Bill Thomas (R-California), chairman of the House Ways and Means Commmittee, indicated on Wednesday he would help the administration crack down on the practice of allowing corporations the ability to lease city infrastructure (including subways) in order to write-off depreciation deductions on tax-exempt property. Such a move could raise $25-35 billion over the next decade.

According to CQ, both conservative Republicans and urban Democrats are opposed to the crackdown measure, which would limit the scale and scope of the deductions. Wednesday, a group of 23 House Republicans submitted a letter to House Speaker Dennis Haster (R-Illinois) asking him to hold off on what they termed a "tax increase" and also complained that there had been "some discussion of applying certain tax increases retroactively". Democrats from large cities are equally concerned, as financially troubled municipalities in cities like New York, DC & Boston had been using the leasing system to sell their unused tax benefits in order to generate revenue.

The Treasury Department has estimated that $750 billion worth of leasing deals have occurred in the last four years, with approximately $33.7 billion over the next ten years directly affected by whether the crackdown proposal is pased.

In an 86-11 vote, the Senate voted to limit debate on the new SAFETEA (S.1072) legislation, with Majority Leader Bill Frist, (R-Tennessee), vowing to pass the bill before the President's Day recess. The price tag of $318 billion is still far above what the Bush administration supports, but Senators seemed unconcerned with the veto-threat, with many saying the price could be adjusted once in conference.

The administration has made some moves regarding their earlier veto threat. We've got the latest update and what it all means over on the analysis side of the website. Be sure to check it out for all the details.

Amtrak's President David Gunn announced Tuesday at a press conference that he was seeking $1.8 billion in funding for FY2005, double what the White House has proposed for the rail agency. This is an exact replay of FY2004, when the administration originally proposed spending $900 million and Gunn countered with the $1.8 billion figure. Gunn again emphasized this year that if the administration only funded Amtrak at the $900 million number, "the entire system would not be viable", causing Amtrak to shut down operations.

Last year Congress ended up funding Amtrak at a $1.2 billion level.

The omnibus energy legislation still hasn't garnered enough support to attach itself to the highway bill, despite receiving an $18 billion cost trimming. CQ is reporting that Senate Republicans are still in disagreement over the best way to move the measure forward. Senator Pete Domenici (R-New Mexico), the chief sponsor of the bill, left after the GOP weekly luncheon Tuesday and announced there was "no use" trying to connect the energy bill to the upcoming SAFETEA measure, despite having cut $3 billion from energy saving contracts and $1.5 billion for natural gas drilling research in an attempt to gain more support.

On the House side, Majority Leader Tom DeLay (R-Texas) indicated the House might attempt a similar manuever to combine the energy and highway bills that has so far failed on the Senate side. This technique would ensure the MTBE liability protection clause found in the House version would be included in the final measure.

Homeland Security Secretary Tom Ridge announced Monday at a Senate Governmental Affairs Committee hearing that the large amounts of money requested for "first responder" units had not been spent at the state and local level. According to CQ, between $8-9 billion in first responder grants appropriated in FY02-03 has yet to be spent. In Fiscal Year 2005, as we've noted earlier, the administration has proposed reducing first-responder funding by $800 million, down to a level of $3.6 billion, causing Senator Carl Levin (D-Michigan) to say the FY05 request was "deeply disturbing".

Is the White House Spoiling for a Veto fight on TEA-21 Reauthorization?

"The highway bill. It's going to be an interesting test of fiscal discipline on both sides of the aisle. The Senate's is about $370, as I understand, $370 billion; the House is at less than that but over $300 billion. And as you know, the budget I propose is about $256 billion." – President Bush on “Meet the Press,” February 8, 2004 (transcript at nbc.com)

“Does George W. Bush really care about runaway federal spending? We'll soon know. The president has set a $265 billion limit on the highway bill, but bills about to be passed by the Senate and House both are way above $300 billion. Members of Congress are addicted to all kinds of pork, but they particularly like highway pork, and will probably override a Bush veto. So what? Let the president exercise his first veto as a matter of principle. That might become addictive to George W.” – Robert Novak on “Capital Gang,” February 7, 2004 (transcript at cnn.com)

It’s always dangerous to try to read the “TEA” leaves. But based on the two quotes above and other recent events, the signs are mounting that the Administration is planning to veto the TEA-21 reauthorization bill if it emerges from Capitol Hill at levels like those contemplated in either the House or Senate bills.

It is very infrequent that a President of either party will talk about transportation funding or policy. Yet in his discussion with Tim Russert on “Meet the Press” on February 8 the “highway bill” was the first spending program the President mentioned in responding to a question about cutting the deficit. Clearly, the President and those around him have decided the highway bill will be a good place to draw a line in the sand that will demonstrate to fiscal conservatives their mettle in fighting against runaway spending.

The fact that Robert Novak cited the impending congressional action on the legislation as his “outrage of the week,” on “Capital Gang” also indicates the importance being ascribed to this issue by both the White House and the conservative base of the GOP.

Don’t be surprised to see a veto of the “TEA-21” reauthorization if it comes to the President’s desk significantly above his proposed figure. But don’t be surprised either to see Congress override the veto.

In an effort to derail the highway/transit bill, Sen. Judd Gregg (R-New Hampshire) on Thursday sought to add to the bill an amendment to guarantee collective bargaining rights to policemen and firefighters, and prevent them from striking. We spoke on Thursday with representatives of the Bush White House, two Senators and several staff members on this issue. All indicated the Gregg amendment could do significant damage to the chances for enactment of the bill.

On the House side, Don Young (R-Alaska), chairman of the House Transporation and Infrastructure Committee, is attempting to obtain an extension of TEA-21 for at least four months, but possibly for up to a year. Young needs more time to iron out details with Bill Thomas (R-California), chairman of the House Ways and Means Committee. Reports coming to us from the committee staff indicate the House leadership and the Administration are sending signals that the Senate figure of $311 Billion over six years for highways and transit is the highest that will be acceptable. It is unclear whether Young will decide to mark-up a six-year bill at that level or give up for this year and press for a longer term extension.

The nail-biting will continue next week.

On February 4, the Senate Banking, Housing and Urban Affairs marked up the transit portion of the Senate’s TEA-21 reauthorization bill (S.1072) by voice vote. The transit title will be introduced as an amendment to the reauthorization bill on the Senate floor.

The Banking Committee bill authorizes $56.5 billion in transit spending over the next six years. Roughly $47 billion of the total funding level would be derived by tapping into revenue from the highway trust fund. The other $9.5 billion is slated to come from the general fund. Traditionally, 80% of federal transit funding comes from the highway trust fund and 20% comes from the general fund.

With $9.5 billion in transit funding designated to come from the general fund, transit advocates are concerned that such money will have to compete with other non-defense and non-homeland security discretionary programs. Funding for the heralded New Starts program would come from the $9.5 billion, which is disconcerting to recipients of New Starts funds and those project sponsors vying for FFGAs. Senators from the Banking Committee and the Senate EPW Committee are working on an amendment, to be introduced on the floor, which would provide a guarantee for both highway and transit dollars. The $9.5 billion in funding that would come from the general fund would also be included in the budget firewall, which would disallow appropriators from letting such transit programs compete with other programs for funding in the annual appropriations process.

The Senate Banking bill would retain the current funding structure of federal transit programs. The funding rations for the Capital Grants Program under current law are 40% for New Starts, 40% for Rail Modernization, and 20% for the Bus and Bus Facilities Program. The new transit title would alter the ratios to read 40%, 37% and 23%, respectively.

Also, much to the delight of transit advocates, the maximum federal cost share for transit capital projects will stay at 80%. The Bush Administration was proposing a maximum federal cost share of 50%, but such a proposal was rebuffed by a majority of lawmakers and transit agencies.

With regard to New Starts, the bill would change the reporting schedule and the contents of the annual New Starts Report. The reporting schedule would report only those projects that the administration is recommending for funding over the next three years. The projects listed would be limited to funding that is anticipated to be available for new projects. Projects listed would then be rated on a five-point scale: high, medium-high, medium, medium-low, or low.

While there was debate on whether to allow non-fixed guideway projects to compete for New Starts funding, only fixed guideway projects will remain eligible for funding under the New Starts program, if the project is seeking more than $75 million in federal funds. Smaller projects, seeking under $75 million, would still be eligible to receive funding under the existing New Starts program. Such projects would have to be cost-effective and the FTA would be given discretion to develop project evaluation criteria. Non-fixed guideway bus rapid transit projects seeking less than $75 million in federal fund would be eligible to receive New Starts funding.

Also, the Banking Committee bill would prevent potential FFGA recipients from seeking New Starts funding for performing an Alternative Analysis (AA), but the committee would set aside $20 million in funding annually for costs associated with performing Alternative Analysis. The bill also adds two planning factors to the New Starts process: "promote consistency between transportation improvements and state and local land use planning and economic development patterns, and enhance integration and connectivity of the transportation system, across and between modes for people and freight."

Yesterday, 39 House Republicans broke ranks to back a Democratic effort to provide additional benefits for jobless workers.

The amendment, offered by Rep. George Miller (D-California), was attached to HR 3030 that authorized block grants which go to local groups sponsoring programs including homeless shelters, job training, Meals on Wheels and adult literacy.

No Democrats voted against the bill.

House leadership allowed a supplemental unemployment compensation program to expire in December. The program provided 13 extra weeks of benefits for individuals who exhausted 26 weeks of state benefits.

Democrats will move this issue in the Senate by trying to attach a similar amendment to unrelated legislation. They also hope to pressure President Bush to support extended benefits. After an earlier extended benefits law expired in 2002, Bush urged the Congress to renew the program at the start of the 108th Congress, which they did extended it the program until May 31, 2003. Benefits were extended again until December 20.

The FTA's annual report on New Starts was released today. Here's the report, covering the proposed allocations of funds for Fiscal Year 2005.

We've also got a look at the markup of SAFETEA over on the analysis side of the website, from Monday's Senate Finance Committee meeting. All the details are there so head on over.

Over on the analysis side of the site, we've just posted a more detailed look at the budget implications for each department. Be sure to check it out.

Treasury Secretary John Snow and Transportation Secretary Norman Mineta have warned the Senate today that they will recommend a veto of any surface transportation reauthorization bill that raises taxes, relies on bond financing or draws money from the general fund. The veto threat, in the form of a letter addressed to Majority Leader Bill Frist reiterates points made earlier by administration officials, including President Bush. The Senate Finance Committee yesterday approved a $35 billion funding package that would transfer some liabilities from the Highway Trust Fund, which is funded by the gas tax, to the general fund. The Snow-Mineta letter said, "Highway spending should be financed from the Highway Trust Fund, not the general fund of the Treasury." All the money should be "derived from taxes imposed on highway use," the letter said.

The letter is located right here and is in pdf format.

While reauthorizing the transportation bill remains a higher priority for the Senate Environment and Public Works Committee, their staff are beginning to work on amendments to the Water Resources Development Act (WRDA). This bill to authorize water resources projects for the U.S. Army Corps of Engineers is nearly two years overdue. The House passed its version of the bill last fall. Senate committee staff expects to send a letter to each senator this week requesting projects and input for WRDA. Local sponsors of projects for flood control, water infrastructure, environmental restoration, or harbors should send letters to their senators asking that projects and related policy concerns be addressed in the legislation.

President Bush today released his budget for fiscal 2005. The $2.3 Trillion spending plan represents 3.9% growth over the current year. The administration estimates the deficit in fiscal year 2005 will be $521 Billion. It projects the deficit will be reduced by more than half, to $237 billion, by fiscal year 2009.

The Budget proposal assumes the Gross Domestic Product will grow by slightly more than 5% in fiscal 2005 and sustain growth levels above 5% right through fiscal 2009, the last year for which estimates are made.

Under the President’s plan, deficit reduction would be achieved by due to increased revenues resulting from economic growth and by holding total spending growth below the projected growth in GDP.

Here are the highlights of the President’s proposed budget:

Tax Cuts

Make permanent the tax cuts enacted in 2001 and 2003.

Defense Spending

Increase by 7% to $401.7 Billion

Homeland Security

Increase by 10% to $40.1 billion.

Other Discretionary Spending

Increase by .5%. This represents a real cut of 4.5% as compared to GDP growth.

Within non-defense/non-homeland security discretionary spending, here are the major initiatives:

Medicaid

The budget drops last year's proposal to allow states the option to accept a “block grant”.

Head Start

Increases spending by $169 million, including $45 million for a demonstration program to promote better coordination of existing programs.

TANF

The Budget renews the administration’s call for TANF reform as proposed last year.

Title I Education

Increase by 8% or $1 billion.

Special Education (IDEA)

Increase by 10% or $1 billion.

Pell Grants

Increase by 7% or $856 million.

Community Development Block Grants

Cut by 6% or $316 million.

Housing Certificates

Increase by 3% or $500 million. Change to dollar-based, from unit-based certificates.

Abandoned Mine Reclamation

Restructure program to increase by 19% the number of acres reclaimed per year. Focus on states with greatest reclamation need.

Department of Justice State & Local Assistance

Cut by 32% or $959 million.

Job Training

Level funding for WIA programs and an assumption they will be consolidate. New spending of $250 million for community college training initiative and $ 50 million pilot of Personal Re-employment Accounts.

Highways

No change in funding from fiscal 2004.

Transit

No change in funding from fiscal 2004.

Aviation

Increase FAA spending by less than 1% or $100 million.

Amtrak

Cut by about 1/3 to $900 million. Renew proposal for restructuring of the railroad.

US Army Corps of Engineers

Cut construction budget by 18% or $ 311 million.

State and Tribal Assistance Grants/SRF

Cut by 17% or $ 675 million, including a cut of 37% or $ 492 million in Clean Water State Revolving Fund capitalization.

NASA

Increase outlays by 12% or $ 1.8 Billion

We will be back to you with more detailed analysis of the President’s budget shortly.

Throughout the day, we'll be updating our review of the 2005 budget numbers over on the analysis side of the website. Be sure to check in often to get the latest numbers.