Budget 2010: Signaling Changes in Federal Transportation Policy

For the most part, the president’s detailed FY2010 budget holds the baseline on transportation infrastructure spending with slight increases at the modal agencies (e.g., highways, transit, railroads) at the U.S. Department of Transportation. This excludes the $53 billion directed to transportation infrastructure in the American Recovery and Reinvestment Act, passed earlier this year.

Yet as with the national conversation about transportation, the president’s budget is noteworthy for the unprecedented treatment of the highway and transit program and the signals this sends for the related federal legislative deliberations slated to begin later this spring.

Specifically, the debate is just about beginning on the reauthorization of the current $286 billion, six-year transportation law: the Safe, Accountable, Flexible, Efficient Transportation Equity Act—A Legacy for Users. That law, dubbed SAFETEA-LU, is due to expire this fall. However, for a number of months the federal program has been facing severe funding constraints in its dedicated trust fund (often referred to as the “highway” trust fund) due to sharply declining receipts from the federal gas tax. This past September Washington was forced to shift $8 billion from the general fund to cover a shortfall in the account.

While the president’s budget is clear that it does not reflect “recommended funding levels or a budgeting approach for the upcoming reauthorization” it does respond to this problem. Because the highway trust fund only has enough revenues flowing into it – mostly from federal gas tax receipts – to support $5 billion in spending the budget also calls for a new $36.1 billion General Fund share account to maintain the baseline spending of the current program.

In the preliminary budget request issued in February, the administration remarked that the purpose of this shift is to make the budgetary treatment of the transportation programs more transparent by reflecting that the revenues are derived from general—not dedicated—revenues. The result, however, could be interesting changes in how federal funds are budgeted for transportation by making them subject to the congressional appropriations process. Right now, due to the transportation program’s “contract authority” provisions, the annual funds that are authorized in SAFETEA-LU are available for obligation in advance of congressional appropriations action. The current infusion of general fund revenues jeopardizes that arrangement.

Apart from those budgetary calisthenics, the budget includes the $1.5 billion in competitive grants that will be awarded to projects of national, regional or metropolitan significance, based on applications from state and local governments or transit agencies, as authorized by the Recovery Act, which also contains $1.5 billion for this purpose. This is an excellent opportunity for the department to assist states and metropolitan areas in one of their hardest tasks: transcending the stovepiping of disparate transportation, housing, energy, and environmental programs that remains a serious cause of undesirable development outcomes.

Also stemming from ARRA is $1 billion to go along with the recovery act’s $8 billion intended to jump start an American network of 100 to 600 mile long high speed rail corridors. Details on the specific application guidance are to be issued by the Federal Railroad Administration by June 17, 2009. With access to a safe, reliable, and convenient rail network metropolitan areas can help address climate goals, congestion problems—at both airports and on highways—and energy independence at the same time providing the infrastructure to enable them to compete in a global economic environment that has tended to favor such investments.

Although still short on specifics, the president’s budget continues his pledge to establish a national infrastructure bank. Considered by the budget as a “major agency” with about as much funding through 2014 as the Army Corps of Engineers ($25 billion), it would provide merit-based credit and grant mechanisms for innovative infrastructure projects of national or regional significance, acting where uniformity is needed or the scale and geographic reach of a problem requires national attention.

Where the budget is more uneven is its commitment to improving transportation statistics. Though the budget highlights its commitment to strengthening federal statistics, the Bureau of Transportation Statistics (BTS) receives only a slight increase to $28 million and has gone years without serious institutional investment. A look at the agency’s budget history shows that in 1998 it received $31 million, equivalent to about $42 million today. While the budget does promise to support core statistical programs as well as improvements to shipping, performance, and livability data, a stronger BTS would frame the debate as policymakers decide how to spend scarce funds on specific projects and programs and improve the patchwork of transportation data programs.

The president’s budget is also interesting for what it cuts. Considerable attention has been given to the $17 billion in reported savings from programs the budget recommends to be terminated or reduced. Over $200 million in savings is projected to come from cutting funding from earmarked projects the Administration believes should be funded through grant money already provided to the states. The budget also recommends cutting loan obligations and credit assistance for the Transportation Infrastructure Finance and Innovation Program from $1.6 billion this year to just $631 million in FY2010. It also ends federal appropriations for state infrastructure banks.

The nation is on the cusp of sweeping change in its federal transportation policies. The president’s FY2010 budget is foreshadowing the changes to come.