June 2011

Public transportation's reckoning is coming soon

by Cliff Henke

As I have recently written in this space, the wave of changes in Congress, state legislatures and governors to a much more conservative content has already had a significant impact on federal and state public transportation policy, particularly in rail investments. Already in 2011, we have seen the Congress and President Obama agree to significant cuts to General Fund discretionary (i.e., non-Highway Trust Fund) transportation programs for the rest of the current fiscal year, and for transit, even the "guaranteed" money from the Mass Transit Account was frozen at last fiscal year's levels.

Most ominously, this bill provided no funding for high-speed rail in FY 2011 and cuts the Capital Investment Grant (New Starts) program by $400 million, with $280 million rescinded from the FY 2010 appropriation bill for New Starts. The president agreed to some of these cuts because of the projects that governors in Wisconsin, Florida and New Jersey recently killed. Yet another, in Ohio, will end state funding for Cincinnati's streetcar, which happens to be the highest-rated project in Gov. John Kasich's state, according to Ohio's bipartisan transportation commission.

They have only begun

These more conservative officials have only begun, however, and the next few months will likely be the most significant for the future of rail investments, perhaps in the next decade or even generation. How three interrelated issues are decided in the short term, all of them even possibly by the time you read this, will largely determine this outcome.

The first of these decision points is over raising the debt ceiling. While the chances of this happening are slim, the idea of flirting with default could make interest rates spike, not only for federal Treasury bills and bonds but also for other public and private sector debt tied to the benchmark federal rates. This could include local and state bond issues for any transit projects. If that happens, the budget will also have to be cut even further to make room for higher interest federal debt payments, putting even further pressure on lawmakers to cut discretionary spending, and, so far, public transportation has taken bigger hits than most other programs.

The second decision is how the president and congressional leaders will agree to cut the federal deficit. Although the recently enacted House budget — which would severely cut not only some of the most politically sacrosanct programs like Medicare and Social Security, but also transportation programs by as much as 30 percent over the next decade — is likely dead on arrival in the Senate, both that body and the White House must agree with the House leadership on something. What that "something" will be will shape federal transportation policy for a decade or more.

Deficit drives decisions

These negotiations will drive the final decision point — authorization. House Transportation and Infrastructure Committee Chairman John Mica will likely draft something that will be vastly smaller than President Obama's $550 billion proposal. The Senate will likely be somewhere in between — but any amount over Mica's would require more taxes. This is why everyone is watching what the "Gang of Six" Senators will do on the long-term deficit. They are starting with recommendations from the president's deficit commission, which included a gas tax increase for the deficit and infrastructure.

This is how the reckoning on the future of federal investment in public transportation will play out. It is unclear how this will go, but all who care need to weigh in, forcefully.

 

 

 


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