Developments in the House of Representatives point to continued problems in producing a TEA-21 bill covering 6-years at adequate investment levels. In recent days, House leaders have taken steps to push towards a six-year bill are funding levels well below those viewed as adequate by highway and transit advocates.

On March 3, House T&I Committee Chairman Don Young (R-Alaska) announced he would put before his committee on March 23 and 24 a six-year $279.5 billion TEA-21 reauthorization. This is almost $100 billion below the amount Rep. Young had been insisting on up to this point and $38.5 billion below the Senate's number. Reports indicate the new number is the one that House Ways & Means Committee Chairman Bill Thomas (R-California) insisted on as the maximum he would support.

Thomas apparently plans to advance the Highway Trust Fund financing legislation, usually attached to the actual highway and transit legislation, as part of his legislation on Foregin Sales Corporations (FSC's) instead. The FSC legislation is needed to head-off trade sanctions levied against the US on March 2 because current tax benefits for FSC's violate WTO rules. Thomas' legislation to make necessary alterations would forbid certain sale-leaseback arrangements that transit agencies and municipalities have used in recent years to reduce the capital costs of equipment. Apparently, Thomas wants to attach the tax provision relating to transportation financing to his bill because he also wants to siphon off revenues which otherwise would go to the Highway Trust Fund. These may include interest on the fund and the proceeds of highway use tax evasion enforcement efforts. The reason he wants to ensure a six-year bill is to produce enough revenue from these sources to be meaningful for him as an offset to other tax breaks in the bill.

This power play by Thomas could have the impact of dictating the cost and length of the reauthorization of TEA-21. Clearly, the House leadership would need to acquiesce in this decision.

As these events unfolded on March 3 and 4, leaders of the highway lobby met with key legislators on Capitol Hill to express their displeasure. Other highway and transit advocates and organizations representing elected officials at the state and local levels are now re-examining their positions on a six-year vs two-year bill.

The period between now and the House T&I mark-up promises to be a turbulent one. Keep you seat belts fastened. We'll have further news as it develops.

The budget resolution that Senate Budget Committee Chairman Don Nickles (R-Oklahoma) has proposed and that the Senate Budget Committee is expected to pass would cut Medicaid by more than $11 billion over the next five years, including the reductions in the federal share of certain state Medicaid costs that would take effect on October 1.

Because many states remain in fiscal crisis, they have been cutting their Medicaid programs and thereby causing the ranks of the uninsured to rise faster. State revisions in Medicaid eligibility rules over the past two years have eliminated eligibility for 1.2 million to 1.6 million low income people, most of them parents or children in low-income working families. Federal funding reductions will force states to implement even deeper cuts by restricting eligibility, eliminating or reducing health benefits and cutting or freezing provider reimbursement rates.

The budget plan also fails to include funding to cover the costs associated with the Senate Finance Committee’s TANF and child care reauthorization bill. Funds for the welfare-reform legislation would have to come from cutting other mandatory programs under the Finance Committee’s jurisdiction, such as by making deeper cuts in Medicaid or the Earned Income Tax Credit or cutting such programs as Medicare or unemployment insurance.

The budget resolution’s spending figures are normally not binding, and House and Senate leaders doubt that the two chambers will be able to agree on a budget resolution this year. However, leaders are pressing for each chamber to adopt a budget blueprint anyway, as a way to impose some measure of spending restraint.

As expected, the Budget Committee deficit reduction efforts would rely mainly on discretionary spending restraint. The committee proposal for $814 billion in discretionary funding would represent a 3.3% increase over fiscal year 2004. This amount is less than the $823 billion proposed by the White House. Republican leaders acknowledge that if they stand any chance of getting 51 votes necessary to adopt the budget resolution, the spending ceiling will have to be raised.

The House Transportation & Infrastructure Committee has tentatively scheduled a mark-up on March 23 of legislation to extend/reauthorize TEA-21. The decision over whether this will be a two-year or six-year bill is still pending. Our travels on Capitol Hill in the last day have unearthed a new option being circulated that would call for a five-year (fiscal 2005 - 2009) bill with a price tag of $275 billion. If you add the aleady appropriated $43 billion for highways and transit to this, the six year total comes to $318 billion - exactly the same as the Senate bill. Apparently, those circulating this proposal believe the packaging change will make it more palatable to the administration. While there is disagreement over the merits of this new idea among committee members, there is agreement on one thing: the situation is very fluid and bears watching on a day-to-day basis.

We continue to be watchful and will keep you posted on developments.

With the administration and Congressional leaders still wrangling over funding details in a long-term TEA-21 reauthorization bill, some lawmakers have begun to look towards a two-year bill as the only way to break the impasse. Even after the Senate passed their $318 billion reauthorization bill in mid-February, the House Transportation and Infrastructure Committee has yet to markup their bill, as House GOP leaders object to the $375 billion price tag accompanying the committee's bill. The House T&I Committee continues to schedule markups and then postpone them. In the last two weeks, two markups were postponed and the committee has still yet to set a definitive date for a markup.

Steve Hensen, a spokesman for Committee Chairman Don Young (R-Alaska) insists that Young is working vigorously with House Speaker Dennis Hastert (R-Illinois) and House Majority Leader Tom Delay (R-Texas) to come to an agreement on the bill's length and cost. All parties involved favor a six-year bill over a two-year bill, but many Senators just want the House to pass any measure, so a conference committee could start ironing out a compromise bill. Quoted by The Hill, Senator Kit Bond (R-Missouri), chairman of the Senate EPW Committee Transportation and Infrastructure Subcommittee, said, "any bill that will allow us to go to conference and begin negotiations is a start. I view a two-year bill as a starting point for getting a six-year bill passed." Bond added, "make no mistake: no matter the duration, a significant level of funding is required now. The costs will only increase two years from now."

Members of the House Transportation and Infrastructure Committee continue to express frustration at the Bush Administration's insistence that no reauthorization bill exceed $256 billion. At a meeting with White House Chief of Staff, Andrew Card, committee members pressed Card to lift the administration's cost ceiling on the reauthorization bill. White House officials are saying privately that the President would sign a $270 billion bill, but not the Senate's $318 billion measure. A two-year bill would fund highway and transit programs at $90 billion over the next two years. The President would likely sign such a two-year bill.

With a ballooning budget deficit, the war in Iraq, and needed spending for the Department of Homeland Security, it appears that transportation programs will bear the brunt of a more restrictive budgetary environment. A two-year bill would give lawmakers the opportunity to pass a larger bill in two years, if fiscal conditions improve. However, many House T&I Committees are concerned that a two-year bill would contain fewer earmarked projects. Such projects are very popular, especially in election years. If the President does not budge from his veto threat, the House may have no choice but to approve a two-year bill, despite widespread opposition in both chambers. State DOTs favor a six-year bill, because guaranteed funding over a longer period helps such agencies plan future transportation projects.

With the second extension of the current law elapsing on April 29 and Congress recessing for two weeks in April, the House will need to act soon on their reauthorization bill or another extension will have to be enacted.

House Republicans are looking to impose tougher work requirements on welfare recipients in a short-term extension of the welfare law. The welfare law has been extended four separate times with the most recent extension expiring on March 31.

Rep. Wally Herger (R-California) is sponsoring legislation, HR 3848, that would change a credit that states receive under the 1996 welfare law for reducing their welfare caseloads. This change would force states to press more of those on welfare to find jobs.

Democrats oppose Herger’s proposal and Senate Republicans want to pass a “clean” extension without extra work requirements in order to have a full debate over reauthorizing the 1996 law this spring.

Lawmakers have struggled for more than two years to rewrite the law, failing to find consensus on work requirements and child care funding.

Under the 1996 welfare law, states are required to have 50 percent of adult welfare recipients working. But the law also granted states a credit based on the number of recipients that have left the welfare rolls since 1995. Because the number of welfare caseloads has fallen nationwide by more than half since the law’s enactment, the Administration and conservatives in Congress argue the credit effectively is a loophole that discourages states from getting more recipients working.

Rep. Herger’s bill would move up the caseload “base year” for the credit to 1996 for fiscal year 2004. The base year would be increased to 1998 for fiscal year 2005 and 2001 for fiscal year 2006.

Democrats argue that it is unfair for Herger to call for stricter work requirements without providing additional money to the states and contend that Congress should provide a straight extension to give the Senate more time to pass a bill.

Sen. Majority Leader Bill Frist (R-Tennessee) has reassured governors that Congress would not let the program expire and would pass a clean extension. If he does, House leaders are likely to acquiesce and not to try to pass Herger’s bill.

The EU went forward and applied trade sanctions against the United States today in response to a World Trade Organization ruling four years ago. The WTO found that the United States was engaging in illegal export subsidies, and Congress has not been able in the interim to change the corporate tax code to repeal the particular problem.

The EU will begin imposing a 5% tariff on a variety of U.S. products, scaling the percentage up a point each month until it reaches 17% a year from now. The tariff will affect more than $4 billion worth of American products.

This week the Senate is set to take up debate on S 1637, similar to HR 2896, a corporate tax bill from the House Ways and Means Committee, which would move the U.S. into compliance with the WTO's ruling. House Democrats, who oppose HR 2896, have started attempting to bring an alternative measure of their own (HR 1769) to the House floor.

The danger of Transportation Department workers being furloughed was avoided yesterday when President Bush extended the current TEA-21 program for an additional two months. This should provide adequate time for the House and Senate to reach a decision on whether to pass another, shorter extension of the existing law, or to go ahead with a six-year reauthorization.

House Speaker Dennis Hastert (R-Illinois) composed a letter indicating he will allow a two-month extension for the September 11 commision to file their report, currently due on May 27. If this satisfies Senators McCain (R-Arizona) and Lieberman (D-Connecticut), they presumably would drop their hold on the temporary extension of the existing transit law.

McCain and Lieberman held up the law to ask for an additional two months for both the report and the dissolution of the commission. Hastert appears to only be supporting an extension in the report deadline, but not for an extension of the date the commission is dissolved (July 26).

Senate Majority Leader Bill Frist Met with the nation's governor's on February 24 and laid out some of the key elements on the Senate agenda for this session of Congress. He had the following to say about key issues:

TANF Reauthorization

The leader said the bill would come to the Senate floor within the next three months. He said to expect "some movement" (in a positive direction) on child care funding on the floor. An extension will be needed before March 31 and Frist said the Senate would enact one.

TEA-21

Frist said he is confident a compromise bill can be worked out that would gain the President's signature. He said the price tag of the bill would have to decrease below the Senate-approved level to achieve this. Despite this show of confidence, he said that various extension options were under consideration, including extending the bill past this congressional session.

Internet Tax Moratorium

Frist said the Senate would have the debate on extending/expanding the ban on taxation of internet access this year. He indicated he did not want to do harm to the states and localities but at the same time he wants to encourage the adoption of new technology.

Budget

The majority leader said the Senate would begin debating the budget resolution during the week of March 7.

Energy Bill

Frist indicated there is a "very good chance" the bill scaled-back energy bill would pass the Senate by mid-March.

Interestingly, the leader did not indicate when the appropriations bills would be completed. Last year at this time he made a point of talking about how important it was to "keep the trains running on time" with regard to appropriations. The problems he experienced last year, which resulted in most appropriations not being completed until the new year, may be repeated this year given the proposal by the President to keep the increase in spending for non-Defense,non-Homeland discretionary spending down to only .5%. Many on Capitol Hill are already predicting a post-election "lame duck" session will be needed to complete the appropriations process for fiscal 2005.

Watch this space for further updates on the legislative calendar for this session.

The extension of the current transit law, passed in the House, has hit a bump: Senators John McCain (R-Arizona) and Joe Lieberman (D-Connecticut) are holding the extension hostage until the September 11th commision is given an extra two months to complete its work.

House Speaker Dennis Hastert (R-Illinois) has been opposed to giving the 9/11 panel extra time to work with, despite the White House being on record for endorsing additional time. Hastert's spokesman, John Feehery, said Thursday that even if McCain and Lieberman are successful in sending the transit extension back to the house, that they "are not coming back", according to Congresional Quarterly.

If the two measures are not passed or unentangled, the Transportation Department will have to shut down operations at the Federal Highway Administration, the Federal Transit Administration, the Federal Motor Carrier Safety Administration and the National Highway Traffic Safety Administration, at the beginning of next week.

We are hearing numerous reports from sources on the House side of the Capitol indicating that a decision is near to drop the six-year authorization of TEA-21 and move an extension through September 30, 2005 instead. Apparently GOP members of the House T&I Committee met today (February 26) with White House Chief of Staff (and former Secretary of Transportation) Andrew Card and Mr. Card said the President would veto any legislation with a price tag over $270 billion. Mr. Card indicated, however, that the President did not want a fight on this and would accept the two-year extension with a funding increase in '05 above the '04 levels. Reports we hear indicate House leadership is leaning towards taking the deal on the two-year authorization and planning to come back to this issue next year.

In a related story, transportation newsletters are reporting today that House Majority Leader Tom DeLay (R-Texas) is threathening to offer his "SHARE" proposal -- to set the minimum allocation in the highway program at 95% of each state's contribution to the Highway Trust Fund -- on a two-year bill if it does come up. This would make passage of the extension more difficult.

Federal Reserve Chairman Alan Greenspan testifed before the House Budget Committe today that rising federal deficits coupled with an aging population would leave "no choice but to make significant structural adjustments in the major retirement programs". He indicated a clear preference for a reduction of benefits over a tax expansion, saying "tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base."

Greenspan's full testimony is located here.

With the current TEA-21 extension bill expiring on February 29, the Senate must pass a second extension bill by week’s end to keep highway money flowing to the states. On February 11, the House passed a second TEA-21 extension that would lapse at the end of June. However, Senate leaders favor a two-month extension bill, which would place more pressure on House leaders to pass a long-term reauthorization bill before the Easter-Passover recess in April.

On February 12, the Senate passed a long-term reauthorization bill (S.1072), which would fund highway and transit programs at $318 billion over the next six years. With the House unable to even pass a long-term reauthorization bill out of committee, the Senate for the time being, will have to follow the lead of the House and pass another short-term extension bill.

Senator James Inhofe (R-Oklahoma), Chairman of the Senate Environment and Public Works Committee, feels that a longer extension bill would impose a greater burden on state DOTs trying to plan for future highway construction projects. Inhofe desires a two-month extension, which would force the House to pass a long-term reauthorization bill by the middle of April. Senator Inhofe recently met with House leaders and feels that both Speaker Dennis Hastert (R-Illinois) and House Majority Leader Tom Delay (R-Texas) are more interested in passing a long-term bill rather than a long-term extension.

Members of the House Transportation and Infrastructure Committee, such as ranking member, Rep. James Oberstar (R-Minnesota) and Highways, Transit and Pipelines Subcommittee Chairman, Rep. Tom Petri (R-Wisconsin), want the Senate to pass a three or four month extension bill. Both Oberstar and Petri feel the House will need more than two months to consider a long-term reauthorization bill. Members of the Transportation and Infrastructure Committee led by Chairman Don Young (R-Alaska), continue to brandish the committee’s $375 billion reauthorization bill. However, such a bill would require an increase in the gas tax and is opposed by House GOP leaders and the President. Chairman Young has indicated that he might drop the price tag of the committee’s bill, but has not yet indicated whether the committee will match the Senate bill’s cost of $318 billion. Chairman Young will have to rely on the Ways and Means Committee to pass a revenue title that will support funding increases in highway and transit programs.

Initially the House T&I Committee was supposed to markup their reauthorization bill on February 25, but the hearing was delayed until either March 1 or 3. Chairman Young is still negotiating provisions of the bill with House GOP leaders and Rep. Bill Thomas (R-California), Chairman of the Ways and Means Committee.