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Related LinksBoard of DirectorsStanding CommitteesAdvisory CommitteesPolicy Advisory BoardsGovernment AffairsLegislative ProgramsPolicy Updates Transportation Funding |
BOARD MEMORANDUM
FOR INFORMATION ONLY The attached document consists of the following two elements: (a) monthly legislative report; and (b) legislative history for the 2003-2004 session of the California Legislature. The monthly legislative report summarizes recent developments concerning important transportation and other issues at the federal and state levels. The legislative history describes some of the key transportation-related bills that are being considered by the state Legislature during the 2003-2004 session. It indicates the status of these measures and any adopted VTA positions on them.
Monthly Legislative Report May 2003
Administration TEA-21 Reauthorization Draft Being Circulated A draft of the U.S. Department of Transportations reauthorization proposal for the Transportation Equity Act for the 21st Century (TEA-21) has been circulating around Capitol Hill for the past several weeks. Known as the Safe and Flexible Transportation Efficiency Act of 2003, or SAFETEA, it calls for authorizing a relatively flat federal surface transportation program for the next six years approximately $247 billion for highways and transit from FY 2004 through 2009. TEA-21, on the other hand, authorized a total of $240.2 billion. Although the Administrations draft plan maintains the budgetary firewalls that were established in TEA-21, it does not embrace an increase in the federal fuel tax or index the tax to inflation in order to raise more money for the Highway Trust Fund. The Administration also appears to have rejected other methods of generating more revenues for transportation, such as drawing down the existing unexpended balance in the Highway Trust Fund and recapturing the interest income earned on that balance, which currently goes to the General Fund. In essence, the Administration is proposing only one new funding source for transportation shifting the proceeds from a 2.5-cent gasohol tax from the General Fund to the Highway Trust Fund, which would raise approximately $600 million per year. The Administrations draft reauthorization plan recommends the following targets for future highway spending:
These numbers are significantly lower than the figures mentioned in statements by Senate and House transportation authorizers regarding the need to grow the highway program. The Administrations draft includes a new Infrastructure Performance and Maintenance Program, which would be funded at approximately $1 billion annually. The funding would be derived from the Highway Trust Fund and would be made available to states with ready-to-go highway projects that address congestion. States would receive these funds based upon the Surface Transportation Program (STP) formula distribution, and would be required to commit them during the first half of each fiscal year. The Administrations draft proposal also offers a new Freight Transportation Gateway Program to address the productivity, security and safety of freight transportation gateways. This program would aid multi-modal freight transportation initiatives at the state and local levels by providing capital funding for projects that mitigate congestion and adverse community impacts caused by freight transportation. The funding for this program, the amount of which is unclear at this time, would come from a set-aside from the National Highway System. With regard to transit, the Administrations draft reauthorization proposal calls for consolidating the current myriad of capital and formula-based transit programs into two major categories: (a)Formula Grants and Research; and (b) Major Capital Investment Grants. Specifically, the Fixed Guideway Modernization Program, which provides funds for rail rehabilitation and modernization projects, would be folded into the new Formula Grants and Research Category. The current Bus/Bus Facilities Discretionary Program would be eliminated, and the funding that normally would be appropriated for this program would be shifted to New Starts, Section 5307 Urbanized Area Formula, Non-Urbanized Area Formula, a new Urbanized Area and Rural Incentive Program, and planning. The New Starts Program would be spun off into the new Major Capital Investment Grant Category. Non-fixed guideway, small starts projects would become eligible to receive New Starts funding, and the local match requirement would be increased from the current 20 percent to 50 percent. Another major element of the Administrations draft reauthorization plan is a change in the way that the funding for the various transit programs is split between the General Fund and the Mass Transit Account. Currently, all transit programs are funded with a mix of dollars from both sources, regardless of whether they are formula-based or discretionary. However, the Administration is proposing that the money for the New Starts Program come from the General Fund, with these dollars falling outside of the guaranteed spending levels. On the other hand, the programs under the new Formula Grants and Research Category would be funded entirely from the Mass Transit Account. If this proposal were to be enacted into law, the New Starts Program would be at the mercy of the availability of General Fund revenues, and at the mercy of the political dynamics associated with fighting with other federal programs in the domestic discretionary budget for a piece of the pie. In terms of transit funding, the Administration is proposing a fairly flat program, as follows:
Officially, the U.S. Department of Transportation refers to the draft proposal as being under review. The official release date remains uncertain, as does what, if any, changes will be made to this draft prior to its release. House Transportation Leaders Recommend Increasing Gas Tax Leaders of the House Transportation and Infrastructure Committee recently endorsed a $50 billion surface transportation program for FY 2004, increasing to $75 billion by FY 2009. To generate the funding necessary to support a program of that size, they are preparing a package of financing proposals that includes the following elements:
Committee leaders hope to put together a TEA-21 reauthorization bill that would increase funding for surface transportation programs at a rate of $5 billion per year over the six-year reauthorization period. This approach would result in a total program of $375 billion over six years, which is about $128 billion more than the figure presented in the Administrations draft reauthorization proposal. Senators Propose to Fund Transit Through Tax Credits Senators Charles Grassley (R-IA) and Max Baucus (D-MT), the chair and the ranking minority member of the Senate Finance Committee, respectively, have put forth a proposal that attempts to increase the levels of federal funding for both highways and transit through a reallocation of gas tax revenues. Currently, the 18.4-cent federal gas tax is divided between highways and transit, with 15.54 cents going into the Highway Account and 2.86 cents into the Mass Transit Account. Under the Grassley-Baucus plan, Mass Transit Account revenues would be reduced to .50 cents, thereby raising the highway share to 17.9 cents. As a consequence of this reallocation, transit revenues would be short by nearly $4 billion per year. Grassley and Baucus want to make up this shortage through some form of treasury borrowing. Under the Grassley-Baucus plan, the debt that would be issued to finance federal transit programs would be secured by a stream of tax credits. Although there is some precedent for this type of borrowing on a small scale, its large scale use would create a new class of federally sponsored debt, priced at a considerable discount to standard Treasury debt, and probably would cause rates to go up on normal Treasury debt issued to finance the growing General Fund deficit. Basically, the General Fund deficit would increase because of the substitution of expensive tax credits for direct appropriations. Because of this impact to the General Fund, the Grassley-Baucus plan likely will meet heavy opposition from the Office of Management and Budget, the Treasury, and congressional tax and budget committee leaders. Furthermore, the transit title has been successful under TEA-21 largely because its revenues and program expenditures have been readily predictable, as a result of the combination of budgetary firewalls for Mass Transit Account revenues and guaranteed General Fund supplements. The Grassley-Baucus plan is a dramatic departure from that approach and is generating significant opposition from groups that represent transit interests. House Proposes Reorganization of Appropriations Subcommittees In an unexpected turn of events, House Appropriations Committee Chair Bill Young (R-FL) created a new subcommittee dedicated to homeland security. This move had been widely speculated. However, until recently, it was considered unlikely that a new subcommittee would be formed primarily because Young had insisted that he did not believe the congressional calendar could sustain passing a 14th appropriations bill. Currently, Congress must consider and approve 13 separate federal agency spending measures each fiscal year. However, after repeated criticism by House Democrats over how the Administration is handling homeland security, Young changed his mind and decided it was necessary to create a new appropriations subcommittee that would focus exclusively on the budget for the newly established federal Department of Homeland Security. In lieu of putting in place a 14th subcommittee, Young folded the Transportation Appropriations Subcommittee into the Treasury-Postal Subcommittee. Under Youngs plan, which is the most sweeping subcommittee reorganization since the mid-1970s, Rep. Harold Rogers (R-KY), who chaired the Transportation Appropriations Subcommittee last year, switches to the new subcommittee dealing with homeland security issues. Rep. Ernest Istook (R-OK) remains the chair of the Treasury-Postal Subcommittee, with transportation being added to his responsibilities. Meanwhile in the Senate, after some initial reluctance, Senator Ted Stevens (R-AK), the chair of the Senate Appropriations Committee, decided to undertake a similar reorganization of subcommittees to mirror the House. He established a new subcommittee to address homeland security issues, and combined transportation with the subcommittee dealing with the Treasury, rather than having it continue to be a stand-alone subcommittee. The transportation appropriations bill now falls under the jurisdiction of the Transportation, Treasury and General Government Subcommittee, which is chaired by Richard Shelby (R-AL). The ranking minority member of this subcommittee is Patty Murray (D-WA). Legislators Continue to Grapple With State Budget Deficit In March 2003, Governor Gray Davis signed SB 17X, the first legislative response to his proposed mid-year budget reductions presented in December of last year. This measure includes a $3.3 billion package of program cuts and fund shifts, with reductions falling most heavily on education ($2.3 billion). Transportation also was included in this down-payment on the states overall budget shortfall. Specifically, SB 17X authorizes a $100 million loan to the General Fund from the Traffic Congestion Relief Fund (TCRF), which is the account for the more than 140 projects included in the Traffic Congestion Relief Plan (TCRP). Under existing law, this loan must be repaid by FY 2006. The Legislature rejected the Governors recommendation to terminate $90 million in funding for local streets and roads in the current budget year. As for the Governors proposals affecting transportation in FY 2004, such as suspending the Proposition 42 transfer of gasoline sales tax revenues from the General Fund to the Transportation Investment Fund (TIF) and forgiving a $500 million General Fund loan from the TCRF, no action has been taken to date. These proposals would result in a permanent loss of more than $1.6 billion in transportation funding. Recently, the Assembly Transportation Committee and the Assembly Budget Subcommittee on Informational Technology and Transportation held a joint hearing to address the negative financial situation confronting the TCRP. The discussion focused on ways to cash-flow TCRP projects that either have an approved allocation or that would be seeking allocations in FY 2004. One compelling scenario that emerged involved the prospect of using new revenue plus the carryover balance in the TCRF for this purpose. Specifically, based upon the high price of gasoline and the depressed economy, there is an expected windfall to the Public Transportation Account of approximately $180 million for FY 2004. These funds, coupled with the anticipated carryover balance in the TCRF of $230 million, could be used as a potential bridge to keep TCRP projects afloat in FY 2004. In any case, many predict that the Legislature will not take any significant action until the Governor releases his May revisions to the budget, which is scheduled to occur on May 14, 2003. The so-called May Revise is a more detailed fiscal analysis of the states budget situation based upon the most recent information available with regard to tax collections and expenditures. CONTACT THE BOARD SECRETARY'S OFFICE FOR ATTACHMENTS.
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