The existing Transportation Equity Act for the 21st Century -- known as TEA-21 -- expires Sept. 30 after six years of record growth in federal surface transportation expenditures. Over the duration of the act, federal investment in highways and transit rose nearly 40 percent: highways were guaranteed at $171 billion and transit at $36 billion.

Now, in the face of enormous federal budget deficits as a result of the economic slowdown, and the need to spend more on national security, the pressure is on surface transportation to tighten its belt after years of presumed largesse.

In the meantime, the American Road & Transportation Builders Association predicts an "up" year for FY 2003, with slight growth of 2 to 3 percent from FY 2002 in highway and road construction across the board. Federal dollars under TEA-21 will undergird the market at record levels while state spending falls off, ARTBA said (see below).
 

Efforts To Roll Back Funding

Even before TEA-21 expires, attempts are being made to roll back FY 2003 spending to well below FY 2002 levels.

At the beginning of calendar year 2003, legislators and the administration still were able to haggle over the size of the federal highway program for FY 2003 because the fiscal year began Oct. 1, 2002 without a surface transportation appropriations bill in place. Since then, these programs have been enabled -- at least into early January -- by continuing resolutions.

"The Bush administration’s insistence on curbing domestic spending may result in a $27.7 billion highway obligation limit for FY 2003, a $4 billion cut from FY 2002," reported the American Association of State Highway & Transportation Officials (AASHTO) in early December.

Just as bad, instead of the nearly $32 billion ceiling locked in for FY 2002, that $27.7 billion obligation ceiling for FY 2003 would become a point of departure for establishing annual ceilings in the successor legislation, currently dubbed "TEA-3".

As a result it might take years for annual ceilings to rise to that level under TEA-3, if at all. "The effort to grow the highway and transit programs so that they come closer to meeting documented needs would receive a huge setback," AASHTO said.

Ironically, even as the Bush administration considers economic stimulus, estimates indicate that a reduction in federal highway obligation $4 billion would, over seven years, eliminate more than 172,000 jobs that would otherwise be created by funding highways at the higher level, with most jobs affected in FY 2003-2004, AASHTO reported.

But increased spending on roads and highways makes economic sense even in a downturn, because the program is self-funding, with money collected through user fees at the gas pump, and not through income taxes. Furthermore, once improved or completed, roads and highways serve as economic multipliers whose benefits ripple through business and society.
 

We've Come A Long Way

In September, testimony by the General Accounting Office before the House Subcommittee on Highways and Transit demonstrated how far we've come in meeting needs, but also how far we could fall if highways are underfunded.

Katherine Siggerud, acting director, GAO Physical Infrastructure Issues, observed that FHWA statistics show that Interstate
pavement condition improved over the past 10 years, with 8.6 percent of the pavement in poor condition in 1990, compared with 3.4 percent in 2000.

"Although overall physical conditions have improved, conditions of
specific sections of Interstate can vary," Siggerud told Congress. "For example, FHWA statistics show 10 states have at least one-third of their pavement in mediocre or poor condition as compared with 18.3 percent of highways in that condition nationwide." Also, she demonstrated that Interstate highways generally are in much better condition than other classes of roads.
 

Domestic Growth Seen For 2003

But despite budget problems in many states, the domestic highway construction market should still grow two to three percent in 2003, an economist for the Washington, D.C.-based American Road & Transportation Builders Association (ARTBA) said in December. 

ARTBA Vice President of Economics & Research Dr. Bill Buechner said record federal investment from TEA-21 during the past two years will drive 2003 market growth after a modest performance in 2002. 

Through Oct. 2002, the value of construction work performed on highway and bridge projects was $46.5 billion, up only one-tenth percent compared to the first 10 months of 2001, according to ARTBA. 

Buechner said many states operating on a July to June fiscal year and experiencing revenue shortfalls may have temporarily delayed road projects for cash management reasons last spring. 

Congressional delay enacting the FY 2002 federal transportation appropriations until Dec. 2001 may have also contributed to the 2002 highway construction weakness, Buechner said.

During the late summer, however, the pace of  highway construction accelerated and set new monthly records in Sept. and Oct. That trend,
Buechner says, should continue through the end of 2002 resulting in modest growth for highway construction over 2001.

Buechner, a Harvard-trained economist who served  the Joint Economic Committee of the U.S. Congress for nearly two decades before joining ARTBA, cautioned his forecast is dependent on state budget and contract letting decisions.

An ARTBA survey of state transportation departments found most expecting no disruptions or cuts in their highway construction programs during 2003.
 

Airport Construction Growth

ARTBA's Buechner also said the value of construction work on airport runways and related projects grew two percent in 2002, following an impressive 30 percent increase in 2001. Airport construction is now a $4 billion market.

The good news for 2003 is that Congress is expected to provide the full $3.4 billion for the Airport Improvement Program (AIP) promised in the Aviation Investment and Reform Act for the 21st Century (AIR-21) for FY 2003, up slightly from $3.3 billion in FY 2002. This should continue to support growth in the airport construction market.
 

System Preservation Endangered

Nonetheless, a shortfall in funding from existing levels for years to come could greatly endanger the system preservation efforts undertaken by state DOTs and supported by the Foundation for Pavement Preservation (FP2).

This was noted by AASHTO in its talking points for the reauthorization struggle.

"Our existing system of roads, built over the last 50 years, is wearing out," AASHTO said. "If it is to serve future generations, it must be preserved and modernized."

According to the analysis done by the FHWA in 1999, the cost for just the 47,000-mile U.S. Interstate Highway System is $10 billion annually beyond current funding.

"The preservation needs of the 100,000-plus miles of arterials on the remainder of the National Highway System are substantial as well," AASHTO said. "It is critical that funding be increased so this important highway and bridge preservation work -- needed in every region of the country -- can proceed."

Yet another area that would greatly boost system preservation would be a greater support for research, an area in which FP2 is heavily involved. AASHTO recommends an increase in FHWA’s Research and Technology Program by 50 percent, to $300 million annually.
 "This will increase the University Transportation Centers Program from $32.5 million to $50 million, fund new environmental and freight research programs, and expand technology transfer programs such as LTAP and NHI," AASHTO said.