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|Federal Highway Administration > Publications > Public Roads > Vol. 72 · No. 5 > Revisiting the TEA-21 Reauthorization: Extensions And Delays|
Publication Number: FHWA-HRT-09-003
Revisiting the TEA-21 Reauthorization: Extensions And Delays
by John Haifley, Ben Hawkinson, and Jeff Price
The recurring extensions avoided shutdowns of highway projects but disrupted the stream of stable Federal transportation funding.
On September 30, 2003, the Transportation Equity Act for the 21st Century (TEA-21), the authorizing legislation for the surface transportation system, was set to expire. With a reauthorization bill nowhere in sight, the flow of funding for Federal highway, transit, and safety programs was in danger of slowing to a trickle.
To avoid a shutdown of the Federal surface transportation program, the U.S. Congress approved legislation to extend funding for 5 months. On September 30, President George W. Bush signed the legislation, known as the Surface Transportation Extension Act of 2003. The legislation extended provisions under TEA-21 and continued authorizations at fiscal year (FY) 2003 levels. This would be the first of 12 extensions over a period of 680 days before the executive and legislative branches could agree on the next reauthorization bill.
The intermittent extensions of TEA-21 disrupted the flow of Federal funding for transportation projects for 2 years. Only the signing of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) in August 2005 stabilized that funding. Examining the causes and impacts of the extensions can shed light on the overall transportation legislation process.
Behind the Authorization Acts
The first and most crucial step in financing the Federal-Aid Highway Program is development of authorizing legislation. An authorization is a statutory provision that establishes or continues a Federal agency, activity, or program for a fixed or an indefinite time. Authorizing legislation for highways began with the Federal-Aid Road Act of 1916 and the Federal Highway Act of 1921. These acts provided the foundation for the Federal-Aid Highway Program as it exists today, and Congress continues or renews the program through passage of multiyear authorization acts. In addition, since 1978, Congress has passed highway legislation as part of larger, more comprehensive, multiyear surface transportation authorization acts.
The purpose of such legislation is to define the overall surface transportation program and authorize the top level of funding available. The act authorizes funds for Federal-aid highways and highway safety, transit, and related programs. The act provides contract authority for specific programs from the Highway Trust Fund, including the Interstate Maintenance program, the National Highway System program, the Highway Bridge Program, the Surface Transportation Program, the Highway Safety Improvement Program, and the Congestion Mitigation and Air Quality Improvement Program.
The funding of other Federal surface transportation programs is accomplished through appropriated budget authority that requires two steps, an authorization act and an appropriations act. The authorization acts are multiyear, while appropriation acts are an annual event.
The congressional process of reauthorization begins with a legislative proposal from the House of Representatives. However, because each chamber of Congress commonly has different ideas about the future of surface transportation, bills may be introduced and can evolve in both houses at the same time. The Transportation and Infrastructure Committee and Committee on Ways and Means consider the House's legislation. Meanwhile, the Committee on Environment and Public Works; Committee on Commerce, Science, and Transportation; Committee on Banking, Housing, and Urban Affairs; and Committee on Finance all play roles in the Senate legislation. If both branches of Congress approve separate bills, then the bills go to a conference committee to resolve differences. The conference committee produces a report that must be passed by the full House and Senate. Then Congress presents the bill to the President for his signature or veto.
After the President signed the Surface Transportation Extension Act on September 30, 2003, Congress continued providing funding for Federal-aid highway, transit, and highway safety programs using current program structures and tied funding levels to the FY 2004 budget resolution. Congress kept in place all policies authorized in TEA-21. A budgetary firewall continued to protect these programs so revenues from highway user fees could not be directed to any other purpose and had to be appropriated at levels directed in the FY 2004 authorization.
Most important, Congress amended the provision in the Internal Revenue Code that prohibited the expenditure of funds from the Highway Trust Fund after October 1, 2003, to allow the U.S. Department of Transportation (USDOT) to disburse funds through the summer of 2004. This amendment kept the Federal surface transportation programs operating for the next several months.
Over the following 2 years, Congress would extend the surface transportation program 10 more times until the President signed the 12th extension, the Surface Transportation Extension Act of 2005, Part VI, into law on July 30, 2005, narrowly avoiding a shutdown. Finally, on August 10, 2005, the President signed SAFETEA-LU into law, authorizing the Federal surface transportation programs for highways, highway safety, and transit for the 5-year period 2005-2009.
Cause of Delays to Reauthorization
On the most fundamental level, Congress extended the surface transportation program for almost 2 years because congressional members could not agree on the provisions of a new multiyear reauthorization. The major issues that caused delay included the level of spending, sources of funding, and overall program costs. TEA-21 increased the level of funding from the previous reauthorization, the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) by about 40 percent. Some expected a similar increase during consideration of SAFETEA-LU, but the options for raising revenue proved contentious: raising the Federal fuels tax; paying interest on unexpended balances in the Highway Account; and indexing the fuels tax to some type of economic measure, among others. In addition to these larger systemic issues, Congress needed to address a series of other concerns described below.
Donor/donee issue. In the view of the States, one of the more divisive issues associated with recent reauthorization proposals is the ratio of the annual Federal-aid highway funds a State receives and the Federal highway user tax receipts from users in the State. Often termed the "donor/donee" debate, at the most basic level, the issue involves States that receive a greater share of Federal highway funding than their share of user taxes paid into the Highway Account (donee States) versus States that receive a lower share of highway funding than they pay into the Highway Account (donor States).
TEA-21 guaranteed that each State's share of apportionments and funding for High Priority Projects was at least 90.5 percent of its percentage share contributions to the Highway Account of the Highway Trust Fund. During consideration of SAFETEA-LU, the House and Senate had differing plans on how to address the donor/donee issue, each of which would have provided a 95 percent return (that is, raised the minimum share from 90.5 to 95 percent). The House bill built upon the Minimum Guarantee program from TEA-21, while the Senate bill created the new Equity Bonus Program. Getting approval from donee States proved difficult because the bills proposed a guaranteed rate of return, which increased the share for donor States but cut the share for donee States.
TEA-21 Extensions: 680-Day Timeline
Summary of Impacts of Short-Term Extensions
In the end, SAFETEA-LU passed with an equity bonus provision that ensured each State's share of apportionments from certain programs, such as the Interstate Maintenance and National Highway System programs, would be at least a specified percentage of its contributions to the Highway Account. The specified ranges in the act are 90.5 percent in 2005 and 2006, 91.5 percent in 2007, and 92 percent in 2008 and 2009.
Lack of new funding sources for larger bill. Another hurdle Congress faces with reauthorization bills is finding new sources of revenue to increase existing funding levels. Before TEA-21, Congress was able to redirect the 4.3 cents per gallon of the Federal motor fuels tax that was being allocated to the General Fund of the Treasury into the Highway Trust Fund. This redirection added an estimated $4 billion per year to the trust fund, which in turn helped alleviate the impact of the donor/donee issue. SAFETEA-LU lacked a similar new source of funding, due in part to funding needs for national security. This lack of substantial new sources of revenue, coupled with the desire to improve the return to donor States, added to the delay.
Current program not eliminated; therefore, no immediate crisis. As noted earlier, when existing multiyear authorization legislation expires, Congress typically enacts one or more extensions to ensure that highway and transit programs continue to operate. Although no long-term, stable funding architecture is in place, USDOT continues to reimburse States when they seek prompt compensation for work completed on transportation projects. This arrangement allows some spending to continue, which can lessen pressure to enact a stable and longer term source of funding.
States concerned with other budget issues. The concerted involvement of the Nation's governors helped pass TEA-21. The governors saw the TEA-21 bill as breaking new ground in transportation policy and planning, while increasing funding for Federal surface transportation programs. In sum, TEA-21 approved 40 percent more funding than the previous authorization.
But during consideration of SAFETEA-LU, States became increasingly concerned about the donor/donee issue, which led to a lack of unity among them. Having secured additional funding through TEA-21, many governors and State legislators focused their attention on other State budget demands, such as health care and education funding, even while transportation funding continued to decline relative to documented needs.
Impacts of the Extensions
The extension acts avoided the detrimental effects of a complete shutdown of the Federal surface transportation program. However, the numerous extensions had wide-ranging effects on State partners and their ability to deliver ongoing and new transportation projects on time.
Funding uncertainty. Most States rely heavily on continuing and guaranteed funding from the Federal Government for new capital projects and planning. Some States also rely on funding to pay bond debt service. During extensions, States continue to receive funding based on existing apportionment formulas, but the funding distribution is spread over smaller periods of time. Funding also can be subject to disruption by a shutdown of the Federal-Aid Highway Program if the law expires without an extension.
A 2003 survey of State transportation agencies by the American Association of State Highway and Transportation Officials (AASHTO) found that 33 of the 45 responding agencies contended that a short-term extension rather than completion of a 6-year bill would mean $2.1 billion in project delays.
In June 2005, just 2 months before SAFETEA-LU was signed, Kansas Governor Kathleen Sebelius sent a letter to her State's congressional delegation urging Congress to stop passing temporary extensions and reauthorize immediately. Sebelius stated that Kansas was in the middle of its 10-year Comprehensive Transportation Program (CTP) and a guarantee of long-term Federal transportation funding was essential for its completion.
"The lack of an adequately funded long-term reauthorization bill, and the piecemeal fashion in which funding has been distributed under the short-term extensions, negatively impact the State's ability to plan and carry out the CTP and numerous local transportation programs that are federally funded," Sebelius wrote.
Delay and reduction in construction activity. Many State department of transportation (DOT) representatives reported problems with project planning and contract letting due to staggered (alternative, short-term, or varied) funding over various nonstandard periods. One of TEA-21's extensions ran through May 2005, leaving many States concerned about plans for summer construction. This situation hit northern States especially hard, where the construction season is much shorter.
"Our construction schedule follows the timetable of Mother Nature," said Utah DOT Executive Director John Njord at the January 2005 AASHTO "Get It Done" press conference on reauthorization held in Washington, DC. "In Utah, we are limited to constructing projects between mid-April and mid-October [that is, 7 months out of 12]. Anytime outside of that window it's simply too cold and too wet to do any work." Njord said that if the Federal legislation was not in place by April 1, an entire construction season could be lost.
"It is very difficult for contractors to make hiring and equipment purchasing decisions when the highway program is left in limbo by endless legislative delays," said Stephen Sandherr, chief executive officer of the Associated General Contractors of America.
In March 2005, Michigan's House and Senate passed a resolution stating, "The uncertainty regarding long-term Federal funding hampers Michigan's ability to effectively plan investments in infrastructure and may contribute to delays in critical highway and transit projects."
State DOTs, which build public roads using a combination of State and Federal funds, "don't move forward with big projects if they're not sure of funding levels," said Leslie Jezuit, chief executive of a manufacturer of highway safety equipment. "We've seen many of the large projects delayed or deferred, or significantly reduced."
Impact on long-term, more expensive projects. The absence of a multiyear reauthorization act also made it difficult for States to plan for longer term, more expensive projects. Large construction projects, such as the Central Artery/Tunnel Project (Big Dig) in Boston and rehabilitation of some Ohio River bridges, fell victim to extensions.
At the "Get It Done" press conference, Utah DOT's Njord said, "States cannot prudently plan spending based on short-term extensions." He also noted that States were unable to proceed with multiyear projects because of the uncertainty of Federal funding. "You don't enter into a multimillion dollar, multiyear project without knowing how you're going to pay for it," he said.
Larger economic impacts of reduction in highway spending. Reduced highway spending can result in ripple effects throughout the broader local, State, and regional economies. "Ohio could expect between 75,000 and 150,000 new jobs with the passage of a long-term transportation authorization bill," said Ohio DOT Director Gordon Proctor. "These are good-paying, stable jobs, the kinds of jobs Ohio's citizens want and need."
Also at the January 2005 press conference, William Millar, president of the American Public Transportation Association, said the delay was affecting manufacturers because State agencies, unsure of Federal funding, were delaying transit equipment purchases. "We need a good bill, a long-term bill, and a bill that is adequately funded," he said.
Echoing a similar sentiment, Tim James, director of Federal relations for the International Union of Operating Engineers, said a fully funded transportation bill was a "sound, proven way" to create jobs and to pave the way for future economic development. "The paychecks created will have tremendous economic consequences," he said.
Erosion of purchasing power. Further complicating planning, States also need to contend with surges in the cost of materials such as concrete, steel, and asphalt, and increases in construction labor costs. In September 2006, the House Transportation and Infrastructure Committee requested that the Office of Inspector General analyze the growth in highway project costs. The resulting report, Growth in Highway Construction and Maintenance Costs, states that "highway project cost growth has substantially reduced the purchasing power of highway funds provided in SAFETEA-LU. A dollar will have lost between 37 and 60 percent of its value between 2005 and 2009, if highway project inflation continues at its 2006 pace. Under these circumstances, the $42 billion provided in SAFETEA-LU for 2009 Federal-aid to highways will only be equivalent to between $16.8 billion and $26.6 billion in 2005 dollars."
More recently, fuel cost increases have approached historic highs, pushing up the cost of materials and construction. For example, since SAFETEA-LU's signing in August 2005, the price of motor fuel has been volatile, which can lead to increased construction bids and other bid complications.
Some say that delay due to extensions has exacerbated the erosion of purchasing power by millions of dollars for State DOTs. "What Congress doesn't seem to realize is that these short-term extensions are costing the taxpayers money," said Mayor Joseph Donaldson, of Flagstaff, AZ, who chaired the National League of Cities' Transportation Infrastructure and Services Committee. "In Arizona, it has meant a slowdown of transportation construction projects," Donaldson said. "As the projects take longer to complete, the cost of construction rises. We cannot get transportation projects already approved underway for the same dollars we could have just 2 years ago."
Public expectations of government stewardship of transportation system. The users of the transportation system expect to experience a seamless system of roads, bridges, and transit services delivered across many political boundaries and overseen by all levels of government. The availability of transportation facilities is not immediately — or visibly — affected by a lack of long-term authorization legislation. Therefore, the impacts of funding extensions might not be apparent or immediately felt by the public.
"This is really about people," said AASHTO President Jack Lettiere, Commissioner of the New Jersey DOT. Citizens "put money in the Highway Trust Fund every time they buy gas — with the expectation that we are going to use those funds to improve their daily travel to work, and to get them home at the end of the day in time for the Little League game. That's who is being shortchanged every day we delay in passing a properly funded surface transportation bill."
Safety. Beyond delaying the authorization for preservation and construction, extensions of surface transportation bills also delay the setting of funding levels for safety programs. States also find it difficult to plan for larger, multiyear safety improvement projects that might depend on funds from a surface transportation authorization act.
Ramifications For the Future
As reported by State DOT and transportation industry representatives across the country, the TEA-21 extensions and 680-day delay leading up to SAFETEA-LU's passage had a significant effect on delivery of the surface transportation program in States nationwide. During extensions, States administer their programs differently in response to uncertain long-term Federal funding. Many State DOT leaders indicate that extensions lead to delays in planning and construction of long-term projects. These delays eventually drive up the costs of delivering transportation projects.
John Haifley leads the Intergovernmental Affairs Team in the Federal Highway Administration's (FHWA) Office of Policy and Governmental Affairs. Previously, he served as director of Federal relations for the American Automobile Association (1987-2000), director of government relations for the Highway Users Federation (1985-1987), and Federal legislative officer for the Maryland DOT (1971-1985). Haifley is a member of the Washington, DC; Texas; and American Bar Associations and is admitted to practice before various courts, including the U.S. Supreme Court.
Ben Hawkinson is a program analyst on the Policy Analysis and Development Team in the FHWA Office of Policy and Governmental Affairs. He has worked on transportation issues as a Senate aide and private contractor. Hawkinson earned his master's degree in transportation policy, operations, and logistics from George Mason University.
Jeff Price is a program analyst on the Policy Analysis and Development Team in the FHWA Office of Policy and Governmental Affairs. He practiced transportation engineering in the Washington, DC, area and helped develop the practice of planning local transportation demand management. He also implemented innovative public-private transportation solutions, such as the Arlington Carshare Program, while working for Arlington County, VA.
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