Bush administration releases FY 2008 budget proposal

President's budget plan fails to adhere to the surface transportation program investments guaranteed by SAFETEA-LU

News ARTBA, AGC and the American Highway Users Alliance February 07, 2007
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The Bush administration released its $2.9 trillion fiscal year (FY) 2008 budget proposal Monday, Feb. 5. This federal spending plan includes mixed results for the $65 billion the measure recommends for the programs administered by the U.S. Department of Transportation.

Specifically, the budget recommends record investment for a number of federal transportation programs, including the highway and transit programs. Unfortunately, the budget plan fails to adhere to the surface transportation program investments guaranteed by SAFETEA-LU of 2005.

The administration is proposing $39.585 billion for the core federal highway program--a $500 million increase over projected FY 2007 investment--and reports Highway Trust Fund highway account revenues have exceeded projections by $631 million. Unfortunately, the administration is proposing to cancel the $631 million upward adjustment of FY 2008 highway investment these additional revenues require under SAFETEA-LU's funding guarantees due to concerns about the trust fund's solvency. This proposal would represent the first explicit violation of the Highway Trust Fund's investment guarantees since they were enacted in 1998.

Under the law, the administration is required to follow a specific process to adjust highway funding over two years. The $842 million positive adjustment intended for 2007 and 2008 was based on past and estimated future revenue from fuel and truck taxes. For the 2007 budget, the administration followed the law correctly and added the $842 million in new funding. However, the 2008 budget proposal deleted the $842 million funding adjustment.

"It is unfortunate that we cannot endorse the President's budget proposal for highways as we have for the past two years," American Highway Users Alliance President and CEO Greg Cohen said. "American motorists and commercial drivers should be concerned that the administration is proposing $842 million less in highway funding than required under the SAFETEA-LU law, even though congestion and safety problems are on the rise. We will work with key congressional committees to increase highway funding to $40.4 billion, the minimum amount required by the SAFETEA-LU highway law."

Highway Trust Fund solvency remains a concern. Projections from both the Office of Management and Budget and the Congressional Budget Office indicate that Highway Trust Fund revenue may not be sufficient to fully fund SAFETEA-LU levels through FY 2009, the life of the authorization legislation. The budget documents submitted do not add any clarification. Charts in the document show the Highway Trust Fund remaining solvent but these projections were not based on the anticipation that the highway program would be funded in FY 2007 at the same level as in FY 2006 ($34.7 billion). The pending continuing resolution instead funds the highway program this year at the SAFETEA-LU level of $39.1 billion. Hearings on the budget this week may clarify projections on Highway Trust Fund status.

The measure also calls for increasing federal transit investment by $450 million to $9.4 billion. This amount, however, is $300 million below the FY 2008 funding level required by SAFETEA-LU and also would be a major break from the transportation funding guarantees. The administration's budget also recommends a $765 million, or 22%, reduction in federal airport construction investment from the current level of $3.52 billion to $2.75 billion in FY 2008.

The administration did not include in its request the annual Revenue Aligned Budget Authority (RABA) funding, which is the mechanism that adjusts the authorized funding level to reflect actual revenue received by the Highway Trust Fund. For FY 2008, the RABA adjustment should be $631 million. The administration says that it proposes not to provide the RABA funding increase in order to preserve the solvency of the Highway Trust Fund. The FY 2008 request is a slight increase over the 2007 obligation limit of $39.1 billion contained in the continuing resolution that should be approved by the Senate later this week. RABA funding also was not provided in FY 2007.

The administration's budget proposes a new highway congestion initiative that will enable a limited number of select cities to test comprehensive congestion reduction strategies that include innovative approaches to manage traffic and facilitate improvements to major interstate corridors. The program would be funded at $175 million in FY 2008. The "innovative approaches" include: congestion pricing (tolls charged at different rates based on the amount of traffic), commuter transit services, commitments from employers to expand work schedule flexibility and faster deployment of real-time traffic information.

It is important to recognize the administration's budget proposal is not binding, but rather represents the first step in the annual budget process. Federal spending decisions for each fiscal year are not finalized until the enactment of the 12 individual appropriations bills.

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