Political Battle Begins for 2010

President Obama’s ambitious $3.55-trillion budget outline for fiscal year 2010 is the latest salvo in his administration’s efforts to revive and reshape the nation’s economy. The proposed budget blueprint, unveiled Feb. 26, aims to cut the federal deficit in half by 2013 but doesn’t slash construction accounts to reach that g oal. Instead, it would boost funding for water infrastructure and create a National Infrastructure Bank.

Photo: AP/Wideworld

OMB’s Orszag (left) delivers plan to Rep. John Spratt (center) and Sen. Kent Conrad

Meanwhile, Congress still needs to approve final spending numbers for fiscal 2009. Lawmakers approved a stopgap measure this fall to continue spending at 2008 levels through March 6.

White House officials say the 134-page fiscal 2010 budget outline provides a broad framework for fiscal policy over the next 10 years. A more detailed budget plan specifying requested amounts for individual programs will be released in April. But even after that plan comes out, it will only be an early step in a long legislative process. Months of hearings by appropriations and tax-writing committees will take place, followed by committee and floor votes. Final numbers for 2010 spending won’t emerge until late summer, at the earliest.

Nevertheless, the summary does begin to flesh out the Obama administration’s spending priorities. The outline, together with the massive $787-billion stimulus package signed into law on Feb. 17, gives a clearer picture of Obama’s fiscal policy.

Initial reaction to the budget proposal has been mixed. Senate Finance Committee Chairman Max Baucus (D-Mont.) calls the budget a "strong proposal that focuses on urgent priorities." But the top Republican on the Senate Budget Committee, Judd Gregg (N.H.), asks, "Where is the spending restraint?"

Jeff Shoaf, senior executive director of government and public affairs at the Associated General Contractors, says, "After all the talk of infrastructure [investment] during the stimulus debate, we would have hoped there would be more room for growth in construction accounts."

"While we have not seen all the details, the president’s disappointing budget proposal appears to move in exactly the wrong direction," says Bruce Josten, U.S. Chamber of Commerce executive vice president for government affairs. "More taxes, heavy-handed regulations and command-and-control government will not hasten recovery."

Under the Obama 2010 plan, the Environmental Protection Agency would be one of the big winners. The $10.5 billion proposed is a $3-billion increase over EPA’s 2008 funding and represents the largest budget request in the agency’s 39-year history. Within the $10.5 billion, Clean Water and Drinking Water State Revolving Funds would receive a combined $3.9 billion to support approximately 1,000 clean-water and 700 drinking-water projects. By comparison, the two SRF accounts received $1.5 billion in 2008. The request calls for reinstating excise taxes that expired in 1995 to collect more than $1 billion to clean up Superfund sites.

The National Association of Clean Water Agencies likes the proposed numbers for water infrastructure projects. "For too long and despite our best efforts, we have watched funding for the popular SRF program dwindle to levels that threaten our ability to provide strong public health and environmental protections at a cost that our struggling communities can afford" says Ken Kirk, NACWA’s executive director. "We must work with members of Congress to ensure strong support for these funding levels."

Construction and transportation groups are less pleased about the funding proposed for the Dept. of Transportation. The administration proposed $72.5 billion, a modest $2-billion increase over expected 2009 levels for DOT. The outline provides few details about how the funds would be divided among DOT programs but indicates the administration will work with Congress to change the mechanisms for financing surface transportation programs. The budget proposal suggests that those reforms could include merging trust-funded and non-trust- funded aviation and highway programs into domestic discretionary spending, or general revenue.

Shifting trust-fund money from the current separate dedicated fund into general discretionary spending could have a dampening effect on long-range planning and investment, says Jack Basso, director of programs, finance and administration at the American Association of State Highway and Transportation Officials. "It simply becomes part of the annual appropriations process...and it makes it much more difficult to have any stable planning for the future because you don’t know what you’re going to get year to year," he says.

Critics already are blasting the proposal. Fourteen lawmakers from the House and Senate, including House Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.) and the committee’s top Republican, John Mica (Fla.), on Feb. 27 urged Obama to drop any efforts to change the scoring of transportation funding. "This is a big deal," says Brian Pallasch, American Society of Civil Engineers’ managing director for government relations and infrastructure initiatives. He says of the administration proposal, "I would say that it is troubling."

AGC also is disappointed in the total transportation dollars proposed. Shoaf says, "We were hoping there would be more of a boost in transportation, instead of a limiting factor....That will have a detrimental impact on the smooth flow of long-term big projects, and we think that is wrong way to go."

The DOT budget request includes a five-year, $5-billion high-speed-rail state-grant program to add to the $8 billion for high-speed rail provided in the American Recovery and Reinvestment Act. The Next Generation Air Transportation system, a long-running program to modernize the air-traffic control program, would receive approximately $800 million.

For the Corps of Engineers’ civil works, the budget proposes $5.1 billion, a $200-million increase from the expected 2009 funding levels. The stimulus measure allocated $4.6 billion for the Corps programs. Construction priorities will include flood-control projects, aquatic ecosystem restoration projects and projects that facilitate commercial navigation.

The budget requests $26.3 billion for the Dept. of Energy, a slight reduction from 2009 levels but an increase over the $24.1 billion enacted in 2008. Funding priorities would include aid for federal building-modernization projects, renewable-energy projects, smart-grid transmission projects and further development of carbon-capture...

...and storage technology. The Yucca Mountain program would be scaled back while the administration develops a new strategy for nuclear-waste disposal.

The budget also proposes $5 billion in 2010 for establishing a National Infrastructure Bank, although little detail is provided as to how the bank would be funded or how it would work. The budget recommends continuing $5-billion annual funding for the bank through 2014. During the campaign for the White House, Obama advocated such a financial mechanism, funded at about $60 billion.

The envisioned bank might well look like an institution proposed in 2007 in a bill sponsored by Sen. Christopher Dodd (D-Conn.) and former Sen. Chuck Hagel (R-Neb.). Under the Dodd-Hagel bill, the bank would provide assistance to states, localities, transit agencies or others that want to build infrastructure projects. The bank’s aid would take a variety of forms, including subsidies, loan guarantees and tax-credit general-purpose or project-specific bonds. The Dodd-Hagel bill initially capped the bank’s bond-issuing limit at $60 billion. The bill did not go anywhere in the last Congress, but Obama was one of its co-sponsors. ASCE’s Pallasch says of the infrastructure-bank concept, "When you’re looking at big projects that have the ability to generate revenue, it is a very good option. It is for those big, transformative projects."

Peter Orszag, director of the Office of Management and Budget, says some of the reduction in the federal deficit would be achieved by allowing tax breaks to expire in 2011 for families earning more than $250,000 a year and individuals earning more than $200,000. Additional offsets could be gained by making government "more efficient" by focusing on "programs that work" and ending support for programs that do not, Orszag says.

Unfinished Business

As the debate begins on the 2010 budget, Congress is moving toward resolving unfinished spending business for the current fiscal year. Before last November’s election, Congress approved three of the 13 appropriations bills for fiscal 2009. Programs receiving full-year funding were those covered by the defense, military construction-veterans affairs and homeland security appropriation bills.

But programs financed by the other nine spending bills—including such construction accounts as highways, transit, Corps of Engineers’ civil works and General Services Administration federal buildings—have been operating since last Oct. 1 under a stopgap bill, generally at their 2008 appropriated levels.

With that catchall bill slated to lapse on March 6, the House on Feb. 25 approved a $410-billion measure that wraps the nine bills together and funds them through the end of fiscal 2009, with some changes, upward and downward, from 2008 levels.

For construction programs, the 2009 bill showed some increases but other decreases. The largest percentage gain was in GSA’s construction account for public buildings, to which appropriators allotted $746 million, more than double the 2008 mark. Major GSA project allocations include $163 million to continue work at a Food and Drug Administration complex in Maryland and $110 million for a federal courthouse in San Diego.

For the key transportation sector, the bill’s totals "look perfectly respectable," says Cathy Connor, Parsons Brinckerhoff senior vice president and manager of government affairs. The largest federally aided construction program, highways, would receive $40.7 billion, down 1% from last year, but the 2008 total included a special $1-billion infusion to upgrade bridges. Transit would get an 8% hike, while airport construction grants would stay at the 2008 level.

At ENR press time, the Senate was debating the bill, and advocates of the measure were pointing to some hopeful signs. The bill had gained the backing of Sen. Thad Cochran (Miss.), the senior Republican on the Appropriations Committee, but he was not enthusiastic. "I am supporting the approval of this bill by the Senate even though the process that has brought us to this point has left a lot to be desired," Cochran said.

The measure’s supporters also turned back a proposal from Sen. John McCain (R-Ariz.) to hold the programs’ spending at their 2008 levels. McCain continued his vociferous criticism of earmarked funding for individual projects. Taxpayers for Common Sense, an advocacy group, counts 8,570 earmarks totaling $7.7 billion in the pending appropriations package, though the group says the Appropriations Committee’s estimate is $3.8 billion in earmarks. McCain’s amendment failed on March 3 in a 63-32 vote, three votes more than the 60 needed to ensure Senate passage of the $410-billion bill.

If the Senate is unable to finish work on the measure before March 6, a short-term continuing resolution would be required. "It would certainly be disappointing if there had to be another CR," says Parsons Brinckerhoff’s Connor. "I think we just need to get this bill done and move on."