On February 12, the Senate passed a bill (S.1072) that will reauthorize highway and transit programs over the next six years. The $318 billion bill passed by a margin of 76-21. Earlier in the day, the Senate overwhelmingly approved a cloture motion, which limited remaining debate on the bill. Majority Leader Bill Frist had made it clear that he wanted to clear the surface transportation measure before the Senate left for weeklong recess.

Despite a stern warning from the White House that the $318 billion bill would warrant a veto, the Senate was defiant. Senate Minority Leader Tom Daschle (D-South Dakota) said that “despite a veto threat from the president, the Senate passed a good highway bill that will create one million jobs here in America at a time when we desperately need them.” Many Senate Republicans favored the bill because of the possible economic ramifications, despite the widespread concern that the bill would worsen the federal deficit. However, some Senate Republicans were concerned that the bill violated the principles outlined in the FY 2004 budget resolution. The Senate passed a budget resolution last year that would have allowed a ceiling of $255 billion for highway programs, $46 billion for transit programs, and $7 billion for safety programs. However, these numbers were reduced in conference with the House to $231 billion, $46 billion, and $4 billion, respectively. Republican Senator John McCain (R-Arizona) filed a budgetary point of order, maintaining that the Senate should have stayed within the parameters of the lower numbers. However, the Senate voted to waive the budgetary order by a vote of 72-24. Another Republican Senator, John Kyl (R-Arizona) introduced an amendment that would have lowered the total cost of the bill to $256 billion, which is what the President’s FY 2005 Budget had proposed. Senator Kyl’s amendment was defeated handily, 20-78.

The highway funding formula in the bill, co-written by EPW Committee Chairman James Inhofe (R-Oklahoma) and Ranking Member James Jeffords (I-VT) in committee did not change during floor debate. Texas Republican Kay Bailey Hutchison was very unhappy that Texas would have been adversely affected by the new funding formula. Under current law, each state is guaranteed a 90.5% return on gas tax receipts submitted to the highway trust fund. Many Senators had clamored for a more equitable distribution of highway funding in the reauthorization bill. The reauthorization bill would boost the minimum return on gas tax receipts to 95%. However, some states such as Florida, California, and Texas would not reach this threshold until 2009. Senator Hutchison introduced an amendment that would alter the formula, but it failed. The Texas Senator, along with Florida Senator Bob Graham (D-FL) ended up voting against the bill because of the perceived funding inequities. Hutchison commented, “for the first time, the Senate has said Texas, California, and Florida, all high growth states, will get back even less from Washington for their needs. Absent any new changes to move donor states closer to parity and bring Texas more gas dollars for critically-needed new highways and road repairs, I have no choice but to oppose this legislation.”

To finance the $318 billion reauthorization bill, the Senate approved the revenue title marked up by the Senate Finance Committee on February 2. The package contains $22.9 billion in revenue enhancements and other measures designed to replenish the general fund. The measure would increase federal revenues by $31.9 billion over 10 years. Most of the revenue raisers in the bill are additional curbs on corporate tax shelters and limits on tax-motivated expatriation. Other important provisions of the Finance-approved measure include: an extension of excise taxes and expenditure authority for the highway trust fund; a reform of the volumetric ethanol excise tax credit; an implementation of several fuel fraud prevention measures; and a simplification and a reform of several non-transportation related excise taxes, including those relating to sporting equipment and alcohol as well as transportation.

Much to the delight of Amtrak supporters, the Senate did not vote to strip a provision in the safety title that would reauthorize Amtrak at $12 billion over six years. The administration has repeatedly warned the Senate that such a provision could warrant a veto.

The Senate bill now heads to conference with the House. On February 11, the House passed a second short-term extension that will keep surface transportation funds flowing to the states until the end of June. The House Transportation and Infrastructure Committee and Ways and Means never came close to agreeing on a funding level for the reauthorization bill. The House T&I Committee leadership continues to push for a $375 billion bill, with a 5 cents gas tax increase. House Ways and Means Committee Chairman Bill Thomas (R-CA), along with other House leaders and the Bush Administration staunchly oppose the House T&I Committee reauthorization bill.

With House leaders and administration officials unwilling to compromise with the Transportation and Infrastructure Committee, Chairman Don Young (R-Alaska) appears ready to relent in his push for a $375 billion reauthorization bill. According to Young’s spokesman Steve Hansen, “He (Young) would prefer adequately funding the highway and transit system, but he also understands that we need to get a bill passed this year. So he is willing to compromise to an extent.” An aide to another member of the committee commented that Young would opt for a smaller bill, but that the House Ways and Means Committee would decide the exact funding level. Last week, Don Young met with House Speaker Dennis Hastert (R-Illinois), Majority Leader Tom Delay (R-Texas) and the discussion revolved around bringing the funding level of the House bill closer to that of the Senate bill.

After the Senate bill passed, a statement from the White House press office read, “The President's senior advisers will recommend a veto of any highway bill that includes excessive spending and violates these principles, including the bill passed by the Senate. The President's budget proposes a responsible $256 billion in highway and transit spending, which represents a 21 percent increase over the previous six-year period and a responsible approach to improve highway safety and curb congestion.”

For your perusal, we have the full bill as well as the full manager's amendment to the bill, both in rich text format.

We've got the lastest run down from chairman James Infhofe's (R-Oklahoma) manager's amendment of SAFETEA. Here's the summary:

• 2285 Daschle amendment asphalt-related reclamation research
• 2301 Murray as modified on ferry construction, maintenance and operation. Increase funding from $38 million to $50 million.
• 2325 Bingaman as modified to continue the development and deployment of the advanced transportation model know as "Transportation Analysis Simulation System" (TRANSIMS)
• 2326 Bingaman as modified to continue authorization for maintenance of public roads used by school buses serving certain Indian reservations
• 2334 Clinton as modified to clarify the responsibility of States regarding emission reduction strategies.
• 2336 Colman amendment to require the Secretary of Defense to reimburse members of the armed forces for certain travel expenses.
• 2371 Snowe as modified to authorize use of CMAQ funds for supporting operations of Boston to Portland passenger rail services
• 2406 Inhofe as modified to make changes to the Indian Roads program.
• 2412 Inhofe conforming amendments (technical changes to Dingell-Johnson Sport Fish Restoration Act)
• 2425 Lott as modified on multi-state International Corridor Development. Creates a new corridor program to focus on corridors that have an international beginning or end point.
• 2447 - 2451 Burns amendments to ensure integrated, interoperable emergency communications in highway safety programs.
• 2471 Byrd to increase use of recovered mineral components in federally funded projects.
• 2487 Spector as modified to improve the transportation technology innovation and demonstration program.
• 2511 Daschle as modified to provide additional funding for bridges on Indian Reservations
• Collins amendment to implement measures to reduce overfishing of stocks of fish managed under the Northeast Multispecies Fishery Management Plan.
• Technical corrections

The complete language of the manager's amendment is located here in rich text format.

Yesterday the long delayed SAFETEA bill passed through the Senate by a veto-proof vote of 76-21. The final price tag came in at $318 billion, much less than the House version yet to be debated, yet still far beyond the $256 billion level the administration has sought.

Only four Democrats voted against the measure, Russell D. Feingold (Wisconsin), Herb Kohl (Wisconsin), Bob Graham (Florida) and Zell Miller (Georgia). Seventeen Republicans voted against the measure, with some arguing that it would negatively impact the federal deficit.

The full text of the bill is located here in rich text format.

We'll have more details throughout the day, so be sure to check back often.

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.