Legislative Update

Chris Hundt

Michigan Department of Transportation

July 15, 2011

July 15, 2011

Overview

• State Issues– Fiscal & political

environment

• Federal Issues– Fiscal & political

environment

– Reauthorization proposals

State Transportation Revenue

$1.70

$1.80

$1.90

$2.00

$2.10

Bill

ion

s

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Down $224 Million Since 2004

MDOT Match Issue

FY 2012-15 Annual Shortfall

State Revenue Shortfall $120-$160 million/yr

Federal Aid Lost to MDOT

Highway Capital Program$700 - $800 million/yr

Match Problems Not Exclusive to MDOT

“Sadly, there are county road commissions in Michigan that are being forced to turn down millions of dollars in federal road funds for which they are eligible, because they simply cannot provide the required local match.”

Michigan’s Roads in Crisis – Highway, Roads and Bridges CAC Report July 2008

MDOT Reinvented

• 15% reduction in staff since 2009

• Closing or consolidating eight facilities

• Organizational changes and process improvements

• Debt restructuring

Better, faster, cheaper, safer, smarter

Legislative Activity

• FY 2012 state budget

• NITC

• Match Issue– SB 351/HB 4521 – sales tax diversion

• Consolidation of government services

Other Planned Legislative Activity

Special message to the legislature on infrastructure in October

• Transportation funding continues to be inadequate for state’s needs

• Structural problem that directly affects Michigan’s economic vitality

• Permanent solution for matching federal transportation funding is needed

Recalls Add Uncertainty

• Approved recall language– Representatives Damrow, Johnson, Jenkins,

Potvin, Pscholka, and Speaker Bolger– Senators Booher, Emmons, Green, Jansen,

Marleau, Nofs, and Major Leader Richardville

• Awaiting clarity hearing– Representatives Cotter, Jacobsen, Scott,

Shirkey– Senators Caswell, Kahn, Meekhof, Moolnaar,

Proos, Schuitmaker, Warren

Federal Reauthorization 2011

• SAFETEA-LU extended through 9/30/11– Originally expired 9/30/09

– Currently on 7th extension

History of Overdue Bills

37

98

275

79

252

680

0

200

400

600

800

STAA 7

8

STAA 8

2

STURAA 8

7

ISTEA

TEA-21

SAFETEA-L

U

Number of Days Authorizing Legislation Was Overdue

Recap of Key Milestones

• August 2005 – SAFETEA-LU signed• September 2008 - $8.017 B GF to HTF transfer• August 2009 - $7 B GF to HTF transfer• September 2009 – SAFETEA-LU expires• March 2010 – HTF shuts down for two days• March 2010 - $19 B transferred from GF to HTF• September 2011 – 7th extension of SAFETEA-

LU expires

Federal Fiscal Environment

HTF is Broke

-$80

-$60

-$40

-$20

$0

$20

$40

$60

2007

2009

2011

2013

2015

2017

Bill

ion

s

Revenue Outlays Ending Balance

Federal Fiscal Environment

• Little/no apparent support for increasing user fees

Infrastructure Needs Are Dramatic

$262

$214$189$194

$172

$134

0

50

100

150

200

250

300

C & P FinancingCommission

PolicyCommission

C&P FinancingCommission

PolicyCommission

20

08

$ i

n B

illi

on

s

Source: Report of the National Surface Transportation Infrastructure Financing Commission

Maintain Scenario Improve Scenario

Infrastructure Needs Dramatic in Michigan

Business as Usual

Estimated System

% of Needs Met

MI Transportation Plan

$37 billion $81 billion 46%

TF2 $2.3 billion $7.2 billion 32%

Administration’s Proposal

• Obama Administration released broad outline of reauthorization in February– $551 billion over six years (2012-17)

• This includes $50 billion in up front funding

– Assumes $231 billion in new revenue

Administration’s Proposal

SAFETEA-LU Admin Proposal

Percent Increase

Highways $228 B $336 B 48%

Transit $53 B $119 B 126%

Safety $7 B $12 B 87%

Rail - $53 B -

Infrastructure Bank

- $30 B -

Total $286 B $551 B 93%

Administration also proposed one-time funding of $2 billion for TIGER grants and $3 billion for airports

• Significant program consolidation to result in:– 6 highway programs

– 6 transit programs

– 2 rail programs

• Expands HTF to TTF and include passenger rail

Administration’s Proposal

Administration’s Highway Proposal

2012-17 Annual Avg.

National Highway $253.3 $37.6*

Safety $17.5 $2.9

Livable Communities $27.5 $4.6

Research, Tech, and Ed. $4.5 $0.8

Federal Allocation $8.9 $1.5

Transportation Leadership $17.1 $2.9

TOTAL $328.9 $50.2

(Billions)

Administration’s Transit Proposal

2012-17 Annual Avg.

Formula Grants $43.1 $7.2*

Bus & Rail State of Good Repair $28.0 $4.7*

Expansion & Livable Communities $19.6 $3.3*

Research & Technology Deployment $1.2 $0.2

Transportation Leadership $14.7 $2.4

Operations & Safety $1.1 $0.2

TOTAL $107.7 $17.9

(Billions)

Proposed Planning Changes

?

House Rule Change

• House procedural rules• “Cut-as-you-go” instead of

PAYGO

• Easier to reduce transportation spending

• More difficult to increase revenue

• Impact on firewalls and funding guarantees

House Budget Resolution

• Fiscal year 2012 budget resolution calls for big cuts• $30B per year from transportation

• Does not allow for a “reserve fund” to bring in additional revenue for reauthorization

House Reauthorization Proposal

• Chairman Mica’s priorities:– Stabilizing the HTF (spending w/in its means)

• $230 billion over six years

– Reform federal program– Increase flexibility and accountability– Maximize private funds leveraged– Accelerate project delivery – 437 day plan

Senate Activity• Agreement among transportation leaders

– Fund program at current levels– Eliminate earmarks– Consolidate programs– Strengthen TIFIA– Expedite project delivery

• Likely to be a two year bill

Alternative Scenarios

HTF Investments in Highways, Transit, and Safety

Six Year Total

(2012- 2017)

Annual

Average

Administration Proposal $467 billion $77.8 billion

Senate Transportation Leaders (current funding)

$339 billion $56.5 billion

House Budget Resolution $230 billion $38.3 billion

Immediate Concern is FY 2012

• House budget and reauthorization plan could:– Reduce highway program by 30%– Eliminate transit new starts– Cut funding for Amtrak

• Impact to Michigan’s highway funding depends on where reductions are made, but estimated reduction ranges from $175 million to $360 million per year

Other Complicating Factors

• Congress has not been willing to juggle transportation with other priorities– Federal budget deficit– Trade Deals & TAA– Appropriation bills

Questions?