Obama’s statement that the new transportation bill would be “paid for,” but it doesn’t say how. Instead, it states, “The President is committed to working with the Congress to ensure that funding increases for surface transportation do not increase the deficit.”

Obama and other administration officials have said they oppose raising the federal motor-fuels tax, the prime revenue source for the Highway Trust Fund. Transportation Secretary Ray LaHood told reporters on Feb. 14 that the administration’s position hasn’t changed. He said, “There are many people in the country that are without work. There are many people in the country that are hurting economically. This administration has said time and time again that we are not in favor of raising the gas tax when we have a lousy economy.”

Highway and transit programs have been operating under stopgap measures since Sept. 30, 2009, when SAFETEA-LU expired. With the current extension set to lapse on March 4, another stopgap is inevitable.

Among non-transportation accounts, EPA water infrastructure takes a heavy hit under the Obama request. Aid for Clean Water State Revolving Funds (SRFs) would be cut 26%, to $1.55 billion, and drinking-water SRFs would be slashed 29%, to $990 million.

Robin Black, director of government relations for Camp Dresser & McKee’s Arlington, Va., office, says if the cuts are enacted, projects could be delayed or cancelled and long-term planning may be reduced.

Eben Wyman, the National Utility Contractors Association’s vice president for government relations, says that non-federal sources won’t be able to fill the gap left by federal cutbacks. “The states have no money,” he says. “Some are having trouble meeting the 20% match requirement for SRF projects.”

While debate begins over spending for fiscal 2012, construction groups first face a more immediate threat: House Republicans’ proposed sharp reductions in domestic spending for the rest of the current fiscal year. Since Oct. 1, 2010, federal agencies generally have been operating at 2010 funding levels under short-term continuing resolutions; the latest stopgap expires on March 4.

With that deadline drawing near, the House Appropriations Committee on Feb. 12 proposed a seven-month bill that would trim a total of $60.9 billion from dozens of programs, compared with 2010 enacted levels.

Among the construction programs that would be cut are high-speed rail, GSA buildings, Corps of Engineers civil works and EPA water infrastructure.

In the Senate, Appropriations Chairman Daniel Inouye (D-Hawaii) is likely to take a more measured approach. Inouye on Feb. 15 slammed the House committee’s legislation, saying, “Many of the recommendations in this bill resulted from a meat-cleaver approach to budget cuts, when we should be using a scalpel—responsibly identifying specific programs that are wasteful or unneeded.”

construction budget’s Winners and losers
Highway obligation ceiling
High-speed rail
Airport improvement grants
EPA water infrastructure
DOE defense environmental cleanup
Corps of Engineers construction
VA construction, major projects
GSA construction
GSA repairs, alterations
DOD base realignment and closure
Other DOD construction
*Fiscal 2011 spending generally equals 2010 levels through March 4
**Funding is for “high-speed corridor development”
***Includes $3.1 billion from “up front” infusion
Source: Ofice of Management and Budget, U.S. DOT


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