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Overall, the FY 2002 budget proposal appears to be unalloyed good news for the transportation construction industry. By William R. Buechner |
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On February 28, 2001, the Bush Administration released its first budget document for Federal Fiscal Year 2002, titled "A Blueprint for New Beginnings: A Responsible Budget for America’s Priorities." The budget blueprint provides a broad outline of the administration’s budget priorities, with details to be released in early April. Based on the available information, this analysis identifies the essential elements of the President’s proposed transportation budget for FY 2002. The data are not final and may be revised after release of the detailed budget figures. Overall, the FY 2002 budget proposal appears to be unalloyed good news for the transportation construction industry. The President’s budget fully funds the $27.2 billion guaranteed obligation limitation for highways in the Transportation Equity Act for the 21st Century (TEA-21) and incorporates the full $4.5 billion revenue-aligned budget authority (RABA) bonus for highways. The total highway obligation limitation for FY 2002 will thus be $31.7 billion. Combined with the $739 million of Minimum Guarantee and Emergency Relief funds that are not subject to the obligation limitation, the total amount of federal highway funds for FY 2002 will be $32.5 billion. The budget also honors the $6.7 billion TEA-21 guarantee for the mass transit program and the $3.3 billion enacted by Congress in the Aviation Investment and Reform Act for the 2lst Century (AIR-21) for the Airport Improvement Program. Unlike the last two budgets of the Clinton Administration, the FY 2002 budget does not appear to recommend using a big chunk of the highway RABA for nonhighway programs. The budget does propose $145 million for a "New Freedom Initiative" to improve transportation alternatives for the disabled, but the budget blueprint is not clear about the source of funds for this initiative. The figures in this analysis represent the administration’s proposals in the budget blueprint and may change with submission of the final budget in April. For FY 2002, the federal transportation programs would receive a total of $61.2 billion of budget authority, slightly less than the $61.6 billion for FY 2001. Most of the decrease comes from two sources:
Almost all of the rest of transportation will receive funding increases in FY 2002. For the years following FY 2002, the budget authority figures for transportation largely reflect projected inflation and are not supposed to be construed as a policy recommendation. Whether that treatment of the out-years will change in the final April budget is unclear at this time. Figure 1 shows the budget authority proposed for transportation for FY 2002—2006. In this chart, the amount of new budget authority for the 91 projects in the FY 2001 appropriations act is taken out to permit comparison of funding for the core transportation programs between FY 2001 and 2002. The chart also shows annual figures in constant 1999 dollars, which takes out the growth in spending needed simply to accommodate projected inflation. This makes clear that most of the projected growth in new budget authority after FY 2002 is solely to keep pace with inflation and represents no real increase.
Table 1 provides a summary of the FY 2002 budget for transportation, from the budget blueprint and other sources. The first section of the table provides data just for the federal highway program. The second section presents aggregate data for the highway and highway safety programs, including funding for the Federal Motor Carrier Safety Administration and the National Highway Transportation Safety Administration (NHTSA), since the budget often combines data for these programs. Table 1. FY 2002 Transportation Budget Authority (Billions of dollars)
The Highway and Highway Safety Programs The Bush Administration would provide a total of $33.049 billion for highway and highway safety programs for FY 2002. This total includes
The FY 2002 highway program funding of $32.5 billion is about $2.1 billion more than the FY 2001 funding level, an increase of a little more than 7%. (For FY 2001, Congress enacted an across-the-board reduction of 0.22% at the end of the appropriations process. All FY 2001 figures are after the reduction.) Figure 2 shows federal highway program funding under TEA-21 compared to the Intermodal Surface Transportation Efficiency Act (ISTEA). The bottom part of each column is the guaranteed funding level under TEA-21 and the amount enacted each year by Congress under ISTEA. Next is a dark section representing the additional funding for the Minimum Guarantee and Emergency Relief programs (Under ISTEA, the dark segments represent mainly the Minimum Allocation, Demo Projects, and Emergency Relief programs). The light third segment for FY 2000—2002 represents the annual RABA bonus (plus a RABA estimate for FY 2003). Finally, the top segment for FY 2001 represents the $1.37 billion additional funding for 91 projects earmarked in the FY 2001 Transportation Appropriations Act.
Table 2 shows the estimated apportionment of federal highway funds among the states for FY 2002, including both the TEA-21 guarantee and the RABA bonus. The total does not include funds held back to cover the Federal Highway Administration’s (FHWA) administrative expenses or programs administered directly by the FHWA. Since the figures for FY 2002 in Table 1 are estimates based on the distribution of funds in FY 2001, the actual FY 2002 distribution may differ slightly. The Bush Administration also proposed $145 million for a New Freedom Initiative to increase transportation alternatives for the disabled, but the budget blueprint is unclear about the source of the funds for this initiative. Table 2. Estimated Distribution of Federal Highway Funds to the States for FY 2002
The Bush Administration’s budget blueprint for FY 2002 fully adheres to the TEA-21 funding guarantee for mass transit of $6.746 billion. This is $486 million, or 7.8%, more than the $6.260 billion enacted for FY 2001 (after the FY 2001 across-the-board 0.22% reduction). Figure 3 shows the amounts provided in TEA-21 for mass transit compared to the funding levels under ISTEA. Except for the small across-the-board reductions enacted for all programs in FY 2000 and 2001, Congress has adhered to the TEA-21 funding guarantees for mass transit and is expected to do so again for FY 2002. Total funding for mass transit under TEA-21 will be 42% greater than under ISTEA.
Although federal funding for mass transit will grow to $6.7 billion in FY 2002, the impact on the transportation construction market will be small. Much of the federal funding each year for mass transit is used to purchase or repair rolling stock, such as buses and rail passenger cars, while almost 60% of the funds that do get into construction go for buildings, such as terminals and vehicle maintenance facilities. The total amount of construction work performed each year on subways and light rail comes to about $1.5 billion, according to the American Road & Transportation Builders Association’s (ARTBA) analysis of United States Bureau of the Census data (Value of Transportation Construction Put in Place, a monthly release available by subscription from ARTBA), and that figure has been declining in recent years. The Airport Improvement Program Under AIR-21, enacted last year, federal funding for the Airport Improvement Program (AIP) is scheduled to grow to $3.3 billion in FY 2002. This would represent a $107 million, or 3.3%, increase over the $3.193 billion enacted for the AIP in FY 200l (after the 0.22% reduction). While the budget blueprint does not include a specific recommendation for AIP funding for FY 2002, the budget does include full "firewall" funding of $13.3 billion for aviation programs and thus, by implication, would fully fund the AIP. The AIP funding level for FY 2002, if ratified by Congress, would be almost double the level provided as recently as FY 2000, as Figure 4 shows.
While AIP funds account for only a fraction of airport construction expenditures, the rest come from airport revenues, state and local governments, and passenger facility charges; the big AIP increase under AIR-21 should have a significant effect on transportation construction. As Figure 5 shows, most of the grants provided to airports under the AIP go toward construction of runways, taxiways, and other airside facilities. In recent years, most airport construction work has been on terminal buildings and hangars; the AIP funding increase should help accelerate runway construction, particularly if airport congestion worsens.
The budget blueprint provides few details on federal construction spending for other transportation modes. Those that can be gleaned from the document include:
Additional details on other transportation programs await the final budget to be submitted in April 2001. Under the first budget submitted to Congress by the Bush Administration, the federal transportation programs would fare very well. The FY 2002 budget honors the firewall guarantees for highways, mass transit, and airports and provides the full RABA for highways. A small amount of highway funds would be used for improving transportation alternatives for the disabled, but the budget blueprint does not identify where the funds would come from. The overall total for transportation in FY 2002 would be slightly less than in FY 2001, but this reduction comes largely from the assumption that Congress will not add funding above TEA-21 for special highway projects, as it did to the tune of $1.4 billion in FY 2001. William R. Buechner, Ph.D., is vice president of economics and research at the American Road & Transportation Builders Association in Washington, DC.
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