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AASHTO Journal

Lawmakers Grill LaHood on Funding Source for $556 Billion Plan
Several senators, in a series of four hearings in the past week on the U.S. Department of Transportation's Fiscal Year 2012 budget request, have expressed frustration at the Obama administration's reluctance to recommend a plan to finance its $556 billion six-year surface transportation plan. The senators suggested that the absence of a detailed funding blueprint is hampering efforts to draft a new reauthorization bill.

"We cannot proceed with a bill unless we have a serious discussion about where the money is coming from," Sen. James Inhofe, R-Oklahoma and ranking minority member of the Senate Environment and Public Works Committee, told U.S. Transportation Secretary Ray LaHood during one of the hearings Wednesday.

LaHood also appeared this week before the Senate Commerce, Science, and Transportation Committee as well as the Senate transportation appropriations subcommittee. He testified March 3 before the Senate Budget Committee. 

During each of these hearings, LaHood has told senators he looks forward to working with Congress to figure out how to pay for the $556 billion six-year transportation proposal.

Senators on both sides of the aisle have expressed their dissatisfaction with that statement.

"If we are to have an opportunity to pass this bill and to move it quickly, we're going to have to know where the money's going to come from," Senate CST Committee Chairman Jay Rockefeller, D-West Virginia, said during his panel's Tuesday's hearing with LaHood. "It's a big chunk that's unfunded."

LaHood replied, "We're prepared to work with you and others in the Congress to find the resources to make this vision a reality."

Boxer Critical of Administration Placing Revenue Options Off Limits

When LaHood appeared before the Senate EPW Committee on Wednesday, Chairwoman Barbara Boxer, D-California, said she would be willing to look at options the administration has so far refused to consider -- including a fee based on how many miles a vehicle travels and indexing the motor-fuels tax to inflation. The 18.4-cents-per-gallon federal gasoline tax and 24.4-cents-per-gallon diesel tax have not been increased since 1993.

The only revenue detail LaHood offered during his multiple appearances lately before Senate panels was to continue ruling out the most common way of funding highway and transit projects, noting President Barack Obama remains opposed to raising fuel taxes to generate new revenue for transportation improvements.

"He is not in favor of raising the gas tax when unemployment is at 8.9%," LaHood told senators. "There are some people in this country that can little afford to buy a gallon of gasoline, let alone one that's been increased by an increase in the gas tax."

Sen. Tom Carper, D-Delaware and a member of the Senate EPW Committee, told LaHood he wants to see the gas tax increase by a penny each month for 25 consecutive months, so that it would rise from 18.4 cents per gallon to 43.4 cents over two years.

"It is high time that Congress has an adult conversation about funding the transportation bill," Carper said in prepared remarks. "A penny per month is quite reasonable when you consider that the price of gas has risen 38 cents in the past month. None of that extra 38 cents is being used to build better transportation in the United States. Most of it is going to countries that are hostile to U.S. interests."

Obama's FY 2012 budget for USDOT reiterates the president's previous call to frontload a six-year reauthorization measure with $50 billion of extra transportation investment during the first year. Obama first proposed the $50 billion jumpstart during a Labor Day speech in Milwaukee. (see Sept. 10 AASHTO Journal story) In total, the administration is seeking $129 billion for surface transportation in FY 2012.

The administration's proposal would authorize two-thirds more surface transportation funding over the next six years than the 2005 surface transportation authorization law known as "SAFETEA-LU" provided through 2009. It would require an additional $231 billion during the six-year period compared to existing estimated revenue, however the budget proposal does not identify where that money should come from. (see Feb. 18 AASHTO Journal story)

Surface transportation programs have been authorized through a series of seven short-term extensions since SAFETEA-LU expired in September 2009. The latest extension which runs through Sept. 30 of this year, was signed into law last Friday. (see March 4 AASHTO Journal story)

LaHood Highlights Greater Investment Levels Proposed in Budget

During his Wednesday appearance before the Senate EPW Committee, LaHood said the president's reauthorization proposal will transform the way the nation manages surface transportation. It proposes four broad goals: building for the future, spurring innovation, ensuring safety. and reforming government and exercising responsibility.

"America's aging roads, bridges, and transit systems must be addressed," LaHood said in prepared testimony. "For too long we have put off the improvements needed to keep pace with today's transportation needs."

LaHood cited projections that by 2050, the United States will be home to 100 million additional people.

"More than 80% of them will live in urban areas," the secretary said. "Concerns about the need for livable communities will increase as communities tackle the need for transportation choices and access to transportation services. If we settle for the status quo, our next generation of entrepreneurs will find America's arteries of commerce impassably clogged and our families and neighbors will fight paralyzing congestion."

The administration's proposal addresses this challenge by creating a national high-speed rail network ($53 billion over six years), rebuilding America's roads and bridges (a 48% funding increase to $336 billion over six years), and investing in accessible and affordable transit options (a 128% increase in funding to $119 billion over six years). LaHood also touted the president's proposal to create a national infrastructure bank ($30 billion over six years) and establish a $32 billion competitive grant program called the Transportation Leadership Awards.

"These new and innovative tools will help us to better meet the transportation needs of America's small towns and rural communities," he testified. "Increased highway funding will expand access to jobs, education, and healthcare. Innovative policy solutions will ensure that people can more easily connect with regional and local transit options -- and from one mode of transportation to another."

LaHood's prepared testimony for all four recent hearings on USDOT's FY 2012 budget request are available at bit.ly/LaHood-budget.

Rural Senators Raise Doubts About Infrastructure Bank

A national infrastructure bank proposed by the Obama administration could benefit metropolitan centers at the expense of less-dense areas, senators from two rural states said at the Senate CST Committee hearing this week, BNA reported.

"I would request a careful review of the policy implications of this program before proceeding," said Sen. John Thune, R-South Dakota, adding that the bank "would principally benefit large metropolitan areas and ignore the needs of rural states like my own."

The Obama White House has proposed some form of the bank in each of its three budget proposals, but the program has never been authorized by Congress amid rural concerns and a consensus that the issue should be considered as part of a six-year surface transportation reauthorization bill.

Sen. Mark Begich, D-Alaska, also expressed concern about the bank and his home state's ability to compete for its funds.

LaHood responded that the Port of Anchorage, which is undergoing an expansion, could make a compelling case for money from the infrastructure bank. The secretary also assured lawmakers that rural areas will be able to win support from the infrastructure bank.

"Rural America will not be left out," he said in response to Begich. "When it comes to roads, we know that there are some places in rural America that need to enhance their roads, and there will be opportunities to do that in our plan, in our vision, either through accessing our highway funds or accessing the infrastructure bank."

LaHood Expresses Support for Re-Establishing Build America Bonds

The Obama administration is actively supporting U.S. lawmakers on bipartisan plans to revive Build America Bonds, a popular infrastructure financing subsidy for transportation that expired at the end of last year, Reuters reported.

LaHood told the Senate EPW Committee on Wednesday that he recently committed to Sen. Ron Wyden, D-Oregon, to help with his idea for the government to reauthorize Build America Bonds, which were created by the American Recovery and Reinvestment Act of 2009.

Wyden is in talks with senators from both parties to build support for a $50 billion bond financing plan for transportation projects.

Build America Bonds paid issuers federal rebates equal to 35% of interest costs, a generous subsidy that made the bonds popular with state and local governments. It gave them access to credit to pay for a range of infrastructure improvements at a time when the municipal bond market froze.

States, cities, and other municipal bond issuers sold $116 billion of BABs, accounting for 27% of total issuance, in 2010.

Critics of Build America Bonds said the 2009 subsidy was too high and succeeded in blocking renewal of the program late last year. (see Dec. 17 AASHTO Journal story)

3/11/2011
Questions regarding this article may be directed to editor@aashtojournal.org.