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A Budget 'Freeze' on an Empty Highway Fund

In his State of the Union, President Obama made reducing the budget deficit one of the priorities of the administration for next year. The announcement of budgetary caps and potential cuts in federal non-national security programs worried communities that rely on discretionary federal spending. The FY 2011 budget proposal released this past Monday shows the highly anticipated figures.

For transportation, however, it is not a clear story. Part of the reason is the schizophrenic nature of the major surface transportation programs that hold contract authority. While their budget authority is mandatory, the spending for highways and transit is discretionary. In the current context of the budgetary caps on discretionary programs, which category gets “frozen”? If it is the funding, then surface transportation is not under the incidence of the freeze. If the cap refers to actual outlays, surface transportation is on the chopping block with other federal discretionary programs.

Either way, the Department of Transportation (DOT) does not seem frozen. For sure, some of the funding will be down next year, given the expiration of stimulus money or chopped programs. But the main surface transportation programs will receive at least the same amount of funding as last year, based on their obligation limitations. The proposed National Infrastructure Innovation and Finance Fund (a.k.a. National Infrastructure Bank) helps too. Without its $ 4 billion of funding in FY 2011, DOT would have $ 2.4 billion less than this year in its proposed budget. As a result, both the proposed funding and the estimated outlays for DOT will be higher in FY 2011 than this fiscal year.

All this discussion of caps on transportation funding does not address the main problem of surface transportation: revenue. The freeze tackles only one side of the budget deficit equation--the spending side. There is nothing on the revenue side, and surface transportation is in a dire situation. The Highway Trust Fund will be in the red again this year and every year until 2020, if no legislative action is taken. More funding from the general fund means not only money taken from another discretionary program or increased public debt, but more budgetary quandaries.

Yet, before calls for a gas tax increase become deafening, DOT needs some real reform of the way it does business, prioritizing projects of real significance and managing for successful outcomes and accountability. That would restore some true responsibility and likely reduce unneeded spending.