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30–252 PDF 2006

STATUS OF THE HIGHWAY TRUST

FUND: HOW THE FISCAL YEAR 2007

BUDGET IMPACTS SAFETEA LU

(109–46)

HEARING

BEFORE THE

SUBCOMMITTEE ON

HIGHWAYS, TRANSIT AND PIPELINES

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

FEBRUARY 15, 2006

Printed for the use of the

Committee on Transportation and Infrastructure

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

JEAN SCHMIDT, Ohio

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

(II)
SUBCOMMITTEE ON HIGHWAYS, TRANSIT AND PIPELINES

THOMAS E. PETRI, Wisconsin, Chairman

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California, Vice-Chair

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

DAVID G. REICHERT, Washington

JEAN SCHMIDT, Ohio

DON YOUNG, Alaska

(Ex Officio)

PETER A. DEFAZIO, Oregon

NICK J. RAHALL II, West Virginia

JERROLD NADLER, New York

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Scheinberg, Phyllis F., Assistant Secretary for Budget and Programs and

Chief Financial Officer, U.S. Department of Transportation, accompanied

by J. Richard Capka, Acting Administrator, Federal Highway Administration ........................................................................................................................ 5

PREPARED STATEMENTS SUBMITTED BY A MEMBER OF CONGRESS

Carnahan, Hon. Russ, of Missouri ......................................................................... 31

PREPARED STATEMENTS SUBMITTED BY THE WITNESS

Scheinberg, Phyllis F ............................................................................................... 32

SUBMISSIONS FOR THE RECORD

Scheinberg, Phyllis F., Assistant Secretary for Budget and Programs:

Response to a question from Rep. Sodrel ........................................................... 22

Response to a question from Rep Baird ............................................................. 28

(1)

STATUS OF THE HIGHWAY TRUST FUND: HOW

THE FISCAL YEAR 2007 BUDGET IMPACTS

SAFETEA-LU

Wednesday, February 15, 2006

HOUSE OF REPRESENTATIVES, COMMITTEE ON TRANSPOR- TATION AND INFRASTRUCTURE, SUBCOMMITTEE ON

HIGHWAYS, TRANSIT AND PIPELINES, WASHINGTON, D.C.

The committee met, pursuant to call, at 2:00 p.m. in room 2167,

Rayburn House Office Building, Hon. Thomas E. Petri [chairman

of the committee] presiding.

Mr. PETRI. Good afternoon. The Subcommittee hearing will come

to order. I would like to welcome our witness to today’s hearing on

the status of the Highway Trust Fund: How the Budget Year 2007

Proposals Impact SAFETEA- LU.

The original purpose of the hearing was to provide members of

the Subcommittee and others with information on the Highway

Trust Fund revenue estimates released last week in the President’s

2007 budget and to hear testimony about how the President’s budget will affect the implementation of SAFETEA-LU.

However, our invited witness for the Department of Treasury,

Mr. Carroll, is unable to attend today’s hearing. He is overwhelmed

with testimony before two other committees on another subject and

will have to be scheduled for a later date. We had invited him to

talk about the drastic differences in the revenue estimates between

2005 and today.

The House and Senate conferees use the revenue estimates in

the President’s 2006 mid-session review, which were released last

July, as the baseline from developing the final SAFETEA-LU conference report. However, when the President’s budget was released

on February 6th, it contained a nearly $1.5 billion shift in the revenue estimates for budget year 2005 and a half million shift in estimates for 2006.

These drastic changes over just seven months bring into question

the reliability of the estimating process of the Department of the

Treasury. It is unfortunate Mr. Carroll is unable to be with us

today, but as I indicated, we still intend to have him testify to explain the factors that influence the fluctuations and the revenue estimates between the mid-session review and the President’s budget.

We are fortunate, as it turns out, doubly fortunate, to have Ms.

Phyllis Scheinberg, DOT’s Assistant Secretary for Budget and Programs, with us today. Ms. Scheinberg was kind enough to come up

and to brief Mr. DeFazio and myself and staff on the Subcommittee

this past fall on the status of the Highway Trust Fund and how
2

possible changes in the Trust Fund may impact SAFETEA-LU.

That meeting served as the basis for a series of conversations that

have led to this hearing.

The President’s budget shows a negative balance, a negative bal- ance of $2.3 billion in the highway account of the highway trust

fund at the end of budget year 2009. The Department of Transportation has said in the past they will not allow the highway account

to run a negative balance.

When Congress passed SAFETEA-LU last summer, it was done

with the expectation that the guaranteed funding levels prescribed

in that bill would be honored for budget year 2005 through budget

year 2009. We have invited Ms. Scheinberg here today to address

how the Department anticipates dealing with this projected negative balance; specifically whether or not they will cut spending authorized in SAFETEA-LU, and if so, how such cuts will be applied

and when they might occur.

We have also asked Ms. Scheinberg to talk about the instances

where the President’s budget differs from SAFETEA-LU. We are

very pleased that the budget closely mirrors the authorizing statute we passed last July. However, we would like to hear why the

Administration has decided to deviate from SAFETEA-LU in the

following areas.

First, funding an unauthorized Open Roads financing pilot program at the expense of State highway formula programs. Second,

funding National Highway Traffic Safety Administration’s vehicle

safety activities, which are traditionally funded from the general

fund, from the Highway Trust Fund in a time when the Highway

Trust Fund may not be able to support its traditional activities.

Thirdly, providing $100 million less than the authorized funding

level for the Federal Transit Administration’s Small Starts program.

We look forward to hearing your testimony on these issues and

I suspect members may have several questions.

I now yield to Mr. DeFazio for his opening statement.

Mr. DEFAZIO. Thank you, Mr. Chairman. It is unfortunate that

someone from Treasury can’t be here to address how there could

have been such an extraordinary change in revenue estimates over

such a short period of time. And I would hope that we can perhaps

schedule a future meeting where we do have someone from Treasury. I understand that the DOT folks can talk about how they

might implement changes in the program if such projections come

true, but they can’t shed any light on how those projections were

reached. I understand that fact.

I am also concerned that the Administration, and I will be asking

about this, has proposed to fund the entire National Highway

Transportation Safety Administration budget out of the Highway

Trust Fund, when traditionally some of those functions have been

paid for out of general revenues, particularly if we are looking at

this problem of a few years down the road in the Trust Fund. It

seems that we wouldn’t want to be adding new burdens at a time

when we are looking at a potential, possible, predicted shortfall.

So with that, Mr. Chairman, I look forward to the testimony.

Mr. PETRI. Thank you. Any other members with any opening

statements? Mr. Duncan.
3

Mr. DUNCAN. All I want to say, I will be very brief, Mr. Chairman, but I think it is certainly good that you are looking into this.

We need to find out not only about this negative $2.3 billion figure

that you mentioned, but we need to, I think we should find out why

this has occurred or come up so soon after the passage of the Highway Bill and find out, is it expected to continue and at how fast

a rate, and is it going to get even bigger or is this some sort of aberration or what.

So I am glad that you are doing this. I thank you very much for

calling this hearing and allowing us to participate.

Mr. PETRI. Any other opening statements? Mr. Pascrell.

Mr. PASCRELL. Chairman Petri and Ranking Member DeFazio, I

want to thank you for holding this Highway Trust Fund hearing.

When we passed SAFETEA-LU last summer, it was done with

the expectation that the guaranteed funding levels prescribed in

the bill would be honored from 2005 to 2009 fiscal year. This budget does not live up to this expectation. The budget does show a negative balance, as the Chairman pointed out, of $2.3 billion in the

highway account.

Aside from the fact that the Highway Trust Fund will be in deficit, this is disturbing for other reasons. How did the Administration

come to this conclusion? I would like to know how they arrived at

it. They must have seen something conveniently after the fact and

maybe you know and we will get to the questions hopefully in a

little while.

The Department of Transportation has said they will not allow

the highway account of the Highway Trust Fund to run a negative

balance. I am anxious to know how they anticipate dealing with

this projected negative balance while living up to their statutory

obligations. Seemingly in contrast with the recent deficit projections, the Administration’s budget also includes new, higher revenue estimates for the highway account of the same trust fund.

And I find it puzzling, and I hope most of us here find it puzzling, that the Fund will receive more funding but end up with

less. I know weird things happen in this town, but I am anxious

to see how that happened.

Finally, I am extremely disappointed that at a time when funds

are scarce, and our Nation’s highways are crumbling and congested

beyond a projected level of capacity, the President’s budget takes

money from the State highway formula of dollars and other highway programs. Highway transportation is a vital part of our Nation’s economy. To underfund at this critical juncture in contrast to

Congressional intent, and here is the problem.

There are committed capital projects in the budget, Mr. Chairman. They are committed. And you know in other parts of the

transportation budget, what we have problems with right now, that

many of those capital projects, many of them water projects, many

of them having to do with damming, many of them having to do

with water quality, those projects stop if the money is not there to

continue those projects. Yet the people in those areas expect those

projects to be committed. In fact, certain parts, agencies within the

Department of Transportation have committed to the public in different parts of the Country that these projects would be completed.
4

I know my district is just one. It only has to do with a dam which

could flood out hundreds of thousands of people. That is pretty important, regardless of where you live, just as it is important to everybody here. None of us are from Mississippi, we are concerned

about what is going on in the Gulf. That is not our district. But

that would be very selfish of us to say we have no responsibility.

So I would like to hear some answers, and I have thrown out

some questions. Does this have anything to do, also, with transfer

of dollars? And second of all, does this have anything to do with

the negotiations that occurred at the very end, when we were looking for a bottom line in SAFETEA- LU? Remember what went back

and forth between the Senate and the House and the Whit House?

And the beat goes on.

So I would like to hear your answers to that question. Thank

you.

Mr. PETRI. Thank you. Mr. Coble.

Mr. COBLE. Mr. Chairman, my colleagues have thanked you for

conducting this hearing, and I did not want my silence to convey

to you that I did not thank you for doing it. So I want to be heard

on that.

I want to just say this, Mr. Chairman. I appreciate what the gentlemen from New Jersey and Tennessee said. I know of no issue

that is more compelling to us than highway infrastructure. It deteriorates daily, bridges, unsafe bridges. And I think it is a direct

link to safety.

So I think this is an important hearing, Mr. Chairman, I thank

you for having it. I am going to have to depart for another hearing

fairly imminently, but again, thank you, sir.

Mr. PETRI. You are welcome. Mr. Mica.

Mr. MICA. Thank you. I will be very brief. I thank you for conducting this hearing, which we must do to review some of these

budget proposals. It appears the Administration is in pretty good

compliance as far as authorization under SAFETEA-LU. There are

a couple of questions that will be raised there.

I think what is most startling about the information that has

been provided for the Subcommittee is the projections, looking out

beyond this budget year. They foretell some very serious problems

in funding our Nation’s highway and transportation infrastructure,

the negative cash balances in the highway account, in particular,

should alarm everyone. It does point out that we have the challenge of finding a better mechanism, both to finance the system

and then also to maintain the integrity and stability of available

funds.

And then as Mr. Coble said, we have tremendous needs in every

district, every State across the Nation for highway infrastructure.

So this hearing does highlight some of the challenges we face. I

yield back.

Mr. PETRI. Thank you.

Are there any other opening statements? If not, Ms. Scheinberg.
5

TESTIMONY OF PHYLLIS F. SCHEINBERG, ASSISTANT SECRETARY FOR BUDGET AND PROGRAMS AND CHIEF FINANCIAL OFFICER, UNITED STATES DEPARTMENT OF TRANSPORTATION, ACCOMPANIED BY J. RICHARD CAPKA, ACTING

ADMINISTRATOR, FEDERAL HIGHWAY ADMINISTRATION

Ms. SCHEINBERG. Good morning, Mr. Chairman. I want to thank

you for the opportunity to appear before you today to discuss the

President’s fiscal year 2007 budget plan for the Department of

Transportation’s surface transportation programs. I am happy to

have with me today my colleague, Rick Capka, the Acting Administrator of the Federal Highway Administration.

Last summer, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, also known as SAFETEALU, authorized funding for the Federal Highway Administration,

the Federal Transit Administration, the National Highway Traffic

Safety Administration and the Federal Motor Carrier Safety Administration through fiscal year 2009. I am very pleased to report

to you today that the President’s fiscal year 2007 budget generally

proposes surface transportation funding as envisioned in

SAFETEA-LU.

The President’s request for highways, transit and highway safety is $50 billion. That is $3.9 billion more than enacted in fiscal year

2006. The President’s request includes $842 million associated with

a revenue aligned budget authority, or RABA, adjustment. This

RABA calculation, as provided in SAFETEA-LU, adjusts highway

funding up or down depending on gas tax receipts and ensures that

revenues collected into the Highway Trust Fund are directed to

fund surface transportation program needs.

The President’s 2007 request, including the RABA adjustment,

will provide historically high levels of investment in our highway,

transit and highway safety programs. The Administration’s 2007

proposed funding levels for these transportation programs are especially significant, given the overall context of the President’s budget.

At a time when most non-security related domestic programs are

experiencing reductions in their funding levels, and when the Department of Transportation’s total budget level is holding steady,

the President’s 2007 budget request would increase highway, transit and highway safety funding by nearly 10 percent above last

year’s levels. Actually it is this year’s levels. This shows the high

priority the Administration has placed on continuing to fully fund

SAFETEA-LU programs among many competing national priorities.

At the same time, the President’s 2007 budget projections reflect

a continuing downward trend in the cash balances in the Highway

Trust Fund. I call your attention to the fact sheet that is attached

to my statement, which will be helpful in reviewing the current

status of the Highway Trust Fund. The Trust Fund has two parts:

a highway account, which funds Federal highways, NHTSA, and

motor carrier programs; and a separate mass transit account that

funds Federal transit programs. By the end of the authorization period in 2009, the Trust Fund balances are estimated to be a negative $2.3 billion in the highway account and a positive $6.9 billion

in the mass transit account.
6

A review of the history of the Highway Trust Fund shows that

projections of the cash balances in this fund typically vary from

year to year, and become less reliable as you look further into the

future. The Department of Treasury model used to calculate the

Highway Trust Fund resources is dependent on macroeconomic

projections that are subject to a large number of variables.

In addition, expenditures from the Highway Trust Fund are estimates and based largely on approximations of each State’s obligations for highway projects and programs. Thus, factors affecting the

cash balances can be difficult to predict.

One way to identify new ways of expanding highway investment levels is through the proposed $100 million Open Roads Financing

pilot program. This new program would make it possible for up to

five States to explore innovative mechanisms that can augment existing sources of State highway funding, as well as improve highway performance and reduce congestion. The pilot States will report their progress and provide lessons learned that would be helpful as we explore new ways to support surface transportation in the

future.

In addition, SAFETEA-LU establishes two commissions charged

with reviewing and making recommendations on issues affecting

the Highway Trust Fund. These two commissions will provide information on potential alternatives to the current gasoline tax approach that may prove more effective in supporting highway and

transit funding.

In summation, the President’s budget for 2007 proposes surface

transportation funding generally consistent with SAFETEA-LU

guaranteed levels. At the same time, the Administration’s revenue

and spending projections for future years indicate a shortfall in resources. We want to work closely with the Congress to find solutions for this projected imbalance. We must begin serious consideration of the post-SAFETEA-LU era to ensure that these programs

are fully financed to meet our Nation’s transportation needs.

Thank you for the opportunity to appear before you. Rick and I

would be happy to answer any questions you may have.

Mr. PETRI. Thank you. I wonder if you could spend a little time exploring with us the practical impacts of the projected $2.3 billion

shortfall. In particular, how would you propose to handle that? Do

you have history to look back to or is this new territory? Would you

be doing an across the board cut or cutting back on certain programs? How would you, when would you have to start making adjustments in order to preserve as much integrity of the program as

possible, given the time lags and all that?

Ms. SCHEINBERG. Mr. Chairman, we are optimistic that we will

not have to get to the point where we will have to make cuts in

the program. We are optimistic that the receipts coming into the

Highway Trust Fund will cover the funding levels through

SAFETEA-LU. This $2.3 billion shortfall in 2009 is relatively small

and it is at the end of the authorization period, by which time we

expect that the receipts will increase and be able to cover the authorization levels.

If it were to come to pass that we would have to deal with this,

we would come to you and to the Congress and discuss this issue.

We are optimistic at this point that we will not have to do that,
7

but if there were some problem, we would definitely talk to you before we would make any plans.

Mr. PETRI. I also wonder if you could comment a little bit more

on the President’s program you referred to in your testimony about

the Open Roads Financing pilot program that will be available for

up to five States. How does that differ from what is already authorized in SAFETEA-LU in this area?

Ms. SCHEINBERG. I believe you are referring to our Open Roads

Pilot test program.

Mr. PETRI. Yes.

Ms. SCHEINBERG. With this pilot, we are looking for new mechanisms of expanding the revenues that we do have, and expanding

the way we fund surface transportation programs. This pilot is

more closely aligned to value pricing programs than it is to a capital program. We are looking for innovative ideas from States, from

metropolitan areas, and from corridors who might have some

broader way of using alternative financing to expand the use of

their State monies. We are looking for creative uses of transportation funding, so that we can apply the lessons learned from these

pilots to remove the barriers to doing different things in the next

reauthorization.

We are looking for ways to finance the highway and surface

transportation programs differently in the next reauthorization period. I truly believe that what we all need to focus on is how to deal

with the next reauthorization. We believe that there is enough financing in the Highway Trust Fund to cover SAFETEA-LU. But

there will not be enough financing after SAFETEA-LU. And that

is where we need to focus.

Mr. PETRI. So there are a number of different innovations that

are going on around the world, in Singapore, in Britain, I think a

lot of us are familiar with what is happening in downtown London,

where you have to pay to drive downtown. I think Manhattan is

thinking of doing the same thing, and in Holland and in Germany.

Are those the kinds of things that you are asking that States look

at? Or are you asking that they do something that has not been

done anywhere before?

Ms. SCHEINBERG. Something like that might be some of the

ideas. We are trying to do it in this Country in a way that makes

sense for us. We are looking for ideas at the State level—and various States and metropolitan areas have ideas. We have been talking to them and we want to make it. We want to give them an opportunity to demonstrate their ideas of how to relieve congestion

and expand financing in their areas.

Mr. PETRI. Thank you.

Mr. DeFazio.

Mr. DEFAZIO. Thanks, Mr. Chairman. I guess since again Treasury is not here, we can’t talk about the projections. But you are

saying you feel funding will be adequate, which must mean that

you feel that perhaps these projections are going to be disproved

by experience in the interim?

Ms. SCHEINBERG. We have found through experience that the

further you go out into the future, the less reliable the Treasury

projections are. Evidence of the fact that they are less reliable is

the fact that we have a positive Revenue Aligned Budget Authority
8

(RABA) calculation for this year. That tells us that the estimates

we had a year ago have been exceeded by the actual receipts coming into the Highway Trust Fund.

Mr. DEFAZIO. Does RABA make—I’m sorry, go ahead. Finish

your answer.

Ms. SCHEINBERG. I just wanted to say, that just shows the uncertainty of these projections. You could go out even further, say three

years into the future and have sufficient funds. We think that

given the positive RABA the estimates are going in the right direction. The actuals are going up as compared to the projections. By

three years, we will have enough to get through the authorization

period.

The other issue is that Congressional Budget Office’s (CBO) estimates for the Highway Trust Fund are even higher than the Administration’s estimates. Traditionally, CBO and the Administration have had some differences in their estimates. CBO is more optimistic that we will have enough money. Their estimates show

that we will make it through the authorization period without a

problem.

Mr. DEFAZIO. With RABA adjustments in the interim?

Ms. SCHEINBERG. Yes. We would do RABA year by year.

Mr. DEFAZIO. Right. But they are projecting that out into the future, too.

Given this projection for 2009, let’s say a year from today they

are still projecting that kind of a shortage. At what point would

DOT feel that it needed to come to the Congress and begin to seriously discuss outlay adjustments in the future, I mean, if it was

projected for next year, two years from now?

Ms. SCHEINBERG. Well, if a year from now, we are having this

same meeting, we will be discussing the 2008 budget. We would

definitely need to look at what is being projected for the remainder

of SAFETEA-LU at that point. Whether we will need to adjust

spending will depend on the magnitude of the estimates at that

time.

Mr. DEFAZIO. Should the policy, should we be looking at, I know

we want to maximize our investment as we go. We have tremendous unmet needs across the Country.

But on the other and, would it be prudent for Congress to be

looking at some sort of minor adjustment to RABA, establishing

some more capability of carry-forward for the trust fund?

Ms. SCHEINBERG. Mr. DeFazio, I think the expression of the Administration’s support for SAFETEA-LU is such that we agree with

this Committee, and with the Congress as a whole, that fully funding for SAFETEA-LU is the right thing to do. We want to give it

a chance. It is not time yet to give up on the calculations that are

in the legislation.

Mr. DEFAZIO. Right, but last year we didn’t anticipate this additional funding and the RABA upward adjustment this year.

Ms. SCHEINBERG. Well, except that the law provided for it.

Mr. DEFAZIO. We allowed yes, but we didn’t estimate it.

Ms. SCHEINBERG. Well, this is related to the volatility of these

projections. We provide for RABA because we expect that there will

be changes in the estimates. I think we saw through TEA-21 that

almost every year there was a RABA adjustment. So we have a his-
9

tory that the funding is adjusted as we compare, the actuals to the

estimates. I think we need to let this process work and see how it

goes before we make any adjustments to the authorization language.

Mr. DEFAZIO. I think you were discussing with the Chairman the

Open Roads financing pilot program, or at least alluding to it in

terms of allowing States or local jurisdictions to innovate in terms

of looking at different ways of assessing costs of the system to

users.

Ms. SCHEINBERG. Yes.

Mr. DEFAZIO. And I am just curious whether you are familiar

with what my State is proposing and whether you think that is

consistent with what you are looking at here.

Ms. SCHEINBERG. I am going to ask Rick to respond.

Mr. DEFAZIO. Sure.

Mr. CAPKA. Mr. DeFazio, the pilot that you have going on in Oregon is a great example of what we are trying to encourage with

the Open Roads pilot program. We are trying to stimulate great

ideas to allow us to look at mechanisms and opportunities to shift

away from the traditional methods of collecting the revenues.

So the program that you have in Oregon is a good example. And

we know there are other good examples out there as well, and we

need to be doing something now so that we can inform the decision

makers a few years down the road on which way we need to be

heading in the period after SAFETEA-LU.

Mr. DEFAZIO. Thank you. Thank you, Mr. Chairman.

Mr. PETRI. Mr. Duncan, any questions?

Mr. DUNCAN. Thank you very much, Mr. Chairman.

Ms. Scheinberg, this is my 18th year on this Committee, and I

have been through several highway bills. Over that time, I have

seen all sorts of figures about the increases in vehicle miles traveled. I saw figures for the 1980s, the 1990s and so forth. Over a

10 year period, vehicle miles traveled have been going up, in some

States three times, in some States four or five times.

I have mentioned before than when I was growing up, most families had one car, some families had two. But now the mother, the

dad, both the teenagers, many families have four or five vehicles

now. These cars and the number of vehicles and the vehicle miles

traveled just seem to keep on going, just almost exploding.

In your projections and your discussions at the Department of

Transportation, do you see that continuing, or do you think that is

going to slow down or taper off? What can you tell us about that,

if anything?

Ms. SCHEINBERG. We see the same trends that you are seeing.

The numbers validate the trends. We see this trend continuing, for

the near future at least, although at some point there probably will

be a leveling off. But at this point the trend of increased vehicle

miles traveled is continuing.

Mr. DUNCAN. At least in the foreseeable future, it keeps going

way up.

Ms. SCHEINBERG. Yes.

Mr. DUNCAN. I assume, too, that highway construction costs keep

just ballooning or going way up. Is that what you also see?

Ms. SCHEINBERG. Yes.
10

Mr. DUNCAN. So these needs, thinking of that, this $2.3 billion,

we have a report here that says these drastic changes between estimates over just seven months bring into question the reliability of

the estimating process at the Department of Treasury. What I am

wondering about, you say that you think there is enough money

there over the next three years. But do you feel pretty certain

about that, with all these figures continuing to go way up, and the

needs continuing to grow?

Then when you talk about needing to do something for the future, do you think these figures are just going to go really explode

in five or ten years down the road?

Ms. SCHEINBERG. Mr. Duncan, I think there are a couple of

things going on here. One is exactly what you are talking about,

that there is, the needs are growing. The other thing that is happening is that the Highway Trust Fund is not growing as fast as

the needs.

Mr. DUNCAN. Right. That is what I was going to get at next.

Ms. SCHEINBERG. The Highway Trust Fund is growing, but it is

not meeting the expanding needs, and it is not expanding as quickly as the needs are. So that is where the shortfall is coming from.

It is not from the fact that we are not generating gasoline revenues. It is the fact that the needs are growing faster.

Mr. DUNCAN. Right.

Ms. SCHEINBERG. We believe that now is the time to consider

other forms of financing highway programs. That is one of the reasons we have proposed the Open Roads program. It is also one of

the reasons that you included in SAFETEA-LU two commissions to

look at other ways of financing the post SAFETEA-LU era. We

need to find more money for highway programs because the needs

are growing exponentially.

Mr. DUNCAN. Well, when you say that the CBO is even more optimistic than the Treasury Department or the Administration, are

you, is your Department having discussions with the Treasury Department and the CBO about this at this time?

Ms. SCHEINBERG. Traditionally there have been differences. This

is not a new phenomenon. CBO has traditionally had higher receipt

levels, and higher estimated levels than Treasury. The actuals usually come out somewhere in between. That says to me is that this

estimation process is not a science. It is dependent on the economy.

It is dependent on some larger issues that are very hard to predict.

I think this Committee and the Congress in general has recognized

that is why we have RABA in SAFETEA-LU.

Mr. DUNCAN. Well, we are going to need to get, the Chairman

mentioned some innovative ideas or things that they are doing in

other countries. We are going to have to get these commissions that

you mentioned and the top talents at the Department of Transportation to come up with some pretty good recommendations for us

to take a look at, I think. It looks like to me like you are talking

about a problem that is going to grow pretty big, just a few short

years down the road.

Thank you very much, Mr. Chairman.

Mr. PETRI. Thank you.

Mr. Pascrell?
11

Mr. PASCRELL. I am looking at the fact sheet that you supplied

to us. The bottom of that fact sheet is a cash balance during the

program up to 2009, including 2009. Is that correct?

Ms. SCHEINBERG. Yes.

Mr. PASCRELL. You show that beginning in 2004, there is a continual decline in the balances within the highway account.

Ms. SCHEINBERG. Yes.

Mr. PASCRELL. That didn’t just happen yesterday, it didn’t happen seven months ago. This happened beginning in 2004. I will get

back to that in a second.

Ms. SCHEINBERG. Yes, sir.

Mr. PASCRELL. Then you show that in the mass transit account,

except for 2005, there has been a steady increase, maybe not to the

greatest proportion in 2009, projected for the mass transit account,

correct?

Ms. SCHEINBERG. Yes, I can explain that if you would like.

Mr. PASCRELL. Okay. That was not my question, but go ahead.

Ms. SCHEINBERG. SAFETEA-LU changed the method for accounting for the mass transit outlays. The change more accurately reflects program outcomes when compared to the way it was calculated before. Because of the technical adjustment that was made

in SAFETEA-LU, the 2006 number is a big jump over 2005. The

mass transit account holds its own through 2008 and then it starts

following the direction of the highway account.

Mr. PASCRELL. And you have already said we can’t trust those

numbers.

Ms. SCHEINBERG. The trend would be that the mass transit account would be going down, similar to the trend for the highway

account.

Mr. PASCRELL. Why is there such a huge swing from 2008 to

2009? That is a swing of $4 billion. We are in the plus area in

2008, we wind up in the minus area in 2009. That is a $4 billion

swing. Why is that? How did that happen?

Ms. SCHEINBERG. If you look at 2006 to 2007, there is a $4 billion

decline in the trust fund balance. Then in 2008 there is another $4

billion decline, and in 2009 there is another $4 billion. This is a

continuous trend. The authorized levels in SAFETEA-LU are such

that the Highway Trust Fund cannot keep up. We are authorizing

programs at the same time that Trust Fund balances are declining.

Mr. PASCRELL. That brings me to my next question. What needs

to be done to the Highway Trust Fund in order for it to keep up,

particularly in the area of highway construction?

Ms. SCHEINBERG. We need to find new sources of revenue.

Mr. PASCRELL. Well, we have been talking about this for a long

time. And the Administration has been talking about it for a short

time and with no suggestions. What would you suggest? What are

the options open to us? Let’s get down to the real nitty-gritty, besides these numbers.

Ms. SCHEINBERG. Yes, sir. We are looking for realistic ideas. One

of the things that the Open Roads program does is look for real

ideas that are going on on the ground.

Mr. PASCRELL. Good. Let’s talk about real ideas.

Ms. SCHEINBERG. In Mr. DeFazio’s district, there are actual

things going on. What we are trying to do with our $100 million
12

program is encourage States and localities to take the risk of trying

out something different, take the risk of doing something—

Mr. PASCRELL. But aren’t you really saying, Ms. Scheinberg, that

you want whatever shortfall we are looking at and whatever downturn we are looking up to be made up in the States of the Union?

Let’s look at those States, let’s see if those States can refinance in

a different way so that they will come up with more money, having,

well, many of those States of course have their own trust funds,

don’t they?

Ms. SCHEINBERG. Yes.

Mr. PASCRELL. And are struggling to deal with them. My State,

New Jersey, is a good example. One administration shifts into the

next administration, nobody wants to touch it. It is the hot rail

here.

So I am asking you to address the hot rail. What is your answer?

Ms. SCHEINBERG. Well, sir, we have three years to come up with

the answer. I don’t have the answer today. But we have three

years and then we have to have the answer. When we have the

next reauthorization in 2010, the Highway Trust Fund will not be

able to support growth in the program.

Mr. PASCRELL. You anticipated my final question. It will not be

there. The money will definitely not be there.

Ms. SCHEINBERG. No, sir.

Mr. PASCRELL. And that is only three years away.

Ms. SCHEINBERG. Exactly.

Mr. PASCRELL. So we have to deal with something pretty soon

within the next 18 months, it would seem to me—

Ms. SCHEINBERG. Yes.

Mr. PASCRELL.—in order to be realistic and honest with the

American people. If we do not want to raise Federal taxes on gasoline, then we need to look for another way to put money—I mean,

let’s talk to the American people facts instead of talking about

what needs to be done, what can’t be done. Because otherwise

you’re going to be, we are talking around the issue here. We don’t

have enough money to finish this, what we set out to do.

And I like what you said that the projects are for five years. How

do you do that? We have been doing it for the last five years, talking about seven years under the former Administration, ten years

of budgeting, five years of budgeting, I mean, it is a joke, you know

it is a joke, I know it is a joke. It sounds good. You don’t know

what the circumstances are ten months from now

But we continue to do that, and the American people seem to

wonder, well, where is all this money going to, and what about

these trust funds? We have to address this. The Administration has

to address it. What is the Administration recommending? Since you

came up with the shortfall.

Ms. SCHEINBERG. The Administration is saying that we need to

think about this right now—

Mr. PASCRELL. We need to think about it.

Ms. SCHEINBERG. We need to come up with something. We recommended this pilot program. We are also fully endorsing the commission.

Mr. PASCRELL. They need to think about it, Mr. Chairman.

Mr. PETRI. Yes, sir.
13

Mr. PASCRELL. Okay. We will be thinking about it. Thank you,

Ms. Scheinberg. I appreciate your thoughts.

Ms. SCHEINBERG. You are welcome.

Mr. PETRI. Mr. Boozman.

Mr. BOOZMAN. Thank you, Mr. Chairman.

The Open Roads project, I guess I really have, I don’t really understand exactly the sense of what exactly we are trying to do. You

made the comment that they were trying to get innovative financing. I guess what I am wondering is, how you spend $100 million

doing that. If you go towards project type things, if you actually did

something, I mean, $20 million spread over five States is nothing.

That is not enough money to do anything.

Have we already determined the States?

Ms. SCHEINBERG. No, sir, and the—

Mr. BOOZMAN. Have we talked about which States? Have any

States come up yet?

Ms. SCHEINBERG. Some States have come in.

Mr. BOOZMAN. Which ones?

Ms. SCHEINBERG. This is not a capital program to build things,

but rather a program to implement different ways of expanding the

revenues that exist.

Mr. BOOZMAN. I understand. But I guess my thing would be, you

know, for a lot of this, the $100 million, you could have a conference and have all the 50 highway commissioners and their staff

come up and talk about it for a week. Again, what I would like to

know specifically, I would like to know what States that you are

considering. And then specifically, if we are already considering

specific consultants, who those are.

I mean, is that what we are going to spend the money on, is consultants?

Mr. CAPKA. Sir, as Ms. Scheinberg had mentioned, what we are

trying to do is stimulate some innovation. As Mr. DeFazio had

pointed out earlier, in Oregon, they have a program right now

where they are trying to do something other than collect the gas

tax at the pump. That requires infrastructure to be put in place.

And it is not building new capacity, it is not building better interchanges, but it is putting infrastructure in place that will allow a

State to explore an innovative idea.

Mr. BOOZMAN. So are we talking, then, about giving them, the

State of Oregon, for instance, X million dollars to implement the

thing that they thought of, or are we just going over there and saying, can you think of any more things?

Mr. CAPKA. Sir, we are looking for the best value, incremental

value, for that next dollar we spend. I think what we want to do

is encourage States to come in with proposals on how they would

set up an experimental program or a demonstration project and describe what they would hope to achieve in that project. Then we

would look at how that project might inform the decision makers

later on, on which direction we think we might want to make some

further investment.

So we are not going to stymie, we are not going to limit the ideas

that come forward. In fact, we would like to see a wide variety of

ideas come froward.
14

Mr. BOOZMAN. I understand that, and I don’t want to keep on,

I guess, if you, first of all, what States are we talking about, preliminarily?

Mr. CAPKA. Sir, we are not in the process of evaluating State proposals just yet. In fact, we have to put the meat on the bone so we

can get that kind of information out to the States to begin the solicitation process of bringing that in. This right now is just a proposal

in the President’s budget. If we are able to grab onto it, then we

will get the specifics out. So we really—

Mr. BOOZMAN. Well, again, with all due respect, and I am a

friend. I am very supportive of the agency, and you know that. But

I guess, Mr. Chairman, the President, you all talked about earmarks the other night, that we needed some reform and things like

that, and this hasn’t been authorized, this is not by anybody’s definition an earmark. I tell people that come into my office that we

don’t fund ideas, we fund for-real projects that are thought out,

that people can look and see exactly where it is going.

So again at this point, I am not saying that we don’t need to do

this, but I am saying, Mr. Chairman, that again, I don’t think we

need to be funding ideas. I think we need to know exactly what we

are going to do. The idea is great and it needs to be done. I just

don’t see how you spend $100 million in five States doing that

without just hiring a bunch of consultants. Like you said, that is

just me, at this point.

But I do think that that is a problem for you, because one of your

duties is to educate people like me. At this point, like I say, I

hadn’t gotten that. I hope we can get that, Mr. Chairman. Thank

you.

Mr. PETRI. Thank you.

Mr. Sodrel.

Mr. SODREL. Thank you.

It has been my experience in business, you have to analyze the

problem correctly before you come up with a solution. Sometimes

you can sit down and solve the wrong problem.

I just have a couple of questions of things that you have looked

at. It occurs to me, one of the unintended consequences of CAFE,

the Corporate Average Fuel Economy standard, was that each of us

pays less per mile traveled as the miles per gallon increases on the

vehicle. And the high cost of energy for commercial users encourages them as well to consume less fuel per mile traveled. That

seems to be exacerbated by the problem of having a fixed cost, fixed

price per gallon for the fuel tax while the fuel went up to $60 a

barrel, which affects the cost of concrete, asphalt, road construction, repairs and everything else.

What we have here is, as consumers, we are paying less per mile

of travel. Am I correct, or have you even looked at a relationship

between gallons consumed and miles traveled? Or do you have that

information available to you?

I am trying to understand why we are on this glide path to $4

billion a year. Do we keep falling off?

Ms. SCHEINBERG. The main reason we are on the glide path we

are on is that we are funding more than we are taking in. Your

question has to do with why are we not taking in more.

Mr. SODREL. That is correct.
15

Ms. SCHEINBERG. I think it is a combination of things. Clearly,

as gas prices have gone up, the amount of money coming into the

Highway Trust Fund is not reflective of the price of gasoline. We

are not getting a percentage, as you said.

There are a lot of things going on in the economy at the same

time. I am not sure I can give you an exact answer as to why there

are not more revenues coming in. But clearly, we are funding a

larger program than revenues. That is the reason for the gap.

Mr. BOOZMAN. All things being equal, it seems that—I think this

is the problem, is all things are not equal. The cost of road construction is tied to the cost of a barrel of crude. But the tax on the

motor fuels is not tied to that same barrel of crude. It is a fixed

price per gallon.

Ms. SCHEINBERG. Right.

Mr. BOOZMAN. I just always like to understand the problem before I go to work on a solution. It seems to me that is what is creating a gap here.

Having said that, do you have any way of taking a computer

model and saying, if for example the Federal fuel tax were a percent per gallon, as opposed to a cents per gallon, what change

would that make for future revenue stream?

Ms. SCHEINBERG. I don’t think that we at DOThave done that

modeling. But maybe somebody has. Clearly, with the price going

up, revenues would have gone up, too, if the gas tax were not a

fixed amount per gallon.

Mr. BOOZMAN. For example, you have a State sales tax in most

States. And it is a percentage of whatever you are paying for the

product. And when the product price goes up, revenues go up with

it, as retail sales go up. But what we have here is, the cost is going

up but the revenue stream to build and maintain the roads is not

going up with it. Or at least not going up on the same flight path.

I have spent a lot of years in transportation. We have run a lot

of fuel. I know in our personal case, in 20 years we have moved

the same number of miles on half the number of gallons. I mean,

as the, not because of CAFE in the case of a private vehicle, but

just because of the incentive as the fuel got higher, it made more

sense to spend your money on capital expenditures that would

lower the cost of the fuel burn.

So I know that we were burning a lot less fuel on the same miles

or were, well, in fact it was the other way around, we practically

doubled our miles on the same level of fuel. But the effect was, we

pay half as much to use the roads as we used to. That was not our

goal, but that was the effect.

Well, thank you. I would just like to see some data if I could, just

so that I get an understanding of what the problem really is and

what solutions might be appropriate. Thank you.

Mr. PETRI. Thank you.

Mr. Reichert?

Mr. REICHERT. Thank you, Mr. Chairman.

First of all, I am from the Seattle neighborhood. We all can share

stories of extreme need in the area of transportation and building

infrastructure. I thought Seattle was the worst place in the world

to drive until I moved to Washington, D.C.

[Laughter.]
16

Mr. REICHERT. So we could use some help here, too.

But I know you are aware of all the needs across the Country,

and the President’s budget shows, as you testified, a negative balance at the end of fiscal year 2009. However, if I heard you correct,

you said you don’t expect that negative balance to really materialize, but you have done the study and it is something you will be

looking at.

But have you also taken a look at the other side? And if this negative balance does occur, have you looked at programs that may

need to be cut? Have you gone through that?

Ms. SCHEINBERG. We have not done that to date.

Mr. REICHERT. I wouldn’t cut any programs in Seattle or Washington, D.C. That would just be my recommendation.

[Laughter.]

Ms. SCHEINBERG. We will certainly talk to you before we do it.

Mr. REICHERT. Okay, thank you. That is a generous offer, isn’t

it.

The last real quick question I have is, there is a note that the

President’s budget matches the SAFETEA-LU program research

request of $429.8 million. That transfers an additional $37.8 million. What does the $37.8 million from the Federal Highway research, what does that fund? I know it goes to unfunded programs.

But what would those be?

Mr. CAPKA. Sir, I can address that for you, and before I do, I

would just let you know, my son lives in Seattle. So we get a

chance to compare notes as to who has the worst congestion. He

is constantly complaining to somebody who he thinks can do something for him in Washington.

[Laughter.]

Mr. CAPKA. We agree with the members of the Committee that

we need to have a strong and robust research and technology program. It is very clear that we need to have something in place that

will support researching the many problems that we do have. And

we discovered as we got into SAFETEA-LU that we had some

structural problems that prevented us from executing those programs which SAFETEA-LU and Congress laid out for us to execute.

So we are trying to figure out a way that we can provide some

additional resources. What we discovered when we looked at the

program, the year 2005, is that we left some contract authority untapped. It was left untapped because we didn’t have the obligation

limitation to tap the full capacity of that 2005 contract authority.

So what we are proposing in the Budget is to allow us to shift

some contract authority into the FY 2007 research and technology

program equal to the amount of contract authority that we had remaining in FY 2005, and match that contract authority with obligation limitation.

Now, this is a one year, 2007 fiscal year, solution only. Because

we are going to be facing the same problem in 2008 and 2009. And

I think as we all know, trying to address this incrementally is a

real problem. So we really do need a longer, more comprehensive

solution to the research and technology problem.

But the specific answer to your question is that we saw some

extra contract authority available in 2005 and we are asking for
17

some obligation limitation to cover it now so we are able to spend

that money on research and technology.

Mr. REICHERT. Thank you. Thank you, Mr. Chairman.

Mr. PETRI. Thank you. I think we will have a second round of

questions. I know several members would like to ask some additional questions. We have a hearty band of members here, but not

the whole panel, so we are able to do that within the time that is

available.

I had a couple of questions, or at least in the area I would like

to mention. We passed, as you know, in SAFETEA-LU, language

that created two commissions to kind of look at funding options

and make recommendations and also infrastructure, how to invest

more efficiently in infrastructure, that sort of thing. But we did not

fund both commissions at traditional levels, despite increased costs.

While the appointments have been made by the various players, no

appointments have yet been made by the Administration, as I understand it.

Could you discuss that and whether it makes sense to try to have

one commission rather than two commissions that actually work in

this area? And can you give us an idea of when the appointments

will be made, so we can get to work? Because you pointed out the

urgency of helping. There are some very good people who are serving on this commission, and I know they are very conscientious. We

look forward to their analysis and recommendations as we prepare

to reauthorize another bill a few years down the road.

Ms. SCHEINBERG. Yes, sir. The names from the Administration

have been identified, and those people are going through the background security clearance process. They should be announced very

soon.

We agree with you that the commission should be up and running as soon as possible to address these important issues. At one

point we discussed with you the idea of having one commission versus two, but I think at this point we are on the track to have two

commissions.

Mr. PETRI. How long do these security clearances typically take?

Ms. SCHEINBERG. The background checks are underway right

now. I don’t know exactly how long it will be, but it will be soon.

Mr. PETRI. Thank you.

Mr. DeFazio.

Mr. DEFAZIO. Thank you, Mr. Chairman.

I think at the outset of your remarks you said that basically the

proposed budget was funding the provisions of SAFETEA-LU. But

I did notice that Small Starts was reduced by $100 million. I guess

it is a two-part question. One is, does that evidence a lack of commitment or future? Should we have ongoing concerns about the

support for the Small Starts program?

Secondly, is it coincidental that that $100 million equals the

Open Roads Financing pilot program, and was the money transferred from transit over to Open Roads Financing, which would

seem to be not the most appropriate? I guess just in reflection to

my colleague from Arkansas, I would agree, I mean, we don’t want

to bloat up these test programs.

The proposal in Oregon, which I am not sure I am particularly

supportive of, but it is innovative and different, and it is at this
18

point rather modestly funded at about $2 million. That is because

of the infrastructure required, GPS driven and special equipment

at fueling stations and that. I would hope that any grants we are

making under this are not for consultants, because we have got a

commission. The commission can blue sky things or bring in people

to testify about ideas.

I would assume that you are going to restrict the expenditure of

funds to real life applications to see whether or not they work, how

they work, what the problems might be or not be, whether they

could be further expanded.

Ms. SCHEINBERG. Yes, sir. We agree on that.

Mr. DEFAZIO. All right.

Ms. SCHEINBERG. Regarding your question about the Small

Starts, this is a new transit program that was authorized in

SAFETEA-LU, and we do support the program. The reason for the

$100 million funding in 2007 is because it was not authorized in

2006. 2007 is the first year. SAFETEA-LU requires that we issue

regulations to establish the criteria for this program, and for selecting projects and new grant agreements.

We have started this process. An advanced notice of proposed

rulemaking came out last month. There is, I believe, an open meeting today in San Francisco to get comments from potential applicants.

The process of establishing the program will go well into 2007.

So by the time we could actually open it up to applicants, review

those applications, and make grant agreements, it would be late in

2007. We don’t believe that we can commit a full year of funding

in 2007.

This is without prejudice for future years. The full $200 million

for the program is reflected in our out-year numbers. The first year

is a transition.

The second part of your question was whether we used that $100

million for Open Roads. The answer is no. The $100 million for the

Open Roads program is coming off the top of the highway program.

It is a highway program, and we wouldn’t take money from transit

to fund a highway program.

Mr. DEFAZIO. Okay, then I guess the other, since we are carrying

forward a balance in the Trust Fund for transit’s a little better off,

I guess I would wonder whether or not that Small Starts reduction

that you could have recommended an increase, say, in New Starts,

for instance, of that same amount.

Ms. SCHEINBERG. Well, we didn’t.

Mr. DEFAZIO. Right. Maybe Congress will do that.

Okay. Then just the last one, about paying for the NHTSA budget out of the Highway Trust Fund, including some things that have

been traditionally funded out of general revenues. We don’t have

jurisdiction over a lot of issues in that since they are considered to

be commerce related. I am just curious why the Administration is

making that request, if it is just because the general revenues are

otherwise in not very good shape and they didn’t want to borrow

more there.

Ms. SCHEINBERG. There is always an issue of how far to go with

general revenues which are always limited. But the other part is

that over time, NHTSA has come under the Trust Fund. More and
19

more of MHTSA’s funding has come under the Trust Fund. NHTSA

has been appropriated funds by Congress out of the Trust Fund in

the last several years. The President’s budget request for fiscal

year 2007 would bring the whole agency into the Trust Fund. It

was more of a way to fund the whole agency from the same source

rather than continuing the split.

Mr. DEFAZIO. Maybe we can clean up our jurisdiction here and

we will take authority over the safety issues, Mr. Chairman.

And on that point, there was one very artfully worded piece to

the bill which escaped the notice of the commerce watchdogs, which

does potentially tread in their area, which I had inserted. And that

is to look at the potential problems with these new high intensity

headlights. Consumer Reports and some others have covered that.

And I note that, particularly on two lane rural roads, that they

are a problem, and the European cars that have them are self-leveling, American cars are not. You do sometimes, it is like driving

at someone with six high beam headlights instead of just two in

your face. I think that this is something that we should be looking

at on the safety side. There was some language in the bill regarding that which we would be happy to point out in case it has escaped your notice.

Hopefully we are going to take a look at that, and some potential

rulemaking. Because without putting in the adjusters, which the

American manufacturers aren’t, you are hitting people with an extraordinary intensity. Apparently we use a very antiquated way to

measure light intensity, which is pre-Edison or just about Edison.

That doesn’t go to the impact on the eye, and particularly with a

lot of people like myself with aging eyes, this is going to become

more and more of a problem with night vision.

So I think it potentially, and you know, they are extraordinarily

expensive and in my mind, stupid because of the very marginal

benefit they provide for the drivers of the car that has them, as opposed to the oncoming car. I think, perhaps the negative benefit

outweighs them, particularly if you don’t do it with this safety

mechanism that the Europeans are using and we are not. So hopefully that will get a good look at.

Thank you, Mr. Chairman.

Mr. PETRI. Mr. Pascrell, anything more?

Mr. PASCRELL. No, thank you, Mr. Chairman.

Then you have the last word.

Mr. DEFAZIO. Oh, thank you, Mr. Chairman.

Mr. PETRI. Oh, Mr. Boozman.

Mr. BOOZMAN. I was going to say, first of all, I am an optometrist, I can visit with you a little bit later, Mr. DeFazio, and look

at those aging eyes and see what is causing your night problems.

[Laughter.]

Mr. BOOZMAN. The other thing is that I would just like to comment, to me, we almost have the potential of this being kind of the

perfect storm. You have the, I think Congress finally is coming to

grips, I think the Nation is coming to grips with the fact that we

need to be less energy dependent on the Middle East. And part of

that is going to be conservation, part of it is going to be more fuel

efficient cars. All of that equation is going to further put pressure

on the gas tax.
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So that is a real problem. The other problem is that as I visit

with my folks at home, my highway commissioners and stuff, they

are telling me that in the last year, since they have done their

projects and all this, that they have upwards to a 30 percent increase in cost. That is a tremendous figure. But that is the for-real

deal. So we have decrease in revenues, we have tremendous increase in costs, and because the economy is humming along, not

only in our Nation but worldwide, I think the potential there is to

increase, also.

So we need to look at, through studies or however we work it

out, to do the gas tax equation. The other thing is, and if you will

just comment to me about what we are doing, the other side is, we

have got to come up with more efficient ways of building roads. The

old, you know, just however you do it, much more efficient way of

building roads in a more cost effective way, whatever is out there,

spread that word. Then also roads that hold up and last longer.

Mr. CAPKA. Sir, that is an excellent observation. In fact, I would

have to thank Mr. Petri and all of you on the Committee for helping us in SAFETEA-LU with at least one program for that purpose.

And I will talk about a couple. But we have a Highways for Life

program that was put into the authorizing language, which addresses exactly that point. How do we look at the way we deliver

the highway infrastructure and how can we deliver it, not just

more cost effectively, but quicker and safer because of what construction congestion means now on the roads? That whole program

is meant to stimulate that kind of innovative thinking.

We also have on the research and technology side, which is another reason why we are very interested in seeing that program be

very healthy, a good program of technology transfer where we are

out looking for the good ideas in the research environment, trying

to stimulate at the Federal level the advanced kind of research, so

the practical research and applied research at the State level can

all be working toward that same direction. But you have hit on a

great point. It is not just how we pay for what we have, but how

we deliver what we need to deliver more efficiently and more effectively.

Mr. BOOZMAN. Thank you very much.

Mr. PETRI. Mr. Baird, any questions?

Mr. BAIRD. Yes, indeed, if I may. I thank the witnesses and

thank the Chairman. When this body passed last year the

SAFETEA-LU bill, one of the provisions of it was a sense of the

Congress language, dealing with the provisions of the Buy America

Act. We are familiar with internal memos from DOT that essentially suggest they don’t have to honor that. I just want to put the

marker down and ask your thoughts on this.

The Buy America Act, when originally passed, I think was intended to do a couple of things: one, identify critical infrastructure

industries in this Country, and assure that those industries remained vibrant. I think two, the general principle is if American

taxpayer dollars are going to pay for a project, it stands to reason

that Americans be employed in the pursuit of constructing those

projects.

Increasingly, State departments of transportation and others are

finding ways around not only the intent but the letter of the Buy
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America Act, and I am greatly concerned about this, and I will tell

you why. We have a steel fabricating capacity in this Country that

is outstanding presently, but that is subject to significant challenges. If we lose our steel fabrication capacity, and the same applies for certain other industries, and there is a natural disaster,

and I live in Washington State, on the West Coast, where we have

such things as earthquakes and volcanoes and hopefully never, but

possibly a tsunami.

If we lose our steel fabricating capacity domestically, and we are

dependent then on foreign sources for fabricated steel, someone will

look back to this date, and say, how foolish we were, in the Congress and in the Administration, if we let that happen. So I would

appreciate any comments you have about whether it is the intent

of the Department of Transportation to ensure that States and

other entities honor the letter and intent of the Buy America Act.

And also, if it is the position of the Department of Transportation

that it would be prudent to allow fundamental domestic industries

like steel fabrication to be lost to foreign competition.

Mr. CAPKA. Sir, I will address that question and your comments.

I know that you and the Secretary and Mr. Chip Nottingham had

a great discussion earlier this week on that very issue. And it is

high on the radar screen.

So we are aware of the concerns. We are also very interested in

ensuring that we do comply with the letter of the law. That is important for us to do that. And that is what we are attempting to

do in the way we apply the Buy America Act. We understand the

sense of Congress and we certainly read that in the language. We

are trying to deal with that as best we can, again, looking at the

legal aspects of it.

But we are sensitive to it. We have had a number of representatives of the steel bridging community come by and see us on this

very issue. We know the issue that is out there. So sir, it is a point

that is well taken and a point that is well understood.

Mr. BAIRD. I appreciate that. We did have, indeed, a very good

meeting with the Secretary and they intend to get back to us. So

I understand, I am not trying to sort of get at cross purposes here.

We met with the Secretary just the other day and appreciated

meeting with his staff.

I just want to underscore the importance of this. Talk to the steel

fabricators as you have, we just had one tell me it is going to close

its doors, 150 jobs, top-flight fabricator. At some point, you put

yourself vulnerable to foreign suppliers, because you just simply

can’t, when you lose the physical infrastructure, the plants, the

cranes, the blow torches, all the other things that go into one of

these, the sophisticated cutting and computer equipment. When

you lose this, you don’t get it back. That is it, gone, gone. And you

lose the work force and you lose the land, because these are very

land intensive things. You have to have all this space to store the

steel, to construct the bridges locally before you transport them.

I really, sincerely believe we would make ourselves vulnerable

from a defense and security perspective, and from an infrastructure

security perspective. And by golly, I think we would be making a

huge mistake if we don’t put a marker down and tell folks like

CalTrans and others that, by gosh, the Congress of the United
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States has spoken and the Administration is with the Congress of

the United States, and if you are going to spend American taxpayer

dollars on your project in any way, then you are going to adhere

to Buy America, the intent and the letter of the law.

President Bush, in his State of the Union address, said specifically, we want all, this is virtually a quote, we want all of the

world to buy American. I would hate to have a little footnote below

that that said, except for California and other States that are

building federally funded highway transportation projects.

So I would just urge you, for posteriority and for current employment in the current infrastructure health of this great Country, to

insist on the fundamental intent and letter of Buy America and put

a strong marker down on anybody who intends to dodge that, that

if they do, they will lose their Federal highway funding.

Mr. CAPKA. Sir, your point is well understood.

Mr. PETRI. Mr. Sodrel.

Mr. SODREL. Thank you, Mr. Chairman. One other issue I would

like to talk about. You just talked about putting NHTSA under the,

or taking the funding out of the Highway Trust Fund. These numbers I have looked at are pretty broad numbers.

What do we fund, other than highways and bridges, out of the

Highway Trust Fund? Originally the Highway Trust Fund was designed for highways and bridges and was paid for by highway

users. What some people may not know here is heavy truck users

pay a, they used to call it a Federal highway use tax, now they call

it a heavy vehicle use tax. It is an annual tax that is paid for the

privilege of using the Nation’s highways, and you pay a Federal excise tax when you buy a new truck that is somewhere between

$7,000 and $9,000 on purchase.

So there is a lot of money that goes into the Fund. And it was

originally designed for the benefit of those people that were using

the highways. Now we are siphoning off a lot for transit, we siphon

it off for rails to trails, we siphon it off for who knows how many

other purposes. And I would like to know what percentage of the

budget is non-highway and bridges. What percentage of the money

that comes out of the Highway Trust Fund is spent on something

other than highways and bridges?

And if you don’t know, if you could get me the answer, I would

appreciate it.

Ms. SCHEINBERG. We will get that to you for the record.

[The information received follows:]
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Mr. SODREL. Because that is the other thing that affects how

much money we have to build and maintain roads, is how much

are we spending for other purposes, purposes other than what the

Highway Trust Fund was designed for. And I would appreciate it

if you have some information on those previous questions as well.

Ms. SCHEINBERG. Absolutely.

Mr. SODREL. I thank both of you for being here today.

Ms. SCHEINBERG. Thank you.

Mr. SODREL. Thank you, Mr. Chairman.

Mr. PETRI. We have one more. Mr. Baird.

Mr. BAIRD. I thank the Chair.

Another question that was called to my attention by some of my

local folks who are working on projects. It is my understanding,

and maybe you can explain it to me, that certain numbers were

designated to go toward certain projects as part of SAFETEA-LU,

and when it comes time for actually the local entities to receive

that money, a quite substantial surcharge has been subtracted

from the money. I understand it is somewhere from 14 to 16 percent, depending on the project and the locale.

I wonder if you can explain that a little bit. Because I have to

explain it back home, when they say, well, Congressman, Congress

designated X amount of dollars for a certain project. When that

check comes, there is quite a discount has been applied to that,

supposedly for overhead at DOT. I am at a loss to fully explain it

to my constituents and State transportation folks. If you could help

me explain it, that would make my job a little easier back home.

I mean really, where does that money go? Under what authority

do you folks take it off the top?

Mr. CAPKA. Sir, I may have to get back to you for the record in

a little more detail. But there are certain requirements that are

taken off the top. We have lop-offs, which is a term that we use

to describe contract authority for allocated programs that is in excess of obligation limitation available, and is required by law to be

withdrawn from the original program and distributed to the States.

There are rescissions that occur. There are obligation limitations

that are placed on the contract authority, which some folks may be

concerned about as they do their calculation of what they will receive. So it is a combination.

What I would like to be able to do is to get back to you for the

record and kind of lay some of that out more specifically. Perhaps

we can be more specific with some of the examples that you have

that I can help you with.

Mr. BAIRD. That would be great. I can just share with you the

sense of frustration and surprise, unpleasant surprise, on the folks

who are to be receiving this. Because they had counted on a certain

figure, and now that figure is quite a bit low. And you know how

these work, you are putting together State, local, Federal match

and occasionally private partners as well. And suddenly you are

coming into 10 to 14 percent, and I understand possibly even more.

They just say, where is this money going to.

I mean, is this a back door way of funding DOT? Is it that we

are not authorizing and appropriating sufficient funds here for the

base operations of DOT? Anyway, that is the question I get asked.
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Mr. CAPKA. Sir, the percentages are, to us in the appropriation

process that we go through. But what we will do is lay something

out for you so that you can be clear and articulate with your constituents as well.

Mr. BAIRD. That would be great. My guess is I am not alone in

this. My hunch would be that many other members of Congress are

hearing from folks, hey, I thought you said $1 million and now we

are coming in at the $870,000 range or something like that. And

it depends on the project.

But that is a healthy chunk. And in some cases I am told it is

literally freezing projects, because that difference is the make or

break difference, and we don’t have, to the extent that States have

counted on the portion of the Federal money, perhaps erroneously,

but counted on that without the discount factored in, the discount

is substantial. So if you could brief us on that, that would be appreciated.

Mr. CAPKA. Sir, I will do that.

[The information received follows:]
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Mr. PETRI. Well, thank you for coming and answering our questions. We look forward to working with the Department of Transportation as we implement SAFETEA-LU and prepare for future

decisions. Thank you.

[Whereupon, at 3:27 p.m., the hearing was adjourned.]
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