It appeared on Monday as if the Administration and congressional leaders were near a deal on the funding level for the TEA 21 reauthorization. The Administration was said to be prepared to endorse a level of about $286.4 billion -- $2.5 billion above their most recent ceiling. If this turns out to be true action on the conference between the House and Senate on the legislation could quicken.

Our communications with key House and Senate staffers on Monday made it clear that the goal of completing conference -- if not achieving final passage -- by June 30 is in reach. Weekend meetings produced few results but there could be speedy progress once the total funding level is agreed to.

We are in close touch with key Members and staff on an ongoing basis and will keep you posted on developments.

Yesterday, the Senate Appropriations Committee approved a nearly $31.25 billion fiscal year 2006 Energy and Water funding bill. The bill is almost $1.5 billion more than House-passed Energy and Water legislation, and it exceeds current-year funding by $1.4 billion.

How the Army Corps manages its budget could provide an additional stumbling block during conference discussions. The House and Senate versions of the bill differ dramatically on issues of corps financial management, including reprogramming funds and issuing multiyear contracts.

The House Energy and Water spending bill would allow Congress to more closely monitor the movement of funds by earmarking appropriations for specific projects, as well as limiting the use of some continuing contracts for projects that require multiyear appropriations. Traditionally, the corps has been granted the discretion to move funding from one project to another as it deals with weather restrictions, construction hold ups and other emergency situations.

The Senate committee passed a $5.3 billion budget for the Army Corps of Engineers and a $1.08 billion budget for the Bureau of Reclamation - more than $1 million increase over the House for the Bureau of Reclamation, which is $130 million above the president's request and $63.5 million more than the FY '05 level. Shipping and port industry groups support the Senate version.

Behind-the-scenes maneuvers in the last two days have failed to produce much progress in the effort to arrive at an authorization level for Federal surface transportation and research programs through fiscal 2009. However, there are some signs of movement towards a compromise.

Transportation industry leaders met June 15 with White House Chief of Staff Andrew Card, Transportation Secretary Norm Mineta and Federal Highways Administrator Mary Peters to discuss the funding level. The Federal officials laid out their case for sticking with the Administration's number of $283.9. The industry representatives were divided on the issue with some, notably John Horsely of AASHTO, arguing for the Senate's number of $294.5 billion. Mr. Card hinted at a willingness to compromise by saying that if the Senate came to him with a number that a majority of Senate conferees (16) could support, discussions could start from there. He said he hasn't seen a number yet that has that support.

Senate conferees are discussing informally whether there is a potential compromise number that could draw the support of a majority of their group. With Democrats hanging tough as a group for the higher number, GOP members who support a compromise will need to come forward in search of a consensus. Sen. Jim Inhofe (R-OK), Chairman of the Committee on Environment and Public Works and leader of the Senate conferees, said yesterday a meeting would take place today (June 16) at which Senate conferees would discuss their options. Later in the day a key staffer said there would be no meeting. Confusion reigns as this is written as to how they will proceed.

In the meantime, very little substantive discussion is taking place at the staff level. If this week passes with virtually no progress towards an agreement, the prospects for completion before June 30 will be dimmer.

We will have further updates as events warrant.

The House Appropriations Transportation-Treasury-HUD Subcommittee held a mark-up on the FY 2006 bill today. Highlights of the bill follow:

FY05 Comparable: $63.172 billion ($18.418 billion Mandatory) FY06 Request: $60.705 billion (assumes transfer of economic development programs to Commerce Department) FY06 Chairman’s Mark: $66.935 billion ($18.993 billion Mandatory)

The bill represents a 6% growth over last year’s comparable levels. The bulk of this increase goes to providing guaranteed levels of discretionary spending for various Highway, Transit and Aviation programs. If the bill did not provide these mandated levels, the rules of the House of Representatives would prevent consideration of the bill. This preferential treatment is unique to certain transportation programs and is not afforded to any other discretionary program including Veteran’s Medical Care, Homeland Security funding or National Defense programs.

Boosts Highway Spending: Federal-aid highways spending is $37 billion, as set by HR 3. This is an increase of $1.6 billion over the President’s request and $1.9 billion over the FY 2005 enacted level, excluding emergency supplementals.

Supports Aviation: A total of $14.427 billion is provided to the Federal Aviation Administration (FAA) -- $877 million above the fiscal year 2005 level and $1.741 billion above the President’s request. This includes $8.2 billion in FAA operations, $3.6 billion for the Airport Improvement Program and $104 million for Essential Air Service. The bill includes $25 million to hire and train 595 new air traffic controllers, and an additional $8 million above the request to hire and train of safety inspectors in the office of aircraft certification and flight standards. The bill also extends the current provisions of war risk insurance, including current premium price caps, for one additional year.

Addressing Critical Housing Needs: The Department of Housing and Urban Development (HUD) is funded at $37.5 billion, $$1.547 billion above last year's level and $4.32 billion above the President's Request.

Funding for Section 8 programs is split into two accounts to provide better accountability and oversight.

*Tenant-Based Rental Assistance (Section 8 vouchers) is funded at $15.53 billion, $765 million over last year and $314 million below the request. Funding for the renewal of vouchers is significantly increased by $735 million to restore the reduction mandated last year and fund all anticipated increases in the costs. The costs of this program alone is now approaching 50% of HUD’s total budget.

*Project-Based Rental Assistance (project-based contracts) is funded at $5.10 billion, $210 million below last year and $16 million above the request. This fully funds all contracts including inflation and expands the use of inspectors to ensure that tenants live in decent affordable housing.

*Public and Indian Housing programs are funded at $6.8 billion and increase of $1.6 billion over last year and $466 million over the requested level. Implements a newly negotiated formula for distributing operating subsidies. Also includes $600 million for the Native American Housing Block Grants, $17 million above the request.

*Provides $4.2 billion for the Community Development Block Grant of which $3.86 billion in the formula funds to entitlement communities and states, a reduction of $250 million from the amount for the formula last year, The Committee did not agree to the proposal to eliminate this program, consolidate its functions and transfer the implementation to the Department of Commerce.

*HOME Investments Partnership is level funded at $1.9 billion, $41 million below the request, but increases the amount for the formula to participating jurisdictions by $60 million above the requested amount.

*Includes $1.34 billion for Homeless programs, an increase of $100 million over last year, $285 million for Housing Opportunities for Persons with AIDS (HOPWA), $741 million for Elderly Housing, and $238 million for Housing for Persons with Disabilities. The Committee did not agree to cut funding for assistance to victims of HIV/AIDs or eliminate funding for the construction of facilities for low income disabled persons, as requested.

*Provides the requested level for the Office of Federal Housing Enterprise Oversight of $60 million.

*Eliminates several lower priority programs, as requested, in order to help meet the rapidly increasing costs of rental assistance in Section 8 and public Housing and stay within the Committees allocation.

Capital Investments in Transit: Transit program spending totals $8.482 billion as mandated by HR 3, $836 million above FY05 and $701 above the request.

Supports National Anti-Drug Efforts: Provides $497 million to the Office of National Drug Control Policy, including:

*$227 million for the High Intensity Drug Trafficking Areas program.

*$120 million for the National Youth Anti-Drug Media Campaign

*$80 million for the Drug-Free Communities program.

Provides for Smarter, More Efficient Amtrak Operations: The bill provides $550 million for Amtrak, $190 million over the President’s budget request and $657 million below FY05. The bill also prohibits taxpayer funding of Amtrak’s most unprofitable routes.

District of Columbia Federal Payment: District Funds: FY05 Bill: $556 million FY06 Bill: $8.3 billion FY06 Budget Request: $573.4 million FY06 Request: $8.3 billion FY06 Funding: $604 million

Federal Judiciary:
Provides a 6% increase in funding for Federal Judiciary. Total funding is $5.8 billion, $341 million above FY05 and $185 million below the request. This level will fully fund the court’s revised request for security improvements at Federal judicial facilities, and enable the courts to effectively process priority criminal, civil and bankruptcy cases.

Agency Funding:

Department of Treasury is funded at $11.6 billion, $336 million above FY05 and $94 million below the President’s request. The Internal Revenue Service is funded at $10.5 billion, $313 million above FY05 and $130 million below the request.

The bulk of the increase is for the tax enforcement activities of the IRS.

Federal Election Commission is funded at the budget request of $55 million, $3 million above FY05 and the Election Assistance Commission is funded at $16 million.

National Historical Publications and Records Commission is funded at $7.5million ($5.5 million for grants and $2 million for administrative costs), $7.5 million above the President’s request.

Other provisions

*Maintains both current law requiring contraceptive coverage under FEHBP (except in certain circumstances) and current law prohibiting the use of funds under FEHBP to pay for an abortion, except where the life of the mother is endangered or in case of rape or incest.

*Maintains current law on all restrictions on federal and local funds for the District of Columbia.

Hopes for a TEA-21 reauthorization funding level above the $283.9 billion in the House measure were diminished somewhat June 14 when House Ways and Means Committee Chairman Bill Thomas (R-CA) said conferees on the legislation should stick to the House number. Thomas had as recently as last week indicated a willingness to find a compromise between the House number and the Senate level of $294.5 billion. He now appears to be taking that idea off the table.

Key staffers on both sides of the Capitol have told us in recent days that if a number is not settled on this week, it will be very difficult to get a bill done before the July 4th recess. The most recent extension of TEA-21 programs expires on June 30. We will be assessing the situation constantly and will report to you as we learn more.

A bipartisan coalition of House Transportation and Infrastructure Committee members introduced a $10 billion version of the Water Resources Development Act yesterday.

H.R. 2864 would authorize funding for major navigation, flood control and environmental restoration projects carried out by the Army Corps of Engineers and is almost identical to the version of WRDA passed in the House in 2003. In April, the 2005 Senate version of WRDA (S. 728), with a price tag between $7 billion and $17 billion, was approved by the Environment and Public Works Committee.

The legislation was introduced by full T&I Committee Chairman Don Young (R-Alaska), Water Resources and Environment Subcommittee Chairman John Duncan (R-Tennessee), T&I Committee ranking member James Oberstar (D-Minnesota) and Subcommittee ranking member Eddie Bernice Johnson (D-Texas).

Congress intended to renew WRDA every two years, but last approved the authorization in 2000. Subsequent reauthorization efforts failed due to opposition from environmentalists and lawmakers who felt the legislation needed to force the corps to do more to mitigate damages to natural resources and stiffen the process for independent reviews of the corps' work.

The House Water Resources and Environment Subcommittee will mark up the bill Thursday, and the full committee markup in the House could come as early as next week.

Last week, the Senate Appropriations Committee approved approved Chairman Thad Cochran's (R-Mississippi) allocations of $842 billion in discretionary funds among the 12 subcommittees.

The 302(b) allocations depart significantly from President Bush's own budget request for FY 2006 and the spending plans developed by the House. In particular, Cochran's plan calls for moving billions from the Defense side to domestic programs, which are slated for deep cuts in the president's budget.

While the shifts Cochran has proposed are not expected to become law, Senate appropriators are hoping the plan will help them avoid some early battles over domestic program cuts that could threaten Republican leaders' goal of avoiding an omnibus for the first time in years.

According to the committee, the allocations for the 12 bills will be as follows:

Agriculture at $17.3 billion, up from Bush's $16.9 billion;

Commerce-Justice-State at $48.6 billion, up from Bush's $47.3 billion;

Defense at $400.7 billion, down from Bush's $407.7 billion;

District of Columbia at $593 million, up from Bush's $573 million;

Energy and Water at $31.2 billion, up from Bush's $29.7 billion;

Homeland Security at $30.8 billion, up from Bush's $29.6 billion;

Interior at $26.2 billion, up from Bush's $25.7 billion;

Labor and Health and Human Services at $141.3 billion, the same level as Bush proposed;

Legislative Branch at $3.9 billion, down from Bush's $4 billion;

Military Construction/Veterans Affairs at $44.4 billion, up from Bush's $43.1 billion;

State-Foreign Operations at $31.7 billion, down from Bush's $32.7 billion; and

Transportation-Treasury-HUD at $65.4 billion, up from Bush's $63.1 billion.

The House continues to move quickly on appropriations bills, having passed half of the bills it needs to move (five out of ten).

In addition to the agriculture appropriations bill passed yesterday, the House has also passed:

*Energy and Water Development

*Homeland security

*Interior-Environment

*Military Quality of Life - Veterans Affairs

All remaining bills have seen some sort of action (at least at the subcommittee level) except for the following:

*Foreign Operations

*Transportation-Treasury-HUD-Judiciary-D.C.

Also yesterday, an Appropriations subcommittee approved $142.5 billion in discretionary spending for health, education and labor programs in FY '06. The Labor-HHS-Education draft bill, which was approved by voice vote, would provide an overall total of $459.5 billion when entitlement programs such as Medicare, Medicaid and unemployment insurance are included. The discretionary funding is $164 million below the current year’s levels, a 0.1 percent decrease, but $924 million more than President Bush’s budget request.

Up on the House floor for next week: Science, State, Justice and Commerce, and Defense.

The House-Senate Conference Committee on TEA-21 reauthorization held its first formal meeting yesterday. Dozens of opening speeches by conferees were the order of the day. The sum total of all that was said made it clear that no resolution has been reached -- and little substantive discussion has taken place -- on the topic of the overall funding number for the bill.

Perhaps the most noteworthy comment of all was House Majority Leader Tom Delay's (R-TX) that the President would only support the $283.9 billion figure and that he would support nothing higher than that either. Speaking most forcefully for those (clearly in the majority) who support a higher number, Sen. Max Baucus (D-MT) said the conferees should settle on a number between the House ($283.9) and the Senate ($294.5) because "that is what we do in conference." House Ways and Means Committee Chairman Bill Thomas (R-CA) said that if Members wanted to work out a different funding level "I'm not hard to find." However, it was clear that unlike last year, Thomas was not going to take a leadership role in trying to find a workable number.

Staffs will now resume their conversations about issues in the bill that can be discussed without having settled on the overall number. Unfortunately, such issues are small in number. If the conference is to be completed in time for the reauthorization to be passed before the current June 30 expiration, a decision on the funding level will need to come next week.

We are in regular touch with staff and Members of the Conference. We will keep you posted on developments.

The 93 conferees for the surface transportation reauthorization bill (H.R. 3) will have their first public meeting this afternoon at 3:00 p.m. as lawmakers work to reconcile the House and Senate versions on the bill before the current short-term extension expires on June 30th. We will be closely monitoring today’s meeting and all future meetings.

Despite conversations between White House Chief of Staff Andy Card and key conferees regarding the difference in funding between the two bills and public comments this week from House Ways and Means Committee Chairman Bill Thomas (R-California) that he’s open to meeting the Senate about halfway on funding levels, Transportation Secretary Norman Y. Mineta sent a letter June 7 to conferees pledging a presidential veto if the legislation emerges with a price tag of more than $284 billion and criticizing offsets in the Senate bill used to increase the overall funding level. In addition, House Majority Leader Tom DeLay (R-Texas) told reporters that President Bush said June 8 $284 billion is the only funding level he will support. Restating what has been included in two statements of administration policy, Mineta wrote that if the bill carries a funding level higher than the House's $284 billion, "the president's senior advisers would recommend that he veto the bill."

The Senate Interior Appropriations Subcommittee voted yesterday to provide $26.3 billion in FY '06 for the Interior Department, Forest Service and U.S. EPA. Overall, the bill would provide $9.88 billion for Interior and $4.12 billion for the Forest Service. House cuts to EPA's Clean Water State Revolving Loan Fund were restored.

In the Interior Department, the bill would increase the operations budget for the National Park Service by $65 million to $1.75 billion, $20 million above the Bush administration's request. In addition, other agencies are funded at the following levels:

*BLM - $1.79 billion ($28 million below FY '05)

*Fish and Wildlife Service - $1.3 billion ($23 million below FY '05)

*U.S. Geological Survey - $963 million ($27 million increase over FY '05)

*Mineral Management Service - $160 million ($14 million below FY '05)

*Office of Surface Mining and Reclamation Enforcement - $110 million ($2 million increase over FY '05)

*Payment in Lieu of Taxes program - $235 million ($10 million increase over FY '05)

Most numbers are close to those in the House bill (H.R. 2361) passed on May 19. The full Senate appropriations panel is scheduled to take up the bill tomorrow.